A representative of a Dutch dried fruit association said that foreign companies specialising in trading, importing, packing and processing cashew nuts are suffering from the contract breaking by Vietnamese companies.

Vietnamese companies have not fulfilled signed contracts, while forcing foreign partners to re-negotiate contracts and asking for higher prices. All this has made foreign partners think that Vietnamese companies want to extort money from them.

The representative said that Vietnam’s cashew industry has got a bad reputation, which will influence the long-term development of the industry. He added that the UK CENTA (Combined Edible Nut Trade Association) and US AFI (Association of Food Industries) are taking steps, through the countries’ authorities, to file the case with the government of Vietnam.

Meanwhile, Nguyen Van Chieu, Deputy Chairman of Vinacas, said that Vietnamese companies unwillingly have had to ask foreign partners to re-negotiate contracts and raise export prices. It is because the companies are facing too many difficulties.

Chieu said that late harvesting and output decreases due to bad weather, leading to sharp increases in production costs, have been putting big difficulties on cashew companies.

Moreover, the changeable macroeconomic policies by the government have made cashew companies suffer. As commercial banks are tightening credit, cashew companies cannot get bank loans for collecting materials to fulfill orders. Moreover, as input material prices have soared sharply (up by 40% compared to 2007), the companies which signed contracts before at low export prices are facing heavy losses.

Vinacas said that by the end of March 2008, cashew exporters had signed contracts to export 1,200 containers (12% of total 10,000 containers Vietnam exports every year). To date, 700 containers have been delivered.

Chieu, when citing the figures, tried to convince foreign clients that the 700 containers delivered in such difficult circumstances showed the efforts Vietnamese companies were making to fulfill signed contracts.

Chieu added that Vinacas and the Ministry of Agriculture and Rural Development have asked Vinacas’ members to strictly follow the contracts despite the difficulties. The association has decided that all orders must be fulfilled by the end of the fourth quarter at the latest.

Friends far different from business partners

Cashew nut prices have unexpectedly increased since April 2007. Meanwhile, Vietnamese companies, which did not anticipate the price increases, signed export contracts at low prices. And now, they understand that they will incur heavy losses with the deals due to the sharp increases of input material prices.

Some Vietnamese enterprises have tried to re-negotiate the contracts with partners. Some foreign partners have accepted the higher export prices, while many others have refused, saying that Vietnamese companies must fulfill the signed contracts.

Vinacas’ Chieu, who is also Chairman of Lafooco, said that it is the duty of companies to respect the contracts. However, Vietnamese companies hope that foreign partners share difficulties with them in order to maintain long-term cooperation.

“We want sympathy and support from foreign partners; we are not trying to extort money from them,” Chieu said.

Dao Van Chan, Director of Ninh Thuan Farm Produce Export Company, said that his company has been trying to negotiate with clients, but has not broken contracts.

Chan said that it would be better if the foreign partners accept higher prices. However, if they don’t, the company will still have to fulfill the contracts in order to maintain prestige.

He added that his company has incurred the loss of $5mil.

In general, Vietnamese companies sign contracts with foreign partners first, and then they borrow money from banks to collect materials for processing.

“Sign contracts only when you have materials in your storehouse,” Vinacas has told its members. The Vietnam Food Association has also advised its members to sign contracts only when they have 50% of material volume in store.

Source: TBKTVN