Exporting products to depressed markets

Major Vietnamese export markets like the US, Japan and the EU are falling into depression.
One of the areas in which the Government will stimulate investment this year is products of high export value. However, the World Bank has forecast that the volume of goods transacted in the market this year will decrease by 2.1 percent. In developing countries, export growth will shrink to 3 percent, a sharp contrast to the average growth rate of 15 percent over the past five years.
At present, cassava starch exported to China is sitting idle at northern border gates. Some Vietnamese products such as watermelon, fresh areca nuts, litchi and rubber have faced the same problem over the past years as Vietnamese businesses continue operating inefficiently due to lack of transparency in terms of market.
Businesses need to master information sharing on their capacity for production and supply as well as their ability to deliver products in each period. Unfortunately, such information is too sketchy for businesses to make sound decision regarding a number of agricultural products in stock.
Prime Minister Nguyen Tan Dung related at a recent agriculture and rural development conference that when he asked about the shrimp and rice cultivation in one province, for instance, local party and administration leaders gave different answers. They seemed unclear as to when and how much products would be sold to earn record profits.
This typical example of poor information forecasting is a common occurrence in Vietnam. When a plan to develop tra and basa catfish in the Mekong delta region was launched in October, 2008 the fisheries association in An Giang province – the nation’s leading catfish producers they found that much important data for 2009 and 2010 was either outdated or contradicted.
This year the National Assembly set an export growth target of 13 percent, instead of 19 percent. However, market experts said that the target is still too demanding for Vietnam to achieve as the World Bank forecast the export growth rate in developing countries at 3 percent.
National export activities are being seriously affected by the world economic slowdown. A private business in northern Hai Duong province, which exported thousands of tonnes of roast suckling pigs to Hong Kong, Taiwan and some other markets reported that its export volume has fallen steeply in recent months because these markets simultaneously stopped importing such meat. Consequently, a number of farmers who supply suckling pigs to the business also fared no better.
Some seafood export businesses said that many importers cancelled their orders this year due to a declining demand. Therefore, many processing factories in the south have to narrow their production and many workers have lost jobs. This is a manifestation of the impact of the global financial meltdown on the domestic market.
In the international integration process, tariff barriers are to be removed across the board while non-tariff barriers will become more complicated. It means that the world market is more open for Vietnamese products but much more demanding in terms of meeting requirements concerning quality and branding. For example in the European markets, fruit, which meets certain specification for both size and colour can be sold in the supermarket.
Nguyen Ngoc Son, Vietnamese ambassador to Switzerland, said that although mangoes imported from Thailand and Pakistan are not as delicious as the Vietnamese mango, they are available in the market.
According to Swiss importers, Vietnamese mango tastes better but the quality is too variable so it does not meet the requirement for bulk orders. The first batch of fruit is good but the following batches come up short because some Vietnamese businesses do not deal in good faith and break contracts with clients, badly affecting the whole Vietnamese business community.
For example, last year, Vietnamese cashew nut businesses refused to deliver goods to clients under signed contracts in order to avoid initial losses and consequently they had to pay a high price for this by selling them dirt cheap when importers refused to import anymore.
Major Vietnamese export markets such as the US, Japan and the EU are falling into depression. Meanwhile Vietnamese footwear imported to the EU won’t enjoy the Generalized System of Preferences (GSP) tax any longer while Chinese garment products imported to the US have had their tariffs removed. However, these demanding requirements provide an opportunity for businesses and entrepreneurs to show the world what they can do.
Despite the decline in the export market due to the impact of the global economic downturn and the strict requirements of traditional markets, many enterprises are still actively finding markets and accelerating exports. For example, Vietnamese businesses are focusing on low-income customers in the US who are looking for cheap products. Businesses share their experience that demand for goods in the African market is high.
In addition it is an easy market to enter and imposes few technical barriers and tariffs. However, businesses are hard-pressed to find suitable payment methods. Many small products have high export value and potential products include suitcases, bags, umbrellas, rubber products, iron, and electric wires and cables.
A number of support policies have been devised for export businesses, including helping them access preferential loans from banks, cutting loan rates, giving credit guarantees for some agricultural products and creating favourable conditions for them to reduce prices and improve their competitive edge.
The more difficult the world market is the more risks businesses will face. Therefore, businesses should be very careful in their operations. In addition to Government support, associations should play key role in providing information for businesses.
Another important information channel that businesses ignore is the Vietnamese trade office overseas, which can provide accurate information about foreign partners, helping domestic ones minimize risk when signing contracts. Further, businesses should know how to find new markets for old products.
(Source: VOV)