Good Morning, Vietnam

Y Mum Eban saw the future 10 years ago. The first thing he did was abandon the corn and beans his family had been growing for generations. The second was to plant as many coffee trees as he could get his hands on.

Like hundreds of others who have rushed into the central highlands to capitalize on Vietnam’s coffee bonanza, that decision made Eban a wealthy man, by local standards, with an annual income of more than $3,000--nearly 10 times the national average.

“I never dreamed coffee could do this,” said a beaming Eban, 46, who has built a spiffy new home, bought a television and two motor scooters--”one of them a real luxury model”--and works his three-acre farm with a small tractor.

By any yardstick, Vietnam’s newest crop has been an astounding success, lifting entire regions out of poverty. And almost unnoticed by casual observers, it has made Vietnam the world’s third-largest coffee bean producer and exporter, though lagging well behind Brazil and Colombia.

“As Vietnam’s economy grows, coffee will become a bigger and bigger crop,” said Thai Doan Lai, general director of Vinacafe, the largest of the state-owned coffee companies here. “It’s creating jobs and eliminating poverty in poor areas, and raising the standard of living to levels rice farmers have never known.”

But success has come at a price. Longtime farmers and an influx of new settlers to the highlands are clearing land for coffee production at such an alarming rate that the government in Hanoi has issued new decrees to protect the forests and stop erosion. Here in Dak Lak province, which accounts for 60% of Vietnam’s coffee, the forest cover has been reduced to 15% from 70% since the Vietnam War ended in 1975.

International farming experts also are concerned that Vietnam’s obsession with increasing crop yields so that it can earn much-needed foreign currency has led to unsustainable farming practices. One example: the widespread use of fertilizers that accelerate growth but are so strong they “burn” the soil, destroying nutrients that the next generation of farmers will need.

For now, however, there is little immediate incentive to start emphasizing quality over quantity. Vietnam has the highest per-acre yield in the world, the government says, and coffee now ranks as Vietnam’s fifth-largest hard-currency earner, behind petroleum, textiles, footwear and rice.

The coffee industry here dates to the 1920s, when plantations were run by French colonialists. When peace returned in 1975, the Communist government in Hanoi gave top priority to expanding the industry, but like almost everything it touched in agriculture, the results were disastrous.

“Yes, we had a small failure,” admitted Lai, the Vinacafe director. “The government tried to tell the farmers everything, even where to plant their trees, and it really had no idea what it was doing.”

The boom began after 1989, when new policies allowed farmers to keep their profits, lessening the state’s role in production. The government also has encouraged coffee-growing with special tax incentives and subsidies when the world price falls below certain levels. Partly as a result, the number of acres devoted to coffee has risen over 25 years from 40,000 to 740,000.

Farmers generally own their land and sell their beans to collectives, which then sell to about 80 private and state companies that market and export the coffee.

“The potential of Vietnamese coffee is huge,” said David Thai, a Vietnamese American investor in Ho Chi Minh City (formerly Saigon). “It’s on an upward trend now, but that’s just the first dimension. The second dimension is more sophisticated farming techniques and shifting from Robusta to Arabica.”

Robusta beans, often used for instant coffee and for filler with higher-quality blends, account for almost all of Vietnam’s coffee exports. The coffee goes to 50 countries, with the United States being the biggest customer. Vietnam is now experimenting with Arabica, which is popular for specialty blends and fetches a higher price.

But Vietnam’s efforts to move ahead in the international coffee business have been hindered by poor processing, storage and sorting, and antiquated machinery, farm experts say. Coffee buyers complain that they are never sure if what is sold as premium beans is really premium. There are few standards, and quality is apt to vary from farm to farm.

“The state companies are unpredictable,” one buyer said. “You don’t know if they’re trying for quality or just trying to sell a bag. Until Vietnam gets its quality up to speed, it’s not going to be a dominant player in the market, like, say, Brazil.”

Vietnam’s marketing also remains unsophisticated, and as Hanoi looks to increase coffee production, it may yet dawn on someone that one potential market worth tapping into is the 77 million inhabitants of this tea-drinking nation.

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Where the Beans Are

Special tax incentives and state policies allowing farmers to keep their profits have helped Vietnam become the world’s third-largest coffee producer. Top producers in 1998, in millions of bags*:

Brazil: 34.5

Colombia: 12.5

Vietnam: 6.3

Indonesia: 5.6

Mexico: 4.7

Ethiopia: 3.8

India: 3.8

Uganda: 3.6

Ivory Coast: 2.7

Honduras: 2.2

* Each bag weighs 132 pounds.

Sources: national Coffee Assn., internaitonal Coffee Organization

Researched by JENNIFER OLDHAM / Los Angeles Times