VIETNAM: Rubber exporters neglect domestic buyers

Viet Nam is now the world's fourth leading latex rubber exporter, with exports last year totalling 780,000 tonnes and generating a record turnover of US$2.3 billion.

With latex prices up by 82 per cent over the previous year, 2010 export turnover was nearly double 2009 levels.

Overzealous exporters, however, have required local industries to import latex from other countries for domestic production. Da Nang Rubber Co director Dinh Ngoc Dam said rubber producers have focused on fostering exports rather than domestic sales in light of skyrocketing global prices

Yet the company has completed construction of a tyre production plant in the central city of Da Nang with demand for 20,000 tonnes of latex annually and was facing considerable difficulties in obtaining supplies from local sources, Dam said.

The company had attempted to buy rubber from small-scale growing areas, but this proven to be a risky practice, he said.

Viet Nam Rubber Group president Le Quang Thung, however, has denied that the group's affiliates were unwilling to sell to domestic enterprises, claiming that many companies turned to other suppliers, unwilling to pay the group's prices.

Viet Nam Rubber Association general secretary Tran Thi Thuy Hoa attributed the problem to the relatively small purchase contracts of domestic manufacturers, with suppliers opting for larger, long-term export contracts.

An official from Dak Lak Rubber Co who asked to remain anonymous agreed, saying that latex providers preferred to sign long-term contracts with foreign partners who could commit to buy despite changes in the world prices.

"Many domestic enterprises only seek to purchase rubber when the prices go up but then try to escape from the deal when the prices go down," he said.

Le Van Huy, director of HCM City-based exporter MTV Huy Anh Co, also asserted that foreign companies were ready to buy rubber even when prices changed while domestic enterprises hesitated.

Huy attributed this to the more efficient purchasing practices of foreign businesses and their large production capacities.

"Their purchase schedules are better than those of domestic enterprises as they have drawn up long-term business strategies," Huy said. "It sometimes takes us the whole month to get an order from a domestic enterprise, while it takes us only a day to sell to foreign enterprises.

"Processing companies like us really want to sell rubber to domestic buyers, but we are in a market economy. If the firms offer us the same prices compared to foreign companies and comply with international trading standards, we will sell our latex to them."(Syed Rashid Ali, Karachi, Pakistan)