Background

Binh Phuoc is the unofficial ‘land of cashews’ in Vietnam, with about 196,024 hectares under cultivation producing about 194,400 tons of cashew nut in 2006, accounting for 50 per cent of total production nationwide. But these businesses have traditionally had only limited resources and the fierce competition among them caused many to buy raw cashew at high prices and low quality.

To address the problem, Binh Phuoc sought to gather cashew businesses under a common body to stabilize purchase prices and ensure quality. Thus was born the Binh Phuoc Cashew Association (BPCAS) in 2005. It has an executive board including nine executive members, three of whom are women. The board also includes a chairman and two vice chairmen as well as a secretary.

BPCAS has very strong local government presence, however. The chairman of the association is also the director of the local Department of Industry (DOI). Most other key personnel are also from the DOI and the organization’s charter states that the president must not be a business owner. As a result, the group leans heavily toward government management. The association has 78 member businesses (23 run by women), most of them private. Some members sit on sub-executive committees, such as the Purchasing Committee, a Finance Committee and a Monitoring Committee.

The group has almost no strategy to attract new members and the members that they do retain contribute membership fees to fund administration. This is the major source for funding, collected according to quantity of cashew sold each year, at about VND 1,500 per kilogram. In addition, the association also receives donor funding from projects such as PRISED. It has no revenue-generating services of its own. Nor does it have an office or full-time staff. Any administration is part-time only.

Member services

BPCAS has made some effort to provide services to its members. It has begun to provide trainings in business management and is providing market information, especially price forecasts on the international market. These are in the form of a newsletter with the Vietnam Cashew Association (VINACAS). It also provides technology support to farmers by collaborating with the Southern Agricultural Science Institute and Provincial Department of Agricultural and Rural Development. The association also proposed, and received, approval from the provincial Council for Science and Technology for financing the research and invention of cashew core and ‘shucking’ (shelling) machine.

The Association also advocates that the Provincial People’s Committee support businesses with greater capacity as the core exporting force in the province while trying to channel smaller businesses together to provide raw cashew for larger exporters. There are also plans to develop the Binh Phuoc Cashew brand and outline standards for cashew nuts.

But to date, the most important function of BPCAS has been to push for common price and standards on raw cashew to stabilize revenues and ensure export quality. It has proposed regulations on organizing the purchasing of cashew in which each business registers and reports purchase price and agrees common procedures on transport.

An opportunity for expanded coverage

The concept of greater member services may still, however, need more promotion, particularly among members who may not yet see the benefits. “Currently, we don’t need any information for the cashew association. We buy when we have agreement between buyers and sellers," said one agent of a large-scale cashew purchaser.

Turning points

Stabilizing price and quality by monitoring the process

At the beginning of 2006, cashew producers in Binh Phuoc were facing a poor crop due to foul weather with high winds and unseasonably heavy rains. Output dropped 20% over the previous year. Quality also suffered and much of the crop contained ‘extraneous matter’, such as floating (flat) nuts. Many agencies in the lower Tier 1 and Tier 2 also began to soak their stock in water to make it swell and increase weight, hoping it would appear as added volume. This only drove down quality.

Unfair price competition among companies also crept into the market, as did several ‘short-term’ purchasing agents. All of this further drove down quality. “We were buying from farmers at VND 8,500 VND per kilo. Suddenly, the agents jumped in to buy at 8,700 per kilo. Then they mixed cashew with extraneous matter and sold it back to us at 8,500 per kilo. But the actual price should have been from 9,500 to 10, 000,” said Mrs. Phan Thi My Le, Director of My Le Ltd. Company.

Then, at a conference in 2006 in HCMC, VINACAS strongly reiterated to members to buy cashew at an agreed price of VND 8,000 per kilogram and not to buy low quality stock with extraneous matter and floating nuts, to ensure the export quality. Members then reached an agreement on pricing and standard quality. This they broadcast to other members and even farmers via radio spots funded by ILO-PRISED. The results exceeded expectations. Local government also supported the movement, offering to examine and supervise lots and enforce strict fines for price fixing and adulterated materials.

As a result, price manipulation dropped significantly and export quality jumped. Prices stabilized at VND 10,200 per kilogram on average over the VND 9,500 of the previous year. This price, though higher, ensured profits for processors. Product for export sold at US$ 4,341 per ton over the US$ 3,674 of the previous year. By the end of season, Binh Phuoc had purchased, processed and exported about 100,000 tons of cashew for export, selling the rest domestically.

Lessons learned

• Stabilization of price and quality are crucial to Binh Phuoc cashew processing and exporting companies. By guaranteeing these factors, BPCAS can help its members to ensure the profitability. And with the right kind of help from the local government, BPCAS has the means at its disposal to act as an effective intermediary among members. Yet this still needs improvement and government partners would see far greater results if they listened to, and acted more swiftly on, feedback from members.
• BPCAS also needs to close gaps in its management structure, staffing and facilities. Where the strong government oversight is a boon, it can also be a hindrance. BPCAS’ high dependency on the local government puts it at odds with many members, who may feel that their specific interests are not addressed. With DOI personnel on the board, members may feel the association is simply another government body rather than a transparent, independent source of technical support. Here, VINACAS would be a valuable partner particularly in organizational resources. For example, members need market information. They do currently receive this in the form of notices and a newsletter, but it is from VINACAS rather than from their home association. BPCAS only acts as the medium, and then at a less dynamic level than what members need.
• Ultimately, the way forward on all of these issues may be by hiring full-time staff independent of DOI. This would afford members greater focus on management, which would allow for collection of membership fees, which could in turn be used for trainings. The support of the DOI and other governmental offices would still play an important role in the development of BPCAS as well.