HANOI, March 14 Asia Pulse - A number of subsidiaries of Vinacafe will have to declare bankruptcy over the next two years in an effort to overhaul Vietnam's biggest coffee exporter, a senior industry official says.

"Declaring bankruptcy is the best way out for a number of Vinacafe subsidiaries in debt due to poor business operations," Doan Trieu Nhan, deputy chairman of Vietnam Coffee and Cocoa Association (Vicofa) told Vietnam News in a telephone interview on March 10.

Nhan rejected local press reports about a government decision to dissolve Vinacafe, saying that the State-owned corporation will be 'restructured' but not 'dissolved'.

"Dissolving Vinacafe was not an option as it contributes some 25 per cent of the country's total coffee production," he said.

The Vicofa deputy chairman did not mention the companies that would declare bankruptcy, but local newspapers reported that they comprise of five State farms, three State-owned companies and a vocational school.

This year will see four other Vinacafe subsidiaries equitised while the State will retain ownership of ten other subsidiaries of the corporation, according to the local press.

"The reorganisation of Vinacafe would follow that of other State owned companies in the textile, garment and seafood sectors to sharpen their competitiveness," Nhan said.

Last year Vietnam National Coffee Corporation's profits - the first in five years - reportedly came from two subsidiaries: the Vinacafe Bien Hoa Joint Stock Co, and the leading coffee exporter Tay Nguyen Coffee Investment Import-Export Joint Stock Co.

Vu Duc Tien, director of Tay Nguyen Coffee Investment Import-export Co, said he was unsure what would happen to Vinacafe's subsidiaries when it is disintegrated.

"But little change is expected to Tay Nguyen, as we gained joint stock company status in 2004," said Tien.

In February, Vinacafe general director Do Van Nam said this year Vinacafe targeted total production worth VND1.1 trillion and export turnover of $219.9 million, up 12 per cent compared to 2005.

Vinacafe has 20,000ha or 4 per cent of Vietnam's total under coffee cultivation, with several of its subsidiaries as the country's leading coffee exporters.

Nam affirmed that Vinacafe would play a "crucial" role in consuming, processing and exporting coffee, aiming to sustainably develop and promote Vietnamese coffee brands in the world market.

(VNA)