A man spreads out coffee beans to dry in the Central Highlands of Vietnam. Photos by Diep Duc Minh
The Vietnamese government has issued a circular clarifying policies that limit foreign companies' access to agricultural land as current rules have been deemed too vague to be followed or enforced properly.
Issued by the Ministry of Industry and Trade to take effect on June 7, the notice comes amid concerns that foreign companies are taking over local agricultural resources and export activities.
Vo Van Quyen, director of the ministry's Domestic Market Department, said the circular is not a new regulation, but was issued to clarify old ones.
It is a set of instructions and guidelines on how to implement previous regulations that have been in place since 2007 and which do not allow foreign companies to buy raw resources directly from local farmers, said Quyen.
Instead, foreign companies must buy through Vietnamese business agents licensed in the field.
Statistics by the agriculture ministry showed that foreign companies bought up around 60 percent, or 600,000 tons, of Vietnam's 2012 coffee output.
Foreign firms in Dak Lak Province, which has the country's largest coffee area in the Central Highlands, include Singapore-invested company Ca Phe Ngon and a branch of leading global supplier Olam which is also based in Singapore. Louis Dreyfus Commodities of Netherlands, which has an office in Ho Chi Minh City, is also big in the Central Highlands.
Louis Dreyfus Commodities bought more than 40 percent of coffee output from the nearby Gia Lai Province last year.
Doan Kim Ca, general secretary of Buon Ma Thuot Coffee Association in Dak Lak, said foreign companies have been buying directly from local farmers.
"There are loopholes in enforcement, which have caused difficulties for local traders," Ca said.
Pepper fields have also received many foreign customers, who bought 36.6 percent of the output last year, up from 11.6 percent in 2011, according to Vietnam Pepper Association.
The association spokesman Tran Duc Tung said the companies' export revenue grew strongly over the first quarter this year, some nearly threefold.
Tung said the good thing about the involvement of foreign companies is that it adds competition to the market, but there are risks that local companies will lose their segments to competitors with stronger financial capacity.
The director of a Vietnamese coffee exporter in Dak Lak who asked to remain unnamed said the competition between local and foreign buyers can benefit farmers, but not for long.
"Once the foreigners manage to eliminate local partners, they will decide the prices. That has happened in many countries in the world and it might happen soon here," the director said.
Hoang Tho Xuan, a former market official at the ministry, also said that Vietnamese authorities need to protect local traders as well as farmers by making foreign investors abide by the rules.
But Xuan worried that local companies may not deserve the protection. Some of them have not treated local farmers well, he said, citing their imposition of price pressures on poor growers.
"It is right to support local businesses over foreign ones, but that policy also needs to pay attention to the interest of other objects involved, especially the farmers," he said, noting that local companies should cooperate with their fellow farmers to compete with foreign components in the market.
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