Middle East - Potential Market for Vietnamese Businesses

11:35:46 AM | 31/5/2019

The Middle East is known to be a populous market bloc with the import demand being relatively high and quality standards being not very strict. This is a very potential market for Vietnamese enterprises if they have right approaches.

Potential market

The Middle East is really a potential market for Vietnamese companies as it has a population of more than 300 million and a gross domestic product (GDP) of US$3,451.6 billion in 2018. Food imports currently account for 80% of the consumption demand, equaling US$40 billion a year. The figure is expected to increase to US$70 billion by 2035.

At the Workshop on Trade Promotion to the Middle East Market which took place on May 24 in Hanoi, Mr. Le Hoang Tai, Deputy Director of the Vietnam Trade Promotion Agency (Vietrade) under the Ministry of Industry and Trade, affirmed that Vietnam and Middle East countries established trade relations very early. So far, Vietnam has established trade relations with all 15 Middle East countries and the two-way trade value has grown significantly. Vietnamese goods exported to the Middle East are also diverse. In addition to traditional products such as agricultural products, apparels and footwear, Vietnam has also shipped more high-valued industrial products like computers, electronic products, mobile phones, machinery, and industrial parts. This is a good opportunity for businesses to access and expand this market.

Besides, the Middle East market has a great purchasing power and high financial capability thanks to abundant oil and gas. The import and export structure of this region is quite accessible for key exports of Vietnam. Moreover, 10 out of 15 Middle East countries have already participated in the World Trade Organization (WTO) and, with the support of the Gulf Cooperation Council (GCC), products exported to this market will enjoy tax incentives of 0 - 5%.

According to statistics, Vietnam - Middle East trade has continuously grown in recent years. The import and export value reached US$12 billion in 2016 and nearly US$14 billion in 2018. Vietnam’s major export markets are the United Arab Emirates (UAE), Turkey, Kuwait and Israel. Aquatic products, including pangasius and basa catfish, are exported mainly to Saudi Arabia, the UAE and Kuwait.

Vietnam also imports fertilizers, chemicals, ores, minerals, fabrics and other commodities from the Middle East.

Many business support solutions

Despite being seen as a potential market with a lot of opportunities, Vietnamese exporters still face many challenges in the Middle East such as geographic distance, market information, language, cultural differences or payment risks.

Among challenges and barriers faced by Vietnamese businesses, the Halal Standard is particularly emphasized by experts at the workshop. This is the most important standard that Vietnamese businesses need to meet. Once meeting the Halal Standard, they will move forward and penetrate into this potential market. At present, only nearly 1,000 businesses meet this standard.

Besides, according to Ms. Nguyen Minh Phuong, Director of the West Asia - Africa Bureau, the Asian - Africa Market Department (the Ministry of Industry and Trade), when promoting trade to this market, companies should anticipate some hardships and risks such as fraud, money laundering, forced change of contract terms, and even payment failure for completed contracts. They businesses should actively monitor and update market information and trade promotion programs, she recommended, adding that they particularly need to check partner information carefully when they search them online.

Currently, Vietnam has six trade agencies in the Middle East. They will help Vietnamese businesses seeking to make inroads into this market.

Food imports currently account for 80% of the consumption demand in the Middle East, equaling US$40 billion a year. The figure is expected to increase to US$70 billion by 2035.

Thu Ha