Cashew businesses lack capital to continue operation

July 30, 2018 - 08:00

Shortage of capital is hampering the operation of many small cashew factories in Việt Nam, according to the Vietnam Cashew Association (VINACAS).

Cashew nut producers expect to receive financial support from banks to continue their production for export. — Photo VINACAS
Viet Nam News

HÀ NỘI — Shortage of capital is hampering the operation of many small cashew factories in Việt Nam.

That’s according to the Vietnam Cashew Association (VINACAS) who say 80 per cent of small cashew processing factories have closed since June due to lack of raw materials and capital for production, causing a major dent in the country’s economy.

This happened despite the cashew sector surpassing rice, coffee and rubber to make revenue of US$3.6 billion last year.

According to Nguyễn Huệ Chí Thái, a consultant to the VINACAS, factories operated with total capacity of 1.6 million tonnes of raw material a year, creating jobs for hundreds of thousands locals in southern provinces of Bình Phước, Long An and Đồng Nai.

“With the current situation, the labour force would lose jobs, move to other jobs, or return to their homeland. If we do not manage it quickly, it may break the planning of related industries such as pepper, coffee and rubber,” said Thái.

Chairman of the VINACAS Nguyễn Đức Thanh has asked cashew processing businesses to co-operate with each other to cope with changes in the market, keeping goods and avoiding selling out.

“According to information from the International Nut and Dried Fruit Council (INC), the price of cashew nut is predicted not to decrease,” said Thanh.

He said the obstacle so far was how to seek capital to import 500,000 tonnes of raw materials for processing and exports from now until the end of 2018.

Thanh said since the meeting earlier this month between the VINACAS and bank representatives, almost all banks had gone quiet, with no word as to whether they support US$800 million in loans for cashew nut producers to import raw materials.

Tạ Quang Huyên, Director of Hoàng Sơn 1 Joint Stock Company in the southern province of Bình Phước said to solve this problem, businesses could not wait for the banks.

“It’s because they will partly lose their customers, creating conditions for foreign businesses to seek new supply resource and occupy the market. It will also be difficult for them to mobilise workers later if the factory is closed for a long time,” said Huyên.

“Therefore, many cashew export producers and exporters must sell processed products to the market at low prices, accepting losses from raw materials imported at high prices from early 2018,” he added.

Meanwhile, raw material shipments, which were ordered by enterprises, are in the port or stored in bonded warehouses – stuck there because there is no money available to pay for their release.

Many of them lost deposit because they did not have enough money to pay.

“When the cashew businesses do not receive financial support from banks, they have to suffer a great loss. The country’s export of cashew this year will not meet the target as scheduled,” said Huyên.

In response to the bank’s not giving loans, Nguyễn Quốc Phong, director of customer relations of the Vietnam Export Import Commercial Joint Stock Bank (Eximbank) said that there was still capital support for the cashew industry.

However, according to the loan regulations of the bank, the business side must specify the fixed capital corresponding to the size of investment. Meanwhile, most businesses applied for loans with large scale of investment, but their registered capital was low.

In addition, the borrowing enterprises must carry out periodical audits, full financial reports and export conditions of the enterprises corresponding to the actual capacity. When the loan application finalised the above criteria, Eximbank would be willing to sign for disbursement, said Phong.

“The VINACAS needs to support banks, listing the classification of enterprises as the basis for the banks’ assessment to consider loan approval,” he added. — VNS