Trung Nguyen and 'sustainable' Vietnam coffee production
From: Pam McElwee
Date: Mon, Nov 19, 2012 at 4:10 PM
To: Vietnam Studies Group <vsg@u.washington.edu>
Dear list:
The most striking thing for me in the article on Trung Nguyen coffee was the assertion that “Vu has his pitch ready for the Western market. ‘American consumers don't need another product. They need another story,’ he said, adding that his company aimed to improve the lives of people in Vietnam's coffee-growing highland region, a link he sees lacking in larger rivals. ‘They sing great songs about sustainable development but at the end of the day, the return on investment is what they care about. They don't grow coffee, do they? We do.’ Trung Nguyen says all its beans come from smaller farms certified for sustainable growing practices, with growers receiving guaranteed prices. Vu was in Lucerne to tout what he calls ‘responsible creativity for harmony and sustainability’.”
I have not worked specifically with coffee growers linked to Trung Nguyen, since most farmers I work with sell to third party buyers who then sell to coffee roasters/packagers, so the farmers have no idea who is actually buying their coffee for what market, but I will say that the idea that Trung Nguyen in specific and Vietnam in general is going to have some sort of comparative advantage in social and environmental sustainability is a stretch at best. Vietnam is a bit behind in adoption of global certification standards for agricultural products. I know that Rainforest Alliance certification, 4C and the FairTrade folks have pilot projects and agreements in Vietnam but that these are still only a very small part of the market (RA has just 1,600 ha from around 500 farmers under certification at last I heard). And Trung Nguyen is not part of these as far as I know. This raises the question if Trung Nguyen’s chairman believes that he can 'self-certify' sustainability by just saying they use sustainable beans. If so, they may be in for a rude awakening. The move toward global certification is quite broad but valid, and Vietnam is not an active player in many certification schemes. In fact, in timber certification, which I know the most about, Vietnam has been dinged in the past for not following certification rules, particularly on use of outside auditors to guarantee the sustainability claims being made are really put into practice. The challenges of auditing smallholder farmers to certify they are organic, or ‘sustainable’ (whatever that means to Trung Nguyen) is tremendous, given that most production takes place on the order of 1-5 hectares farmsteads scattered all over the landscape and given a lack of a strong independent audit culture in Vietnam.
Social sustainability is also a potential problem. The idea that Trung Nguyen can pitch a story that American consumers will like seems to me a potential case of greenwashing. Having done research with coffee growing smallholders in Dak Lak, Lam Dong and Son La in particular, it is clear that coffee has been good to many, but it has been terrible for many others. And in many cases the terrible outcomes were ones that could have been avoided with a clear early commitment to social and ecological standards. Landlessness and indebtedness, in ethnic minority communities in the Central Highlands in particular, has clear links to coffee production and fluctuating world markets, compounded by poor enforcement of land tenure laws, discrimination in credit financing, and a lack of voice in production and selling decisions (e.g. true cooperatives run by farmers themselves).
I did an analysis of some of these problems as part of a report for the World Bank that came out in 2009 titled Country Social Analysis: Ethnicity and Developing in Vietnam (available on the web). I will provide a snippet of what we saw in Dak Lak from pages 157-8: "The credit situation has also been particularly acute in recent years in the Central Highlands, where the lack of access to larger loans has driven many poorer farmers, particularly minorities, to take their coffee production loans from the informal system. This included private traders and agricultural supply stores (dai ly), which can provide loans that are much larger than VBSP and VBARD, much faster, and with much less paperwork. We were told a private loan from a coffee trader can take only one day versus several months for the formal system. These loans are highly risky, however, as they involve very high rates of interest and short-term loan periods that cannot usually be extended without potentially forfeiting the collateral put up for the loan, which was usually a land tenure certificate. In other cases, the loan would be approved on the condition that the coffee the farmer produced would be paid to the loaning trader, at much lower than market rates when the harvest was ready, leading to an inability to get out of these debts because the household could make no profit on their crops.
When coffee prices dropped in the year 2000, many Ede farmers with these short-term private loans told us they could not pay. In many cases, the lenders took the Ede land that had been put up as collateral, or the Ede had to sell other lands to pay the debts, leading to increasing landlessness among Ede. We interviewed a Mr. M. in Cu Prong commune of Dak Lak who not only had to face the coffee price drop, but a motorcycle accident in 2000. He took out an emergency loan from the coffee supply store for 6 million, with a one-year repayment term and interest of 4.8 million over the course of the loan (about 7 percent per month, compared to the formal sector rate of less than 1 percent per month). He put up his coffee lands as collateral (about 1.2 ha, with 750 coffee trees). When Mr. M. could not raise the 10.8 million to pay off the loan at the end of the term, the coffee trader took Mr. M.’s lands. Had Mr. M. actually sold the lands outright on the market (as they were productive lands with 5 year old coffee trees), he would have gotten more than twice the amount of his loan payment for these lands.
In other villages, traders have not taken lands from farmers yet, but continue to demand repayment of high-interest loans, which keep rising in size far beyond the original loan amount. In Adrong village of Cu Pong commune, out of a total of roughly 100 mostly Ede households, about 20 households had outstanding debts of over 50 million dong, and over 10 households had debts of 20–50 million dong each. These debts accumulated from the high-interest loans taken from traders to pay for machines and fertilizers for growing coffee in the 1990s, when coffee price were high. The burden of debt that cannot be repaid only increases over time as the interest keeps compounding.
The Kinh, who also had to face the same drop in coffee prices, appear to have been more able to weather the price drop. Kinh reported being more likely to have had their loans from the formal bank sector, and provincial and central policies were adopted to let banks extend loan terms during the coffee crisis with the interest on these extended loans being subsidized by the government. Additionally, many Kinh said they called on relatives, particularly in sending areas of the Red River Delta or elsewhere that were not in the same crisis situation as Dak Lak was, to send them money to help them weather the low prices. Thus, there was less land forfeiture among those with formal loans and migrants who could draw on family resources during this period.”
This story of indebtedness, landlessness and discrimination is probably not something that is going to promote Vietnamese coffee globally, and until there is a serious commitment on the part of not just coffee buyers but also local and national authorities to deal with the inequality that exists for coffee producers, these problems are not going away anytime soon. The next drop in coffee prices will expose these problems even more dramatically than the last. There is an ongoing debate in the academic literature if certification and other standards in global food chains will help or hurt these poor smallholders (e.g. see J. Lee, et al (2012) “Global value chains and agrifood standards: Challenges and possibilities for smallholders in developing countries”. Proceedings of the National Academy of Sciences 109 (31) 12326-12331). So there are no magic bullets. But it helps for everyone to see clearly what the challenges are, which I don’t see reflected in the Trung Nguyen chairman’s statements.
Pam McElwee
Dr. Pamela McElwee
Assistant Professor
Department of Human Ecology
School of Environmental and Biological Sciences
Rutgers, The State University of New Jersey
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From: Tom Miller
Date: Tue, Nov 20, 2012 at 3:36 AM
To: Vietnam Studies Group <vsg@u.washington.edu>
If Trung Nguyen is seriously interested in certification, it should contact Paul Rice at Fair Trade USA, the leading Fair Trade certifier in the USA. Prior to heading Fair Trade, Paul spent years working with coffee farmers in Nicaragua establishing fair trade coffee standards, and also researched and produced a business plan for fair trade coffee production in Vietnam. Fair Trade USA has been criticized for certifying larger growers, but its standards are the most universally accepted in the USA.
Tom Miller
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From: Oscar Salemink
Date: Tue, Nov 20, 2012 at 4:21 AM
To: Vietnam Studies Group <vsg@u.washington.edu>
Thank you Pam, for a most insightful comment.
One of the problems with coffee in Vietnam is indeed the land issue, which means that any claim to meet social and environmental standards must not only take the coffee producers into account, but also the non-coffee producers, including landless farmers (or better: formerly subsistence peasants). The coffee boom (but also rubber, pepper, cashew, cocoa) in the Central Highlands since 1990 did not only involve a massive environmental transformation, but also a massive demographic transformation, as the labor for the newly cleared farm plots and gardens were mostly migrants from the North. This migration of millions could only happen by ignoring claims to common landed property of the ‘indigenous’ ethnic minorities, who – as you point out – were massively displaced in the process, even if ethnic minority households received individual plots as private property. In other words, the land allocation to individual households, so much pushed by international donors, had the net effect of dispossessing certain groups of people. Many minority communities responded by moving further into the forest (with predictable environmental effects), others tried to adapt to the new economic, ecological and cultural circumstances of ‘market modernity’ by converting to evangelical Christianity.
Anyway, there is no turning back the clock, because any attempt to do so would amount to ethnic cleansing – which is absolutely not a solution, and not something that any sensible person would advocate. But any certification that does not take the specific (recent) history of this part of Vietnam into account, misses out on the real environmental, social, and cultural cost of coffee.
Oscar Salemink
Professor in the Anthropology of Asia
Department of Anthropology
Faculty of Social Sciences
University of Copenhagen
Øster Farimagsgade 5
1353 København K.
Denmark
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From: Tai, Hue-Tam
Date: Tue, Nov 20, 2012 at 4:39 AM
To: Vietnam Studies Group <vsg@u.washington.edu>
Thanks also from me to Pam for a clear exposition of the consequences for local people of Vietnam's push to grow more coffee.
I agree with Oscar and Pam about the relationship between coffee growing and dispossession of minorities in the Central Highlands. The push to expand coffee production, more than any other cash crop, was responsible for unrest in the Central Highlands, which the authorities insisted on blaming on missionary activity.
This rapid expansion caused the collapse of the coffee market which dealt another blow to the very people who had suffered from it in the first place. The anecdote recounted by Pam is one of such many many sad stories.
Hue Tam Ho Tai
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From: Melanie Beresford
Date: Tue, Nov 20, 2012 at 5:20 PM
To: Vietnam Studies Group <vsg@u.washington.edu>
Interesting thread. I also much appreciated the contributions of Sarah and Pam.
I agree that certification is very difficult with hundreds of small producers. However, it is quite normal in such buyer-driven value chains for the buyers to set the standards. They call it CSR. Whether or not they adhere to some common standards or not (and I've no idea whether Trung Nguyen does), the standards generally respond to western consumer demand and/or western protectionist sentiment, NOT the conditions of the local population or environment. Moreover, local conditions can often render them fairly meaningless. I feel sure that Mr Vu will be able to come up with something that keeps the former happy.
cheers,
Melanie
--
Melanie Beresford
Associate Professor in Economics
Faculty of Business & Economics
Macquarie University, NSW 2109, Australia
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From: Melanie Beresford
Date: Tue, Nov 20, 2012 at 5:24 PM
To: Vietnam Studies Group <vsg@u.washington.edu>
And this is precisely one of the problems with CSR. It favours producers who can afford to meet the standards imposed by developed country markets. Moreover, if Fair Trade buys from larger producers they can often sub-contract to the small-holders, but certify it as their product, thereby evading the standards altogether. This appears to be happening in the garment industry in Cambodia.
Melanie
Melanie Beresford
Associate Professor in Economics
Faculty of Business & Economics
Macquarie University, NSW 2109, Australia
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From: Hong Anh Thi Vu
Date: Wed, Nov 21, 2012 at 8:19 AM
To: Vietnam Studies Group <vsg@u.washington.edu>
Hi Melanie and all,
Do you think it makes a difference when an organization like the WWF is involved in "reassur[ing] consumers that the seafood they buy is farmed with respect for the environment and local communities..." like from these farms in the story below?
"Ho Chi Minh City, Vietnam – Today the Aqauculture Stewardhip Councial (ASC) celebrated the achievements of the first five Vietnamese pangasius producers to gain the ASC certification for responsible aquaculture. Vinh Hoan Corporation, Vinh Quang Fisheries Corporation, NTACO Corporation, Hung Vuong Corporation and Hoang Long Seafood Processing Company were honored during a gathering in Hoi Chi Minh City, Vietnam.... Read on...http://nieuwsbrief.tisign.nl/t/ViewEmail/r/85BDC92C931F415B/29EA66DF224AFD62AF060D6555554232
Hong Anh Vu
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From: Sarah G Grant
Date: Wed, Nov 21, 2012 at 9:40 AM
To: Vietnam Studies Group <vsg@u.washington.edu>
Dear Pam and list:
I very much appreciate and enjoyed reading your response. I do think coffee certification schemes are on the rise in Vietnam — 4C especially. The International Trade Centre is making, I think, a great effort to create a knowledge exchange between certification representatives and small farmers in the highlands (Dac Lac in particular) via training courses and a well established online "standards map" system.
I've spent too much time thinking about what happens to Vietnam should the next global coffee crisis arise. Or the possibility of a glut of Arabica (if/when Vietnam makes a drastic shift to Catimor and Arabica) that plummets global prices. It's frightening, especially in the face of such a strong global demand for affordable Vietnamese coffee. I do want to echo your sentiments in some way to say that I think the issue isn't necessarily one of certification scheme awareness and presence but one of accountability and a poor understanding of what certification standard criteria actually are — espousing an equally vague notion of "transparency" at training seminars and in farmer manuals. I've worked primarily with 4C and Rainforest Alliance (Fair Trade is extremely expensive for coffee producers and still very new in Vietnam) and it seems to me that most of the rhetoric about sustainability and quality is incredibly vague and poorly defined. A Q&A session at a certification standards training course, for example, might focus largely on questions that seek further understanding about the long term environmental implications of soil erosion and pesticide use but more urgently, about the possibility of growing high volumes of coffee while still meeting some vague "sustainability" standard. I'm still trying to make sense of it all but hopefully once I have a more complete draft of a chapter on certification schemes, I can share some more coherent thoughts (and analysis of auditing documents related to certification schemes).
Thanks again Pam!
Sarah
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Sarah G Grant
Ph.D. Candidate, Cultural Anthropology
University of California, Riverside