The ASEAN market is appreciated as the third largest export market of Vietnam after USA and EU, but Vietnam’s exports into ASEAN markets are still modest. In order to “upstream” into the ASEAN market especially to the ASEAN Economic Community (AEC), managers as well as the enterprises need to make more effort.

Vietnamese enterprises participated in the fair area in Cambodia

Gradually have position

According to the Ministry of Industry and Trade, in the number of commodities which are exported to ASEAN, there are 2 commodities which have many more advantages, they are garments and fertilizer. The competitive pressures of the Textile sector in this market are not too big because the competitors are Thailand, Indonesia, and Malaysia where there are mainly processing products and have not yet developed a great world trademark. However, in order to make use of the advantage, enterprises will have to overcome the great difficulty which is the origin of the raw materials. For the Fertilizer sector, in the ASEAN region, Cambodia, Laos, Myanmar, and Thailand have huge demand but the production is not enough for consumption and they must import with huge quantities. Especially, Cambodia and Myanmar have to import up to 90% of the domestic demand and the fertilizer import duty was 0%.

In 10 years since joining the ASEAN market, from the modest figure $US1 billion (1995), Vietnam’s export turnover to this market has increased to $US18.3 billion with the average growth rate of 17.1%. Before 2010, Vietnamese enterprises mainly exported 2 main commodity groups to ASEAN - crude oil and rice (accounting for over 50% of total turnover).

Currently, commodities exported to ASEAN are more diverse, besides crude oil and rice such as: Telephone mobile phone and parts; computer and electrical products and spare parts; Steels and Iron; machinery and equipment, tools and instruments; garment products, foot-wear, fishery products, coffee, rubber, etc. It shows that enterprises have interest in the ASEAN markets.

Enterprises began to put the “bricks” to build the foundation for export growth to ASEAN in many ways such as: participate in trade fairs, trade promotion organizations or look for the partners by themselves. There are many Vietnamese brands which are gradually becoming familiar with consumers in the region such as: Nhon Hoa Scale, Thien Long ball-pen, Bidrico or Cholimex, etc. For example in the Myanmar market, there are some Vietnamese enterprises which have a good position such as: Dien Quang Lamp Joint Stock Company, Bibica JSC, Hoa Phat JSC, etc. In the Thailand market, ceramics products, electricity and cable, confectionery, garment products have better market entry.

Over a long time, the Quang Vinh Ceramic and Export Handicraft Company (Hanoi) has only been interested in large export markets such as USA and EU, but in the recent 5 years, it has been interested in the ASEAN potential markets. Laos is the first country which Quang Vinh Ceramic and Export Handicraft Company was interested in exporting its product. According to Ms. Ha Thi Vinh, the Director of the Quang Vinh Ceramic and Export Handicraft Company realized that although the Laos population is still modest there is a potential market in line with the products which are made by the company. Currently, the ceramic products of the company are sold in Laos, from Vientian to Luang Prabang.

“Uncertain” foundation

Although a number of Vietnamese enterprises have taken the quite comprehensive step to exploit the ASEAN markets by investing directly which actively develops value chains in the region and receive opportunities from the AEC, and transport goods and services to enter the ASEAN, but it is still ineffective. The evidence has shown that in the last 5-year trade relations with ASEAN countries, Vietnam still stays in trade deficit which has reached $US 6 billion in 2010 (accounting for 57%). The balance-of-trade deficit was $US 4 billion in 2014, equal to 20.3%. Exports in 2015 were lower than in 2014, the turnover was estimated at $US 20 billion, the trade deficit rose to over $US 5 billion and the trade deficit of over 30%.

In fact, Vietnam’s exports to ASEAN in the first 10 months of 2016 have shown signs of decline. Meanwhile, Vietnam’s exports to China have increased by 23.9%, to the USA market increased by 15%, the EU market has increased by 7.4%, and export to ASEAN markets has dropped by 7.6% compared to the same period last year. In 10 ASEAN countries, there are 6 countries which have reduced importing goods from Vietnam. Vietnam’s export to 3 countries with growth are Myanmar (21.1%), Philippines (13.8%) and Thailand (11.6%). The causes as explained by the Ministry of Industry and Trade are due to the reduction of crude oil export in volume and value.

Mr.Do Quoc Hung the Deputy Director of the Asia-Pacific market Department (the Ministry of Industry and Trade) added that, the export foundation of Vietnamese enterprises to ASEAN is “uncertain”. Although the AEC was built at the end of 2015 there have many big challenges with Vietnam’s export products. The rate of tariff elimination in ASEAN-6 countries is 98% of which Vietnam, Lao, and Myanmar is 91% and is striving to reach 98% by 2018. Moreover, when the ASEAN countries implement tariff elimination with Vietnam’s export products, a technical standard system will be built immediately to protect the domestic markets, and restrict Vietnam’s exports.

Vietnam’s exports to ASEAN market are: garment products, footwear, fertilizer, agricultural products, foodstuff, and construction materials but most enterprises sell to importers. Although there are a number of commodities which have great demand in the market but Vietnam’s enterprises still have no opportunities to access the market and always have low price by importers. “For that reason it makes high quality products still not building the trade mark, especially when importers use the trademark of the domestic company to sell the products on the market” Mr. Hung said.

Fiercely competitive

Beside the problems raised by the Ministry of Industry and Trade, enterprises also face difficulties when they access the ASEAN market. Especially, Vietnam’s products have to fiercely compete with Thailand’s and China’s products.

Mr. Pham Minh Hoang, an employee who has been in charge in the field of import and export of the Dong Anh Electrical Equipment Corporation has directly gone to Laos many times during the last 3 years to look for partners. The efforts which the enterprise spent on looking for partners have initial results by small contracts of about $US 1.5 million. But the enterprise must fiercely compete with Thailand’s enterprises (due to the technology and management implemented by Thailand in the Laos market, so Thailand has the knowledge and the business relationship). Therefore, this enterprise can not be a regular provider for customers in Laos, it has only replaced Thailand’s enterprises when their devices have problems. Mr.Hoang has seen the potential market of Laos but he has felt “powerless” because there is no information on the market and about partners.

Having the same opinions above, a representative of a Textile enterprise complains that “On the website, the information on the ASEAN countries’ markets is still unspecific. We need the official and full information which is published by the Ministry of Industry and Trade on these markets in order not to grope for the information for along time”. Other enterprises said when they contacted the Counselors Authority, the officers were very busy and have no time to contact and prepare the information support for the enterprise.

There are many difficulties in joining the ASEAN markets but according to the experts, these are the potential markets for Vietnam. Hence, the enterprises as well as the functional agencies need to pay further attention to this market. Mr. Do Quoc Hung also frankly admitted, when Vietnam integrates with the AEC it also means opening for the region’s goods flow in the domestic sector. Therefore, Vietnam’s goods will have to compete strongly with ASEAN’s goods and contrary to the goods which are exported to this region also under pressure. In order to enhance the competitive capacity and take advantage of the opportunities to export into ASEAN markets, enterprises have to innovate technology, enhance the quality and the rate of domestic products. Along with this, the enterprises need to focus on building the trademark which is based on quality and added value, building distribution channels in export markets and enhancing market research and promoting trade in order to exploit thoroughly potential markets in ASEAN.

Related to the information issues, in the coming time, the official information on ASEAN markets will be publicized on the website of the Ministry of Industry and Trade. The E-commerce Department of the Ministry had a survey information channel on the markets as well as the Import and Export Tariff Nomenclature which enterprises can contact for searching information, Mr.Hung said.

Mr. Pham Tat Thang, of the Trade Research Institute (the Ministry of Industry and Trade):

AEC establishment has created the single market and the general production space, therefore, there are 2 big problems posed.

Firstly, enterprises need to survey the demand of the market with more than 600 million people in different areas and countries to orient for manufacturing for that demand. But it seems that we have not set up the problem and implemented seriously. For example, have we thought about the manufacture of foods for Muslim consumers? In order to export goods to Indonesia, Malaysia, have we thought about exporting items which are provided for Muslims?. Hence the goods which are exported to ASEAN not much as the expectation.

Secondly, the general production space which requires enterprises to join the manufacturing chain, added value of ASEAN. For this problem we are still weak, we have not found a position and thought about joining to the manufacturing chain of ASEAN. This problem needs to be addressed.

It can be seen, ASEAN is a potential market which has the consumer style and consumer demand is very different. However, we have not thought about this problem, we only focus on exporting agriculture products, selling goods which we can manufacture as export to Philippines and Indonesia without thinking of other markets. In order to export to ASEAN we need to seriously think about the demand of consumers and manufacture for that market.

Vietnam’s goods have great similarity to ASEAN countries, if we continue to produce, it will be difficult for export and lead to trade deficit from ASEAN.

Source: http://customsnews.vn/vietnams-goods-need-to-upstream-into-asean-market-1687.html