Linking businesses with cooperatives to increase the value chain
Strengthening linkages in the value chain between domestic production units and import-export businesses remains a major challenge, with many bottlenecks that need to be addressed by logistics companies and freight forwarders. Fostering effective connections between agricultural producers, cooperatives and export businesses through efficient cargo logistics services is crucial for enhancing export efficiency and meeting the requirements of international trade.
Experts emphasize that agricultural cooperatives play a pivotal role in promoting horizontal links among farmer households through collective activities and organizing production with the help of international shipping companies and freight logistics providers. They also facilitate vertical linkages with export businesses along the value chain. Agricultural export enterprises act as key intermediaries, connecting producers and promoting vertical integration.
Recently, the Government has had many policies to encourage cooperatives to participate in value chain links. Photo: H.Diu
However, at the National Cooperative Forum 2024, Mr. Huynh Van Thon, Chairman of Loc Troi Group, highlighted challenges in serving farmers and facilitating exports, from providing seeds and services to linking production and meeting export orders. These include legal and regulatory hurdles, tax issues, and the problem of “breaking deals” with cargo delivery companies.
Specifically, weak legal enforceability leads to farmers disregarding contracts with cooperatives, making it difficult for export businesses to secure large orders and maintain export volumes with the world’s major logistics companies. Small cooperatives lack capital, capacity, and negotiating power with input suppliers and international freight service providers. They often lack technical expertise and management capabilities, hindering their ability to meet export order requirements from global shipping companies. Lack of collateral and reputation also limits access to trade finance and working capital for production, hindering collaboration with logistic service providers facilitating exports.
Meanwhile, Mr. Nguyen Anh Duc of Saigon Co.op acknowledged that the production and export supply scale of cooperative organizations is not highly specialized, and their connections with international trading companies remain modest, resulting in weak export logistics linkages.
However, due to fragmented export logistics linkages, many trade facilitation policies have not been fully effective. According to the State Bank, export credit for Cooperatives and Cooperative Unions reached only VND6,024 billion by February 2024, down 1.69% from late 2023, limited by weak export linkages, disconnected supply chains, market risks, and inefficient export finance disbursement
Experts suggest exporters and cooperatives must leverage government incentives and global market opportunities to build resilient export linkages and integrated value chains through partnerships with shipping and logistics leaders. Mr. Huynh Van Thon emphasized that farmers and cooperatives need to link effectively to organize export-oriented raw material sources and produce according to importers’ specifications, requiring deep investment from export businesses in logistics infrastructure, facilities and stringent quality management aligned with export market requirements.