Vietnamese goods struggle to penetrate ASEAN market

The AEC, with its combined population of some 630 million and gross domestic product of nearly US$2.6 trillion in 2016, is expected to become the fourth largest economy in the world by 2030, creating multiple opportunities for regional firms to exploit.

Additionally, tax reduction commitments in the AEC are being fulfilled faster than those in other trade agreements.

Vietnam has completed cutting import taxes for ASEAN-made products, Nguyen Thi Tue Anh, deputy director of the Central Institute for Economic Management, said at a seminar titled, “ASEAN Market: Opportunity for Vietnamese Enterprises,” jointly held by the Saigon Times Group and the 2030 Business Club in HCM City on October 10.

According to Pham Thanh Kien, director of the HCM City Department of Industry and Trade, tariff and non-tariff barriers among AEC countries have been gradually removed. Under the ASEAN Trade in Goods Agreement, Vietnam has reduced import duties to 0%-5% on more than 10,000 tariff lines, or 98% of the total.

Kien and Anh shared the same view that Vietnamese enterprises have multiple opportunities to ship their products to other ASEAN countries and their partners, such as the Republic of Korea, Japan and China.

However, Vietnamese products are largely absent from the ASEAN market due to the similarity between locally made products and those produced in other regional countries, resulting in the strong competition between them.

On the local front, however, Vietnam-made goods find it difficult to compete with those imported from other ASEAN countries as most of the local firms are using outdated equipment and technologies in production, said Kien.

In addition, the quality of the local workforce remains low, Kien added.

He expressed concern over the trade deficit with the ASEAN market, noting that Vietnam spent US$7.2 billion purchasing products from other ASEAN markets in 2016, which went up by 13% year-on-year to reach US$8.15 billion last year.

Domestic firms are also unable to make use of opportunities arising from international integration.

The revenue from Vietnamese exports to the ASEAN market accounted for less than 10% of the country’s total export turnover in 2016 and only 11% last year.

This means that Vietnamese enterprises have shown little interest in or have neglected the potential market, Anh of CIEM said.

Pham Thiet Hoa, director of the HCM City Investment and Trade Promotion Center, pointed out that Vietnamese enterprises have yet to fully exploit the potential of the ASEAN market, given the uncompetitive prices of their products, the underdeveloped distribution system, the loose connectivity with the competent agencies and the lack of knowledge of the requirements and regulations of importing countries.

To grasp the available opportunities arising from participating in the AEC, domestic companies should improve their competitiveness and innovation as well as draw up business plans to measure the demands of consumers and build links with prestigious distributors in each regional country.

Enterprises can also cooperate with Vietnamese commercial counselors and general consulates in other ASEAN countries to connect with companies in those markets, Hoa said.

According to Punthila Puripreecha, operations director of MM Mega Market Vietnam Co., Ltd, an arm of Thailand’s TCC Group, in addition to doing business in Vietnam, the company has sought Vietnamese suppliers for 1,400 supermarkets and convenience stores in the region.

The seminar was sponsored by HCMC Development Bank (HDBank) and MM Mega Market Co., Ltd, and attracted the representatives of some 300 enterprises in HCM City and neighboring provinces.