[Vnbiz] Vietnam: Cashew exporters dying of ignorance

[Tai Phan]

Vietnam: Cashew exporters dying of ignorance

The news about the possible lawsuit against Vietnamese cashew exporters and
the fate of the cashew processing industry remain hot topics these days. The
Vietnam Cashew Association (Vinacas) on June 6 held a press conference to
provide more information about the cashew exports Vietnamese companies are
owing.

According to Vinacas, the ignorance of small and newly established companies
has caused the problems. These companies do not well understand laws and
were foolish enough to sign contracts they could not fulfill.

Owing exports because of ignorance

Nguyen Duc Thanh, acting Chairman of Vinacas, said that small companies,
though having limited capacities, still signed big export contracts.
Meanwhile, brokers lent a hand in the contract signing. As they could get
the commission of 1% of the contracts' value, they tried to urge the two
sides to sign as many contracts as possible.

Ho Ngoc Cam, former Chairman of Vinacas, said that some companies which had
the production capacity of 5 containers a year signed contracts to export 40
containers. As a result, they could not collect enough material cashews to
fulfill contracts, especially as prices began skyrocketing.

In 2007, some companies signed contracts with the export price of $4.9/kg
with deliveries in early 2008. Meanwhile, the cashew nut price has soared to
$6.6/kg.

The biggest problem now for cashew companies is lack of capital. In 2005,
cashew companies suffered the loss of VND1tril; therefore, they could not
borrow money from banks in 2006 and 2007. As a result, companies had to
venture to sign big contracts with partners first, and then show the
contracts to banks to get bank loans. Meanwhile the companies really did not
have the capability to fulfill such big orders.

Bigger companies owe more

According to Vinacas, UK-based Clyde & Co law firm, the representative of
the plaintiff, listed 38 Vietnamese companies that owe export products.
However, the list VietNamNet now has names 52 companies, including big
companies.

Lafooco is one example. The financial report of the company showed that by
January 1, 2007, the total assets of the company had reached VND142bil.
According to Clyde & Co, Lafooco owes 16 containers, worth $310,450
(VND5.1bil).

Ten companies on the list are ranked among big companies, and account for
2/3 of the owed exports (470 containers, or 7,400 tonnes, out of 700
containers or 11,113 tonnes).

What to do?

Thanh said that cashew companies have been trying to deliver the products
they owe. 400 containers, or 6,300 tonnes of cashew nuts, have been
delivered, while the remaining volume will be delivered between now and
September.

However, in fact, the number of companies that can deliver owed exports
proves to be very modest. The document provided by Vinacas on May 13 showed
that 14 of the 38 companies are members of Vinacas. However, by June 6, only
two companies reportedly had delivered 2 containers. Some members of the
association still owe several tens of containers. It is very difficult to
reckon the volume owed by non-Vinacas members.

According to Vinacas, the possibility of a lawsuit has become greater.

Re-negotiating with partners and speeding up deliveries are clearly the
things cashew exporters need to do now. However, in addition to that,
Vinacas and enterprises should sit together to think of the best ways to
minimise losses if clients do initiate a lawsuit, as they have threatened
they might do.


Source: english.vietnamnet.vn<http://english.vietnamnet.vn/biz/2008/06/787734/>

Publication date: 6/11/2008
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