These factors necessitate the business community to follow market developments closely and to devise strategies to diversify their markets.
Here are some experts’ recommendations to Vietnamese enterprises on ways to reduce their reliance on a single market.
Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry
Many sectors’ heavy reliance on the Chinese market and East Asian economies in terms of both input and output has made the Vietnamese economy more vulnerable than ever. I think an urgent measure needed in the short run is supporting production and business. Administrative procedures must be dealt with as boldly as the combat with the epidemic while it is necessary to cut costs for enterprises to help them survive this period.
In the long run, importance must be attached to the domestic market while it is necessary to diversify international markets, reshape value chains through restructuring the economy, enhance competitiveness, increase resilience and reduce excess reliance on any one market.
There is a growing awareness that if Vietnamese enterprises wish to reach out further into the world, they need to have a firm footing in the domestic market. With 100 million people, an expanding middle class and a rising economy, the local market must be the foundation and the largest resource for national development.
No-one can guarantee that in the future, the United States, China, and even Japan and the Republic of Korea will not protect their domestic markets when they fall into difficulty. We must account for this scenario with a more well-designed, effective and substantive strategy for domestic market development from here on in . At the same time, it is necessary to further bolster supporting industries and take advantage of new free trade agreements to expand supply channels and diversify markets. ----------
Vo Tri Thanh, Director of Institute for Brand and Competitiveness Strategy
Vietnam is joining new-generation free trade agreements to not only increase exports, expand production and attract more foreign investment, but also to use commitments to such deals as a catalyst to stimulate institutional reforms at home with a view to increasing economic resilience and reducing the impact of trade deflection.
But most of these goals are Vietnam’s own doing, meaning our partners in the trade pacts that Vietnam has signed are only interested in complying with the commitments while their effectiveness is Vietnam’s concern. A question that has lingered for a long time now is how much Vietnam has taken advantage of such agreements.
It should be repeated that in a recent trade policy review, the World Trade Organisation stated that Vietnam has done well in complying with its commitments. But the utilisation of opportunities from WTO accession has not been that substantial, not to mention that many opportunities were turned into challenges as foreign markets have been the pillars of Vietnam’s export-led success.
The problem lies not only in new free trade agreements but also in old institutional bottlenecks that have yet to be resolved completely. If enterprises are still encountering difficulties at home, it is hard for them to capitalise on external opportunities. ----------
Luu Tien Chung - General Director of Bac Giang LGG Garment Corporation
With the EU-Vietnam Free Trade Agreement likely to take effect from July this year, while the EU has simultaneously cancelled its orders with Bangladesh over social responsibility concerns and ended its General System of Preference with Cambodia, Vietnamese garment makers should expand their production to prepare for an increase in new orders.
I think it is still necessary to maintain a balance between our major markets (the US, the EU, Japan and the Republic of Korea) to avoid risk, and at the same time, adopt advanced manufacturing technologies to ensure effective operation given that labour costs are rising. Moreover, enterprises need to enhance product quality and step up compliance with social responsibility rules in order to meet more stringent requirements from major partners.
In the long run, the world will realise that the reliance on a single source of supply from China is too risky. Enterprises need to formulate a more balanced customer strategy. In addition to looking for suppliers of raw materials from India or other countries aside from China, Vietnamese enterprises need to increase domestic supply, which will be the basis for the country to take advantage of opportunities from its trade pacts with the EU and Pacific economies.
At LGG, we have secured 50% of materials for manufacturing from domestic partners and the goal is to raise this local constituent figure to 80-90% in future. ----------
Dinh Cao Khue, Chairman of Dong Giao Foodstuff Export JSC (DOVECO)
The Covid-19 pandemic is severely affecting many sectors, including farming exports, especially fresh fruit and vegetables. As such, in order to avoid risks for goods with a short storage time, special attention must be given to deep processing, in addition to promoting fresh product exports.
At our company, most products will undergo processing so the coronavirus epidemic’s impact on prices and export volumes is not very large. Our main products such as frozen pineapple, canned pineapple, coconut water concentrate, passion fruit concentrate, frozen lychees are still selling well both at home and abroad.
In addition to processing plants in the northern provinces of Ninh Binh and Bac Giang, we have just opened a new processing centre in Gia Lai province in the Central Highlands. The new plant will process many types of fruits and vegetables such as banana, dragon fruit, passion fruit, avocado, mango, durian, spinach, edamame, sweet corn, Japanese sweet potato, kabocha and so on.
To date, the first batches coming out from the new processing centre have been exported to the EU, Israel, the US and Japan. Our company’s products are also on sale at many small and large markets across Vietnam. We are planning to build another processing centre in Son La and then one more in Tien Giang. There are many potential customers around the world and the thing is we must raise our capacity to meet their demand.
In addition to focus on processing, it is also necessary to select the products with a competitive edge in order to conquer export markets. For example, Brazil is a large producer and exporter of passion fruit but the country still imports Vietnamese passion fruit because our products have better quality thanks to their being cultivated at a high altitude. It is a competitive edge that we needs to take advantage of to differentiate our products from those of other countries.
