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  • Cashew and globalization: How did Vietnam win the crown from India?

    Dec 4th, 2017

    Thanks to the ingenious promotion of automation, Vietnam is now the 'king of the industry'. And Kollam, a victim of government mismanagement and unwilling to accept the reality of a free global economy, is still reeling in his direction.

    Cashew: from Brazil to India

    Cashew was exported from Brazil to India through Portuguese explorers in the 16th century. The tree soon made its way to Kollam, one of India's most important commercial ports.Cashew has been commercialized on the world market since then, beginning in the late 1920s, when regulators from a subsidiary of General Foods signed contracts with local Indian businesses to collect buy raw cashew nuts and peel off the nuts.

    General Foods then shipped them to Hoboken, NJ, using a patented vacuum packaging process. From there they are roasted, packaged and sold throughout the United States under the brand name Baker's Vitapack Cashews.This is the beginning of the rapid development of the global business is currently worth $ 6.5 billion. In the United States, the largest export market, cashew nuts are considered healthy snacks, are being processed to become substitutes for butter and milk. In India, the largest market for cashew kernels, a growing middle class is also fond of adding cashew nuts to biscuits and sweets for weddings and birthdays.For decades, Kollam was the 'cashew nut capital' of the world. The plants have performed almost the entire process from shelling to sorting.Today, however, Vietnam is the 'king of the industry', thanks to its ingenious promotion of automation. And Kollam, a victim of government mismanagement and unwilling to accept the reality of a free global economy, is reeling in the direction.

    Kollam: 'Capital of the regulator' for a while

    This is an example of the age of globalization. Globalization creates markets around the world. The international supply chain is scattered all over the world. This combination can bring communities out of poverty and create fierce competition that can strengthen those communities quickly.The bosses of the industry, so do not ignore the opportunity to get rich. After a few years of visiting to set up contracts for General Foods, Johnson and his wife moved to Kollam, where he teamed up with a local partner, formed his own cashew processing business and sold back to General Foods itself.

    He has accumulated a wealth of wealth and even named his daughter Kerala (Kollam City, Kerala State, India). After the United States entered World War II and ordered all American women and children to leave India, Johnson had to leave, still hoping for a return. But he never did.A handful of local families then continue to dominate this sector. There has been a conflict between processing plants and local workforce even when these people are the main source of employment.

    From the beginning, cashew industry has used cheap labor but skilled to carry out cashew nut removal process. Almost all of them are done by women. They earn a small income.Says K. Ravindranathan Nair, 85, who built the company Vijay Alaxmi Cashew into one of Kollam's biggest cashew processors: "Previously, these women only worked at home. It's not too big, but for them, it's an extra income for the whole family. "Skilled workers are appreciated, although their wages do not reflect that. Especially skilled people can quickly, by looking and feel, the exact classification required by the importer.

    Khadeeja, a 39-year-old worker who has worked at Kollam's facilities since the age of 15, said: "It's a skill that only we know of."In the 1960s, Kollam sprouted hundreds of processing plants, the smoke of their roasters smoldering everywhere. These factories work with hundreds of thousands of workers at peak times.

    Krishnan G. Nair, executive of KGN Cashew, said: "Kollam is where the market is."On his desk there are two books: "The Wealth of Nations," Adam Smith's work on free markets; and Karl Marx's Das Kapital. They grasp that the competitive forces have formed in the Kollam industry from the very beginning.

    Cashew business boom. But laborers are subject to low salaries and abuse of labor. Of course, this situation can not last forever.Since the 1970s, local trade union leaders have put a lot of pressure on the local leadership with managers who support the workers.To expand employment and raise wages, the state has set up two major government cashew processing plants. These companies dominate the local industry. The minimum wage, even for private producers, is also set by the state government.

    Wages rise, health care is improved, cashew industry makes many families out of poverty. Women and children are the biggest beneficiaries.With the development of the cashew industry, Kollam was able to build the local theater, public library and the best hotel of the city. Kerala quickly became one of India's most advanced states.

    "Most of the facilities and agencies here are the result of cashew nuts," said NK Premachandran, representing the Kerala legislature.For a time, the balance between capitalism and Marxist ideology seemed to prevail. India's cashew exports in 1999 reached 97,000 tonnes, doubling what they had achieved at the beginning of the decade. They account for about 80% of the global market. In general, India processed 173,000 tonnes of cashew nuts in that year, leading the world.

    For the people of Kollam and other large cashew production areas in India, cashew nuts bring life to them, cashew nuts are considered as something of a spiritual significance.Bhaiamma, an 80-year-old woman who worked in the factory from age 11 until her retirement in 2006, said: "Life is tough, for the people here are the cashew nuts."

    How to win the crown from India?

    Travelers from Vietnam started to go to Kollam in the mid-1990s. Producers said they represented cashew growers. Vietnam has previously been a source of raw cashew nuts for many factories here. The producers do not hesitate to guide the Vietnamese on how to process cashew nuts.One of the visitors here is actually the engineer working for a man determined to develop Vietnam's cashew industry, named Nguyen Van Lang.Since the 1980s, the Vietnamese government has encouraged landowners in some of their poorest districts to grow cashews. In the 90s, a processing plant has confirmed itself. They work with thousands of workers, just like in Kollam.

    Western retailers such as Wal-Mart, Carrefour and Tesco, the biggest cashew growers, are struggling to find suppliers that can offer them cheap prices. than.In 1995, Lang, the owner of an export food packaging business, was asked by the government to find out how Vietnam could export cashew nuts to the US or anywhere else. buying.Mr. Lang has never seen cashew nuts before. When he could not obtain a visa to visit India, a brother living in Paris went there on behalf of Mr. Lang.

    Mr. Lang said: "Technology will bring significant competitive advantage."At that time, an Italian company built a machine that could cut cashew nuts. This machine is expensive and breaks many nuts. While cutting seeds is just one step, it is thought to be the simplest.Therefore, he decided to make his own machines. The 73-year-old said of the difficulties he had experienced: "We tried many times until we found a way to get the machines into each stage."Most recently, in the early 2000s, Vietnamese processing plants still looked very similar to their counterparts in Kollam: rooms with women are 'immersed' in peeling, grading and grading of cashew nuts by hand.

    Pham Thi My Le, now 60, began construction of one of Vietnam's first cashew processing companies in 1993, after years of buying cashew nuts from Binh Phuoc province and selling them to the farmers. It transports them to processors in India.From 2000 to 2007, her factory employed 2,000 workers in the peak months. Most of the workers walked nearly a thousand miles from their northern Vietnamese hinterland, hired as temporary laborers in dormitories.My Le knew the machine that Lang is developing. She did not see why she had to buy these machines until one day the work force was exhausted. Foreign companies in the North provided many jobs for the workers, so they decided to return to their homeland,Eventually, My Le decided to buy the machines and put them into production. Over time this has greatly improved the operation of the plant.

    Today, her factory only needs 170 workers. Each day they produce 66,000 pounds of cashew nuts, equivalent to the volume of about 2000 workers previously.Today's workers live in the same dormitory, but the whole family can live together, each with their own room. Their children are also cared for while the workers have to go to work.Another businessman, Le Quang Luyen, is even more keen on investing in technology. His company, Phuc An, recently spent $ 40 million to build a fully automated facility that will open this year. This plant can handle up to 110,000 pounds of cashew nuts per day with just 30 employees.

    What mistake made Kollam lose the king?

    In Kollam, gaining market dominance in the global market has dulled political leaders, dissuading mechanization from fear that this could lead to job losses.Local laws prevented local processing plants from laying off workers and thus lost the opportunity to minimize the costs and benefits that technology can bring.Government policy makes things worse. In order to protect the cashew growers and expand the domestic crop, the government of India imposed a tariff of 9% on imports of raw cashew nuts in 2006. The Kerala state government has raised 35% of wages for workers in the industry. They now earn $ 5.40 a day.As a result, private processors have moved their operations to other states in India where wages are lower and they can mechanize factories.

    Companies controlled by the Kerala state government can not move production, simply losing money.Employees are only able to work 165 days a year compared to 200 days as before. With a pay rise of 35% on demand, the company has to pay workers an average increase of 22% while performance is down 18%.Earlier this year, a cashew company controlled by the Indian government, Capex could not buy raw grain and had to shut down for several weeks. To cut jobs, Capex says it has not hired new workers for more than five years. The company currently employs 3,500 people, half of its workforce in 2010. Their job protection goals have made things worse.Capex says they have done their utmost to protect employment with the government's wage policy. India's raw cashew nut processing stagnated last year at 1.5 million tonnes, while exports dropped 38 percent to 82,302 tonnes, the ministry said.Meanwhile, according to the Ministry of Agriculture and Rural Development, Vietnam has produced 1.4 million tons of raw cashew nuts, doubling from five years ago.

    What is the future of Vietnam cashew industry?

    Like Bhaiamma, a retired worker in Kollam, Vietnamese workers, Nguyen Thi Thinh also appreciated her work.Thinh started with sorting and picking raw cashew nuts by hand. But when Ms. Bhaiamma retired in 2006, she still had to do the same work, still by hand.At Tha Le's company in Vietnam, Thinh learns how to operate machines in the process from peeling to grading. She began to manage other workers who operated the machines.

    Ms. Thinh, earning $ 352.40 a month, has weekends and bonuses on holidays, said: "Thanks to the technology that I have become I of today."However, there are still many difficulties ahead. Domestic cashew production has been declining in recent years. As Vietnam's wealth is increasing, agricultural land is gradually shrinking. Processing plants are increasingly dependent on imports.When Vietnamese buyers come to developing areas of Africa to buy raw cashew nuts, local government officials there have a requirement: In addition to paying for cashew nuts they plant, They want to know where they can buy cashew processing machines that Vietnamese companies are using.

    Obviously, in the global context, competition will increase, whether Vietnam becomes the second Kollam or will continue to hold the king of the 'king of the industry'?


    According to the Wall Street Journal

    Source: Vietnam Finance