Binh Phuoc Cashew Association

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 (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.

Background

The Hanoi Union of Associations of Industry and Commerce (HUAIC) today is a product of the Doi Moi era, when government policy in Vietnam shifted toward open market reforms. It functions as a facilitating institution for businesses in the market economy, representing and protecting their legal rights and offering information exchange among members and government partners. HUAIC promotes trade investment and cooperation among businesses, facilitates business ventures with foreign investors, and provides services such as brand building and competitiveness training.

The first Hanoi industry and commerce association dates back to 1956, led by what was known in the terminology of the time as ‘nationalist bourgeois’ Bui Gia Hung. This association was mandated to mobilize the industrial and commercial sector to support the private and capital reform policy. The association continued during the war but was dissolved in 1975. Ten years later, Doi Moi again allowed people to go into business for themselves but after a year there were only about 20 private business, all factories. Then the Politburo issued a decision allowing small business owners and individual manufacturers to form an association. In early 1989, businesspeople in the city then proposed establishment of their own representative body under the name of the Hanoi Industrial and Technological Association. Word of the new association attracted the interests of more small business owners and after a great deal of effort, in 1996 HUAIC was born.

HUAIC has been very active in advocating for the legal and business environment. Its representatives now participate in drafting or revising trade law, laws on banks and credit organizations, tax law, corporate tax law, VAT, land laws, the Enterprise Law and Investment Law. The Association also conducts market research and has participated in several studies together with the National Economics University and other institutes.

Member services

Mapping the future

HUAIC was instrumental in preparing the plan for the South Thang Long Industrial Park, where it seeks to provide spaces for its members. And through its Trade Promotion Centre, the Association has been successful in matchmaking between businesses domestically and internationally. Hundreds of companies have received support to design projects, conduct market research and attend foreign trade fairs.

The group established its Trade Promotion Center in 1998 when no agencies, not even the Ministry of Trade, had such a facility. The center is administered by the Association. It is its own legal entity, has its own seal and generates its own finances, and after eight years has proven its role as a bridge between local enterprises and domestic and international markets. Hundreds of enterprises have received funds to conduct market research or take part in trade fairs both domestically and abroad.

Before the launching of the current information portal, HUAIC has also collected some 10,000 legal documents and several hundred thousand pages of materials for business research.

Access to credit and financial support

The Association has established relations with organizations that support domestic and international enterprises, such as the Danish International Development Agency (DANIDA), Mekong Private Sector Development Facility (MPDF) and the Japan Bank for International Cooperation (JBIC). Once members have established relations with enterprises they turn to direct contact and only return to the Association when necessary. Over 30 enterprises have received $2000 to $3000 for grants from DANIDA to develop business partnerships in Denmark. Over 20 enterprises have received loans of VND 1 to 3 billion each from MPDF as well, and 20 enterprises have received loans of approximately VND 55 billion total from JBIC to expand production.

Partnerships

The Association has established dynamic relationships with many domestic and international organizations, including the Beijing Industry and Trade Association and other Chinese groups to facilitate business on both sides. It has also been active in the following:

• Partnership with ZDH (Germany).
• Partnership with the Asia Foundation (U.S.).
• Works with the Asia World Research Institute (Japan) to recruit mechanics and welders to participate in technical training courses.
• Partnership with JETRO.
• Works with IMF and the World Bank in creating a more favorable environment for business through annual business forums in Vietnam.
• Participates in linkages between business associations of ASEAN and India chaired by the Prime Minister of India.

HUAIC has also joined with domestic research institutes and associations such as VCCI, the industry and trade associations of Ho Chi Minh City, Dong Nai, and Can Tho, and associations in steel, tea coffee, sea food and wood to exchange information and to organize conferences, workshops and dialogues.

Turning points

New endeavors

HUAIC is currently planning two projects in parallel, a Pro-poor Fund and the Business Development Research Institute. The Pro-poor Fund originated from an inspiration for larger firms to conduct corporate social responsibility programs. This will raise funds from HUAIC members and domestic and international organizations to sponsor disadvantaged individuals, businesses that need support and poor children who show talent and the willingness to better themselves. Target beneficiaries include the disadvantaged in Hanoi and individuals who demonstrate talent, notably young adults who demonstrate skills in technology, architecture, music, arts, and business. The program also reaches out to victims of accidents and natural disasters. It will grant limited cash support to target groups as funds for procurement of production materials or equipment, and as scholarships.

The Business Development Research Institute (BDRI) was inspired by Vietnam’s accession to the World Trade Organization, which will bring both opportunities and challenges for members. The challenges will come from foreign competition and will dramatically increase the need for capacity building in domestic entrepreneurship. BDRI, which operates on service fees, will function as a research institute on macro-economic policies, economic institutions and the issues of business administration, financial management and human resources. It will create a network of high profile researchers from national and regional institutes as well as business leaders. Currently, the Institute has been able to bring together 20 scientists (professors and doctors) and six notable business leaders. HUAIC is now finalizing procedures for the establishment of the institute, slated to come into operation at the end of 2007. It is also re-designing its “Doanh nghiep & Kinh te thu do” Newspaper as “Thoi bao doanh nhan ngay nay” (Modern Entrepreneur Times).

Lessons learned

• The most serious problem facing enterprises today is space. This grows out of several factors, including a lack of land, inefficient administration, lack of knowledge among enterprises themselves, and lack of mutual understanding between enterprises and authorities. HUAIC has prepared plans for the South Thang Long Industrial Park (119.5 ha) and acts as guarantee for the Infrastructure Development Company, where it seeks to meet the demands of space for its members. It has also organized many training courses to improve management capabilities of members and acts as the connection between enterprises and authorities.

• As Vietnam has joins the WTO, the demand for better international-caliber business practice will grow. Enterprises need closer contact with foreign businesses. This it is not easy for smaller local entrepreneurs. HUAIC, with its status and reputation, facilitates communication between local and foreign businesses.

• Traditional business loans require high collateral. But there are other capital sources from developed countries, through groups such as DANIDA, MPDF, and JIBIC. And with its network, HUAIC can put members into contact with these organizations as well as with other commercial banks which are members of HUAIC, such as VP bank, Ocean Bank and AB Bank.

• Although HUAIC has provided a strong package of services to its members, it must continue growing. Members have requested consulting services, for example, more study tours to learn more hands-on experience in other companies, and better newsletters. Members have also called for greater professionalism in HUAIC administration.

Background

Da Nang is a municipality in the heart of Vietnam. Its geography is well-suited to economic development and it is an ideal tourist destination for both Vietnamese and foreign visitors. The city is in the middle of the country on the north-south road, rail, sea and air routes and is near three well-known world cultural heritage sites, Hue, Hoi An and the My Son Holy Land. It is also one of the important gateways to the Central Highlands, Laos, Cambodia, Thailand and Myanmar via the East-West Economic Corridor linking Tien Sa Seaport to regional trade corridors.

Da Nang has about 7,000 SMEs, many of them in tourist services and food processing. A significant number of these are run by women. Yet they have traditionally operated in almost complete competition with each other and many lack professional business skills and market information. There has been almost no collaboration. But recently, business owners called for an institution to gather small business into a larger body to foster development and benefits for all. In 2000 the Da Nang Women’s Business Club was formed and in 2001 it received UNIDO support to establish a network of member clubs. There are now nine satellite organizations in services, rice noodle production, fish sauce production, dried cuttlefish production, stonework and cultivation of mushrooms, among others. UNIDO also provided funding to organize training-of-trainers (TOTs) for member enterprises.

The Club’s mission is to:

• Improve knowledge, experience and skills of management administration for its member enterprises.
• Create business linkages among business to reduce costs and maximize mutual benefits.
• Set up a forum for women entrepreneurs to exchange information and experience and provide mutual support.
• Participate in social charities for disadvantaged and vulnerable groups.

The club has also begun meeting every three months on issues such as business law, AFTA, and value added tax.

Member services

The club has conducted a survey on the needs of small enterprises managed by women. They interviewed 900 women entrepreneurs in food processing and from these findings defined their program. They now offer training in financial management, business administration and marketing, among others. Specific trainings have covered food production, product quality improvement, fish sauce production, and skills building. Members may also get small business loans through projects by the Belgian Government and the World Bank.

Training and consultancy

With UNIDO’s “Program on the development of woman-owned businesses in food processing”, there have now been 81 training courses on food production, financial management and marketing. The club has also been instrumental in a number of other valuable programs, including:

• Training courses by the Da Nang Women’s Employment Service Center.
• Training courses from 2003 to 2007 in the project Environment Development Action in the Third World - ENDA funding and help from the Da Nang industrial extension program.
• Helping the local Women’s Union train staff with only tertiary education to become long-term key instructors.
• Two training courses on club management skills for 16 women in charge of nine business clubs in local districts.
• With UNIDO support, completed a set of curricula for food processing, publications on such products as fish sauce, dried fish, and rice noodles.

Access to credit

The Club has also worked within the Women’s Union structure to lend VND 28 billion to 5,201 businesses to develop production. This has been combined with a series of trainings on best use of capital.

Markets information, and technology

The Club helps members access market information and technology as well. Members have organized several workshops on building trademarks and brand. They also hosted 40 woman-owned businesses to participate in a special trade fair for products made strictly by women.

Partnerships

The chairwoman of the Club has also met with faculty from the Ho Chi Minh University of Technology’s Food Bio-Technology and Environment Department on new methods to produce better fish sauce. This included a component with a three-year loan to buy the latest labor-saving equipment.

Workshops

The group has organized a wide range of workshops, such as “Special Praise for Businesswomen”, “Enhancing Capacity for Da Nang’s Businesswomen”, and “Da Nang’s Businesswomen and Economic Integration”. And to supplement information on policy and law, the Club also invites local officials to its regular meetings.

Networking

From 2000 to 2003, there was only one women’s business club in Da Nang with 30 members. But since 2003, those numbers have increased markedly and through aggressive networking there are now nine clubs with 220 members. Last year, nine women members of these clubs were appointed to participate in the APEC Summit.

Corporate social responsibility

The Club has also given VND 14 million to build houses for women in Lai Chau Province. In addition, at the beginning of this year, the group contributed VND 50 million to build a treatment center for poor women.

Turning points

At its inception, the Club had just a few members, mostly in rice noodle production. Each enterprise had to go to the far northern provinces such as Thanh Hoa or Nghe An, or southern provinces such as Tien Giang or Hau Giang, to buy material. The cost of transport and retail purchase made this an expensive way to do business The Club then started looking for new, bulk resources to get the price down. This was a milestone for future development and demonstrated the buying power of the group. The club has also changed attitudes and the way people do business. By pooling their buying power they’ve seen the benefits of cooperation.

The way forward

Today in Vietnam women’s rights in economic self determination are protected by law and Da Nang officials have demonstrated support, for example, by reducing fees for them at the annual spring trade fair. Yet business skills of most women in Da Nang and the surrounding area are still limited. They act merely on ‘the way they have always done it’ rather than on market research, business plans, marketing, financial management and good personnel management. Most businesswomen in food production have insufficient knowledge of processing techniques and food hygiene, and other enterprises simply lack capital, or they have capital but have not used it effectively. Still others are overwhelmed by the fierce competition on the market. They are afraid of taking risks.

Lessons learned

• The Da Nang Women’s Business Club shows that if the members maintain an interest in the activities, they will be more successful. As a result, the Club can ‘raise its voice’ to the local authorities. And if the leader of the Club has a good reputation and is enthusiastic then she can persuade others to work with her for the greater good of all.

• By pooling resources to increase buying power, the Club not only connects them members but also helps them save input costs. This is one of the most valuable initiatives of the Club.

• The wide and effective network of the Club has made it an important entity in the business community. Many other agencies, such as the Industrial Extension Center, the Department of Planning and Investment, the Department of Science and Technology and the Vietnam Chamber of Commerce and Industry often seek it out when they want to carry out programs in Da Nang.

• The recent development of the Da Nang Women’s Business Club has proved that the ‘personal dynamics’ of leaders is exceptionally important for the existence and growth of a business club.

Background

Nam Dinh is an agricultural province in the south of the Red River Delta. It has a population of about 2 million. Currently, there are about 2,000 enterprises in operation. Some are large ‘equitized’ state firms but most are small and medium-sized enterprises in agricultural production, small scale metalwork, handicrafts, garments and textiles. Nam Dinh was once centre of the textile industry during the subsidy era, but when subsidies ended the province suffered serious unemployment and the social problems that come with it.

From 2001 to 2004 GDP was 7.3%, much lower than the average in the Delta (10.5%), and Nam Dinh ranked second lowest (above Thai Binh). It was also near the bottom of GDP, at VND 4.47 million per year.

Yet despite this, private enterprise has grown 27.9% on average since 2001 while state sector growth has been just 14.2%. In 2001, local enterprises partnered with the Nam Dinh Urban Development Project and the Swiss Agency for Development and Cooperation (SDC) to found the Nam Dinh Private Enterprise Association. Just 58 businesses joined at first and growth remained sluggish due to limited resources; members repeatedly cited a need for greater coordination. So on April 24th, 2006, the Nam Dinh Small and Medium Enterprise Association (NADISME) was established as a result of non-stop lobbying and encouraging of businesses and local authorities. The Association fosters cooperation networking and mutual support. It also improves efficiency, protects the legal rights of members, connects SMEs with government authorities, improves business policy and fosters deeper integration into the international economy.

Member services

NADISME offers support and consulting services for SMEs. With support from SDC/Nam Dinh Urban Development Project, the Association has conducted a number of trainings on business law, preparation for WTO membership, production management, marketing and best practices. It has also bridged the public and private sector. In 2006, NADISME brought together the provincial Department of Planning and Investment, Department of Taxation, Department of Natural Resources and Environment, as well as other agencies to meet with the business community. The dialogue provided a platform for free and direct communication with policymakers.

Corporate responsibility is another of the Association’s strong points and members have organized trainings for disabled entrepreneurs to exchange information and raise awareness of government policy. And with the support of the Nam Dinh Urban Development Project, NADISME also posts vital information on www.nadisme.org.vn, although the site is yet to be finished.

But while trade promotion and business linkage are core elements in the group’s charter, members have yet to implement them formally. Currently, these issues are addressed mostly by the entrepreneurs themselves without any active support from the Association.

Turning points

At its inception, NADISME found that it needed an operating budget. But member dues were insufficient, so it established a business consulting company. This was a joint-stock company offering consultancy, training, and health services for businesses. In the future it will focus on health care, offering medical check-ups and health insurance. It will also open a clinic for member staff and monitor their health. This sort of onsite service has proven to be more affordable and convenient, and it meets WTO requirements on corporate responsibility.

The Association also provides the other following services:

• Supports establishment of new businesses (drafts company charter, business registration, tax registration, and official stamp).
• Trainings on selected management topics as requested by clients.
• Health care services for workers in factories, regular health check-ups, health insurance, emergency.

To date, the company has been successful. There are more clients seeking services. This helps build trust in the Association while guaranteeing an income to finance operations.

Human resources and local government support are the strongest points for NADISME. A former governor of the State Bank (now chairman of the Vietnam Association of Businesspeople) has endorsed it. The group has also won favor with the Alliance of Cooperatives, the Department of Taxation, the Department of Natural Resources and Environment, and especially the Department of Planning and Investment. It has now established sub-associations in three districts and one member has been honored among 100 typical enterprises receiving the Thanh Giong Cup. And at the lower level, NADISME has helped members explore more efficient use of materials, helping enterprises in Hai Hau District re-process waste materials from the production of mushrooms for cooking and medicinal purposes.

Lessons learned

• Public relations are still weak for NADISME and the group has just established a website to promote itself, although the site is yet to be completed. Members have cited a need for more interesting articles and enhanced advertising. The Association also needs to cultivate a deeper relationship with newspapers.

• Membership meanwhile, is, at 325, modest for a provincial level organization in an area with more than 2,000 businesses. Most current members are situated in the city or around district townships and efforts to reach remote and isolated areas containing more enterprises could be stepped up. Within the first six months of 2007, the Association enrolled only 20 members due almost entirely to personal encouragement by the chairman.

• With the support of the government and donor projects and with earnings from services, the Association can maintain and expand its programs, but human capacity and strategic development remain questions.