High Prestige Required When Penetrating Japan Market

Japan is a top economic and trade partner and a major export market of Vietnam. To boost bilateral economic and commercial relations, the two governments always facilitate companies of the two countries to expand import and export activities, exchange experience, and seek partners.

 

VJEPA officially took effect on October 1, 2009, approximately 92 percent of goods traded between Vietnam and Japan will be exempted from import duties within 10 years. Vietnam’s agricultural and aquatic products as well as garments will be exempted under the VJEPA when they are imported into Japan, while Japan’s industrial products, including automotive spare parts and electronics devices imported into Vietnam will be exempted from import duties or with reduced import tariffs. VJEPA not only abolishes tariffs, but also aims to strengthen bilateral economic relations, including investment, cooperation and trade, thus unlocking the advantages of the two countries in relation to regional and global economies.

 

Speaking at the seminar, Mr Bui Huy Son, Director of Asia - Pacific Market Department under the Ministry of Industry and Trade, said Vietnam’s exports to Japan were valued at US$8.54 billion in the first 10 months of 2011, while it imported nearly US$8.4 billion from the East Asian nation. After two years of VJEPA enforcement, Vietnamese exporters have capitalised on preferences provided by the agreement to successfully penetrate and boost growth in this potential but demanding market.

 

He added that 87.66 percent of the two-way trade revenues will be imposed zero tax 10 years after the agreement is enacted. As many as 8,873 tax lines out of 9,390 tax lines are added to the zero-tax list. Major duty-free goods are chemicals, pharmaceuticals and electronics devices. With tax preferences provided by the JVEPA Agreement, tariffs on industrial goods have already been very low (0 - 5 percent). Vietnam has advantages in agricultural, forest and aquatic products and Japan pledges to offer more special preferences than most other ASEAN countries. Specifically, out of 1,638 best tax lines that Japan vows to offer ASEAN countries, 24 best tax lines in the class are for Vietnam. Up to 23 out of 30 top agricultural, forest and aquatic exports are levied zero tax by Japan immediately after the agreement took effect or within 10 years of enforcement.

 

Sharing the same opinion with Mr Son, Mr Tadashi Kikuchi, economic attaché to the Japanese Consulate General in Ho Chi Minh City, spoke highly of the bilateral trade revenue in the past year. After two years of enactment, VJEPA has generated positive effects on two-way trade, especially when Japan’s demand for Vietnamese goods remains high. He said the two countries’ bilateral trade revenue has experienced a 20 percent year on year increase this year and Vietnam’s exports to Japan will continue rising in years to come.

 

Mr Tadashi Kikuchi added that in spite of being affected by the global financial crisis and economic recession, Japan remains a top foreign investor in Vietnam and many Japanese investors intend to redirect investments into Vietnam. Enjoying privileged tax rates, Vietnam has many opportunities to catch this new wave of Japanese investment.

 

However, technical barriers are still being widely used in Japan while requirements for product quality and qualifications are very strict. Mr Tadashi Kikuchi said Japanese consumers pay attention to aesthetics, quality, durability, convenience and utility of products. Therefore, in order to penetrate this demanding market successfully, Vietnamese companies need to pay special attention to product quality and attach highest importance to prestige. In addition, they need to have long term market plans, sustain long term relationships with Japanese partners, explore Japanese corporate culture, and seek partners.

 

Citing experience accrued from a locality with many exporters to Japan, Mr Huynh Khanh Hiep, Deputy Director of the Ho Chi Minh City Department of Industry and Trade, said: Apart from technical barriers, distribution systems and goods exported to Japan must go through many stages and thus selling prices are very high in relation to importing prices. For that reason, manufacturers ought to quote reasonable prices, not just relying on information on retail prices. Accordingly, to develop economic and commercial relations with Japan in the coming time and capitalise on the advantages of JVEPA, Vietnamese enterprises must attach the highest importance to prestige, build up trust and mutual understanding of Japanese partners, control product quality, and comply with Japanese quality standards. Besides, they need to take full advantage of Vietnamese and Japanese support channels like trade promotion agencies, business associations and Japan External Trade Organisation (JETRO) to have more business opportunities.

 

Mr Son recommended that technical standards and product quality are primary requirements that Vietnamese producers need to take into account when they manufacture exports to Japan. In addition to strict product quality, requirements about environment, factory, warehouse, production capacity and other factors are also so important that Vietnamese companies should pay attention to when sending products to Japanese professional distribution systems. Besides, they should carefully study and understand the peculiarities of the Japanese market and find new customers in addition to maintaining existing ones.