Vietnam's Farm-produce Export: Growth yet to Match Potential

The Ministry of Trade and the International Trade Centre (ITC) have recently released a report on the export potential of Vietnam based on the real situation of export activities, the country’s production capability and the development of the world market. Vietnamese and foreign experts say that most Vietnamese farm-produce has highest export potential. Yet, so far Vietnam hasn’t implemented any suitable strategy to fully tap this potential.

 

According to Dr Michael Freudenberg, senior market analysis expert from ITC, Vietnam has gained an impressive year-on-year export growth rate of 14 per cent since 1997, but exports have been concentrated mainly in a certain number of groups of goods, including textiles, garments, footwear, crude oil, and seafood. In addition, these items have small market shares. Their quality is poor and prices are very low. As a result, Vietnam risks suffering negative impacts from ups and downs in world prices. The report studies export potential of around 40 groups of goods in Vietnam, including pre-mineral products and fuel, seafood, farm-produce, industrial products and handicrafts (except services) to help Vietnam concentrate on the groups of exports which have the highest export potential.

 

Therefore, to avoid a waste of resources, it is necessary for the Government and enterprises to concentrate on the groups of goods which are capable of making a difference, according to Dr Freudenberg.

 

Alain Chevalier, senior trade advisor at ITC, said: “It is not accidental that we have evaluated the potential of farm-produce with the high export potential of Vietnam, including coffee, rubber, black pepper, cashew nuts and seafood; while other items, such as rice, honey and tea are classified into a group with ‘constrained potential, or low potential.” Chevalier said that Vietnamese tea had not found a good position in the world market because it doesn’t yet have trademarks, and its quality remains poor. This can be seen via the price of Vietnamese tea, which is 30 per cent lower than the par price on the world market. Without a strategy to improve its quality, it will be more difficult for Vietnam to export the item. Vietnamese rice has found a good position in the world market with a high export value, which the highest among all of Vietnam’s farm-produce. However, the item was classified into a group with ‘constrained potential.’ Experts say that rice is an item, which mainly meets the domestic demand and the export volume accounts for just 25 per cent of Vietnam’s total output. In addition, the export value is not high because of its poor quality. In addition, there is no sign of any expansion of rice export in the Vietnamese Government’s strategy. Vietnam has maintained its rice export volume at 4.5 million tonnes per year since 2000. According to experts, Vietnam should develop new rice varieties and improve rice quality by increasing the processing effectiveness and diversifying export markets with an orientation to such hard-to-please markets as the US, Japan, China, Australia and New Zealand or Vietnam would face more difficulties to export of rice in the future.

Other items, including coffee, black pepper, rubber, and cashew nuts are evaluated with good potential even though to date they have mainly been exported as unprocessed products. Vietnamese coffee has a high competitiveness thanks to favourable environmental and climatic conditions, not to mention low labour costs. Vietnam is one of the countries producing the most coffee in the world. However, Vietnamese coffee has poor quality because of outdated harvest and dry processing technology and equipment. Also, it is yet to have a recognised trademark. Furthermore, local producers lack marketing skills, so they can offer their products at prices lower than the average price on the world market. However, Vietnam has the potential to improve the quality of products via investment in modern harvesting, storing and processing technology and equipment. With its solid position in the world market, Vietnamese coffee will become the most import export item if the country has a strategy to improve its coffee’s quality.

 

At the same time, Vietnamese rubber, despite low output and fair technology, still has an advantage thanks to lower costs for production and export than other countries in the region. To take the advantage of this, experts say that Vietnam should farm rubber varieties of high quality for manufacturing high-end products, building trademarks for its rubber products. Vietnam’s cashew nuts, with a market share accounting for 25 per cent, has established a leading position in the world market thanks to modern processing technology. To promote export, Vietnam should expand the production of materials and diversify processed products.

 

According to experts, it is time Vietnam developed a suitable strategy for the export of farm-produce. Accordingly, Vietnam should identify its comparative advantages when investing in each item. For example, there are solutions to promote the export of fruit and vegetables despite the item being classified into groups with ‘constrained potential.’ The solutions are to improve the quality of raw materials and upgrade processing technology, improving infrastructure facilities, including storage warehouses and freezing equipment, registering trademarks in foreign countries and seeking opportunities to diversify export markets, targeting other markets, including the EU, the US and Canada. For many groups of goods, Vietnam’s strategy is to concentrate on products of poor quality and low prices. This may hamper the country’s export. To adhieve its export potential, experts suggest that Vietnam should upgrade its standards to the international standard. This is the most important factor for farm-produce as non-tariff barriers, especially technical ones, and plant and animal quarantine regulations have become increasingly tough in recent years.

 

Vietnamese enterprises should increase their awareness about the importance of trademarks because over 90 per cent of Vietnamese farm-produce are exported without trademarks. Finally, a poor effectiveness of information, processing and transportation infrastructure will be a great constraint to Vietnam’s export unless it is improved.