March 2, 2011, Buon Ma Thuot-- Vietnam is the world’s second largest producer and exporter of coffee but inconsistent quality and lack of processing limit product price in international markets and the incomes of smallholder farmers. That may soon change thanks to support provided by the Vietnam Challenge Fund, a component of Making Markets Work Better for the Poor, Phase 2 (M4P2), a project run by the Asian Development Bank (ADB) and funded by the UK’s Department for International Development (DFID).
Haruhiko Kuroda, President of the ADB, visited Dak Man Coffee Company to learn more about the processing method the firm is piloting with a coffee-growing commune in the Ea Kiet district. The pilot is creating the first smallholder-owned and operated coffee washing station in Vietnam and is the first Fair Trade certified project of its kind.
Introducing processing at the smallholder level can raise product quality, increase demand, and carve out a new market segment for Vietnamese coffee in international markets. More than 550,000 households in Vietnam derive their living from coffee growing, and about 2 million Vietnamese depend on coffee for their livelihoods. Approximately 95 percent of the coffee is exported, and in 2010 was valued at US$1.7bn.
“We see this as an important new step for the coffee industry in Vietnam,” says Jonathan Clark, managing director of Dak Man. “Our hope is that this project will herald a new niche for Vietnamese coffee in the international market, and that both our company and the commune members will mutually benefit.”
The Vietnam Challenge Fund provides co-financing grants to business projects that can raise the incomes of the rural poor by changing how agri-business is conducted in Vietnam. Buddhika Samarasinghe, of Nathan London and Team Leader of M4P2, says that if the project is successful it will be replicated in other parts of Vietnam and have a big impact on the rural poor.
“This is exactly the kind of project that the Vietnam Challenge Fund was designed to support”, says Nick Freeman, adviser to the fund. “We look to assist relatively high-risk projects that are both innovative and have the potential to raise the incomes of Vietnam’s rural poor in significant numbers. The determination and inventiveness displayed by Dak Man and the coffee-growing commune is to be commended, and we have high expectations for this project.”
After visiting the project, Mr Kuroda said: "I am impressed with the progress Dak Lak is making in its socio-economic development. The success of people centered projects with ADB's assistance is not only improving the welfare of poor people but also supporting the country's bright future through inclusive growth."