Vietnamese farms: boom at the bottom

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Vietnam is the world’s biggest exporter of cashew nuts and black pepper, the second biggest exporter of rice and coffee and a major global supplier of farmed fish.

But few people in Europe or America realise that when they open a pack of nuts, gulp down a cup of instant coffee or dig into a portion of fish and chips, they may well be eating Vietnamese products.

Vietnam’s millions of smallholding farmers have capitalised on the country’s integration into global markets to become successful producers of high volume, low value agricultural commodities.

Yet it will not be easy for Vietnam to move up to the next level, producing higher value processed foods and branded products, according to Prakash Jhanwer, who heads up the Vietnam, Indonesia and Laos offices for Olam International, the Singapore-based agricultural commodities giant.

“Vietnam has some of the best farmers in Asia,” Jhanwer told beyondbrics in his Ho Chi Minh City office. “But driving through agricultural change is very tough.”

Olam has been buying commodities in Vietnam since the late 1990s and has grown to become the country’s biggest foreign coffee exporter, and the leading exporter of cashew nuts and black pepper.

Having increased its turnover in the country to $400m, Olam is eager to produce more high value products in Vietnam, rather than just exporting the raw commodities.

Olam has already built an instant coffee plant in Vietnam and it plans to invest further in the processing of cashew nuts and black pepper.

But, when it comes to coffee, Jhanwer argues that Vietnam is unlikely to be able to develop strong high quality brands like Javanese or Costa Rican coffee because the climactic conditions limit the production of the stronger tasting Arabica beans.

Like Nestle, which has also invested in an instant coffee plant in Vietnam, Olam wants to sell more of its products onshore as the country continues to develop and consumption grows. But the government needs to ensure better infrastructure to facilitate the expansion of the domestic market, Jhanwer said.

Jhanwer is open about Olam’s key objective in Vietnam, which is “to invest to get access to raw materials.” But he defended the company from criticism that it is seeking to exploit poor farmers in countries like Vietnam.

“We’re not fly-by-night operators. Look at our investments in coffee and cashews and compare it to local companies. It’s very positive for the economy. We’re marketing Vietnamese produce to uncharted territories and it’s not possible for local companies to do this.”

Related reading:
Guest post: how to restructure Vietnam’s economy, beyondbrics
An awful lot of coffee in Vietnam, beyondbrics
Vietnamese coffee and Philippine hamburgers look a neat fit, beyondbrics
Vietnamese food products: fishy?, beyondbrics
Vietnamese superfarm leads the way, beyondbrics

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