Enterprises need to be more active to increase exports to ASEAN market

The market of countries in the ASEAN currently is the fourth largest industrial trade partner of Vietnam after China, the US, and South Korea. Despite many incentives, enterprises have not focused on exploiting this market to promote exports.

Textile is among the products that still have export potential to the ASEAN market. (Photo: SGGP)

Textile is among the products that still have export potential to the ASEAN market. (Photo: SGGP)

This is the information given at the conference ‘The ASEAN market and promoting the export of Vietnamese goods into the ASEAN’ held by the Asia-Africa Market Department in association with the Ho Chi Minh City Center of International Integration Support on June 26 in HCMC. The conference also connected online with Vietnam trade offices in 11 countries to provide information and answer questions for enterprises.

Figures from the Ministry of Industry and Trade show that trade turnover between Vietnam and countries in the ASEAN reached US$57.6 billion, accounting for 12 percent of the total trade turnover between Vietnam and the world. The ASEAN market is not as choosy as other developed countries in Northeast Asia, the EU, and the US. Countries in the ASEAN can import a wide range of products suitable for the competitiveness of Vietnamese enterprises. Besides, Vietnam is considered to be a gateway for the EU to come to the ASEAN when the EU-Vietnam Free Trade Agreement (EVFTA) and the EU-Vietnam Investment Protection Agreement are expected to take effect early in July or August this year. This is also a great opportunity for Vietnam to develop trade relations with countries in the ASEAN.

In the field of trade, Vietnam and countries in the ASEAN have implemented the ASEAN Trade in Goods Agreement (ATIGA) in 2010 and are carrying out tariff reductions. Compared to other agreements, the commitments to cut tariffs in the ATIGA are the highest and fastest. Vietnam has completed its route of tariff reductions in 2018, the rate of tariff elimination across the ASEAN has exceeded 98.6 percent. With a population of about 650 million people, a total gross domestic product of more than $3.11 trillion, and average growth of 4.7 percent per year, the ASEAN is considered as an especially important market of Vietnam and the first market for Vietnam’s products to test their competitiveness before entering the global market.

Although there are several incentives and geographical advantages, the ASEAN market is only considered an "opportunity” and "potential" market, the most of Vietnamese enterprises have not exploited well to increase the number of export goods. Specifically, Vietnam's exports to the ASEAN currently are the lowest compared to other countries in the region. Of the 100 percent of Vietnam's exports, only about 10 percent entered the ASEAN market in 2016, while the ASEAN's average was 24 percent. By 2017, the proportion of exports within the ASEAN increased to 11.7 percent but still had not achieved the expected level.

More worrying, in the first five months of this year, the import-export turnover between Vietnam and the ASEAN reached about $21 billion, of which exports merely reached $9.3 billion, down 14 percent over the same period. The main reason for the sharp decrease in two-way trade was the impact of the Covid-19 pandemic. According to an analysis by Mr. Nguyen Phuc Nam, Deputy Director of the Asia-Africa Market Department, rice exports to the Philippines and Singapore still grew but seafood exports dropped, especially pangasius fish exports plummeted 23 percent in Thailand, 22 percent in Malaysia, and 27 percent in Singapore. Manufacturing and processing group dropped by 16.8 percent in the first months of the year, in which key products such as machinery, cell phones, and components, computers, and components dropped steeply. Similarly, the group of construction materials also declined heavily because infrastructure and construction projects were interrupted and delayed by social distancing policies in some countries in the ASEAN.

Acknowledging the possibility of increasing the export volume and penetrating the ASEAN market, Mr. Pham Ngoc Hung, Vice Chairman of the HCMC Union of Business Association, said that the decline in export turnover because of the Covid-19 pandemic was unpredictable. Up to now, there is still no answer and no one dares to affirm when the pandemic will reach its peak and come to an end. This has greatly affected the production and export plans of enterprises. Currently, some enterprises have finished preparation for export orders but they cannot export because of many unavoidable reasons. On the other hand, the weakening purchasing power of ASEAN countries, especially for non-essential consumer goods, was also the reason that caused exports to shrink.

However, there is still a crucial reason that makes Vietnam's exports to the ASEAN to grow sluggishly. According to Mr. Hung, large Vietnamese enterprises have not focused on exporting to the ASEAN, the export businesses are mainly small and medium-sized enterprises whose production technology is still outdated, suitable for the markets of Laos, Cambodia, and Myanmar. Meanwhile, products exported into the ASEAN must also compete fiercely with high-tech products from China, Japan, South Korea, and India.

A survey not long ago on human resources and qualifications of Vietnamese and regional enterprises showed that Vietnam only got 3.39 points out of 10 points, while Malaysia got 5.59 points and Thailand got 4.94 points. The low production level has weakened the ability to diversify products and competitiveness on the market of Vietnamese enterprises.

According to the recommendation of Ms. Le Thi Mai Anh from the Asia-Africa Market Department, to make the most of the opportunity on tariffs and increase the export volume to the ASEAN, Vietnamese goods must ensure the rules of origin and the origin certification procedure. Specifically, a product is considered to be of the ASEAN origin if it has a pure origin or is produced entirely in the ASEAN region; or meet specific regulations in the rules of origin outlined in Annex 3 - Rules of origin.

It is time for enterprises to update and master the regulations on standards and quality; upgrade the production and preservation lines; focus on packaging, designs, and packing specifications. In the export process, it is necessary to actively study and solve the potential problems themselves; promptly notify Vietnamese authorities and the Vietnam trade office in that market for assistance and advice. Enterprises need to continuously update consumer trends, actively participate in trade promotion activities, actively seek cooperation with prestigious local distributors for Vietnamese products to penetrate that market more easily.
Mr. Pham Binh An, Director of the Ho Chi Minh City Centre of International Integration Support: The market is near and convenient for export

Import and export activities between Vietnam and the ASEAN are extremely convenient thanks to the proximity. Importantly, the ASEAN Economic Community offers many opportunities for Vietnam to participate in the value-added chain, improve production capacity, compete in supplying raw materials, capital, and high technology. The remaining problem is that each enterprise needs to make more efforts to improve its competitiveness, proactivity, and creativity to best meet the needs of consumers. The products of each country and each enterprise are in the regional value chain or global value chain. If enterprises do not constantly change to refresh their products, they will be lagged and eliminated.

Ms. Le Thi Mai Anh, the Asia-Africa Market Department: Vietnamese agricultural products see many opportunities

Vietnam still has great potential to export commodities, such as processed goods, manufactured goods, phones of all kinds and components, computers, electronic products and components, machinery, equipment, tools and accessories, spare parts, garments and textiles, wood and wooden products, agricultural and aquatic products, coffee, tea, construction materials. Especially rice, the ASEAN market accounts for more than 50 percent of Vietnam's rice exports. Currently, Vietnam has bid to supply a maximum of 300,000 tons of G2G rice to the Philippines. It is expected that the Philippines’ import demand for rice in 2020 and 2021 will continue to increase due to declining domestic production; Vietnam also plans to sign a bilateral MOU on rice with Singapore, in which the latter will buy 7,000 - 8,000 tons of rice every month within two years. Therefore, the prospect of exporting rice to the ASEAN market is huge.

By Thuy Hai – Translated by Thuy Doan

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