Last year witnessed Ho Chi Minh City's export turnover to the EU market reach over US$5 billion, with US$ 2.3 billion being recorded in the first half of the year alone. Local businesses are currently preparing to take advantage of the European Union-Vietnam Free Trade Agreement (EVFTA) which began to take effect on August 1.
Higher standards required to export goods to Europe
Europe represents a familiar market, consuming thousands of tonnes of fresh lemons each year from the Vietnam Lemon Trading and Investment Joint Stock Company. Despite this, the economic value of the items cannot be considered high as its products are mostly made up of raw materials with high transportation costs.
In anticipation of greater export opportunities to increase product value when the EVFTA comes into effect, the company has moved to import machinery from the Republic of Korea and Japan in order to produce lemon powder in line with HACCP standards.
Nguyen Van Hien, chairman of the company’s Board of Directors, says that his business is poised to ship the first batch of five tonnes of lemon powder and an additional five tonnes of dried lemon peel to the EU market in the near future.
Wooden products also represent a strength of firms in Ho Chi Minh City operating in the European market. At present, the tax rate of these item to Europe ranges from 2% to 10%, although when the EVFTA takes effect 83% of tax lines will be removed in line with expectations of wood processing enterprises based in the southern city.
Currently, several firms have initiated careful preparations to make sure of a sufficient supply of wood materials, whilst investing more in machinery, equipment, workshops, and trained human resources to improve product quality, therefore meeting requirements set by the demanding market.
HCM City devises business support plan
Nguyen Thanh Phong, Mayor of Ho Chi Minh City, says that the southern metropolis will map out a strategy in an effort to fully tap into the European market, especially its range of advantageous goods.
Ahead in the immediate future, the Ho Chi Minh City People's Committee has assigned functional agencies in order to devise specific schemes aimed at supporting businesses, with the Department of Industry and Trade required to submit a programme to the City People's Committee before mid-August in order to support firms exporting to the European market.
"Competent agencies must offer extensive training for each enterprise on rules of goods export and quarterly, point out difficulties facing enterprises when exporting to the European market, and report them to the Department of Planning and Investment for settlement by inter-sectoral working group”, Phong emphasises.
Whilst many commentators believe the EVFTA offers a good opportunity, it also presents a challenge for local businesses due to the majority of them being small and medium-sized enterprises. With the active support of municipal leaders and joint efforts of local businesses, it is hoped that over 20,000 export enterprises will be able to achieve EU market penetration in a rapid and effective manner.