Sharp drop in agricultural export

The Ministry of Agriculture and Rural Development said the export value of agricultural, forest and aquatic products totalled US$17.98 billion in the first eight months of 2013, down 1.1 percent from the same period in 2012. The export value of staple agricultural commodities like as rice, coffee, seafood and rubber was estimated at US$8.99 billion, down 11.7 percent year on year.

Rice, one of main agricultural products exports, experienced the sharpest drop in export turnover. In the first nine months of the year, rice export reached an estimated 4.69 million tonnes worth US$2.05 billion, down 15.7 percent in volume and 18.4 percent in value year on year. Coffee export volume reached 974,000 tonnes worth US$2.09 billion in the first eight months of the year, down 23.2 percent in volume and 22.5 percent in value from the same period in 2012. Rubber export value also declined 14.1 percent year on year.

Crop failures, impacts of global economic recession, shrinking markets and fiercer competition are behind the export decline. Rice import demand in China has slid as the second largest economy in the world has enjoyed a good harvest, while Vietnamese rice is faced with severe competition from Chinese and Thai rivals.

At a seminar on solutions to difficulties facing agricultural and forest product export markets, a representative at the Vietnam Association of Seafood Producers and Exporters (VASEP), said, thus far this year, seafood export continues to face difficulty because of unstable supply of input materials and contracting markets weighed by global economic turmoil. In addition, lawsuits and product returns have affected Vietnam’s seafood export turnover and brand names. Luong Van Tu, president of Vietnam Coffee - Cocoa Association (Vicofa), added that coffee export revenue slipped in the first eight months as production output decreased 20 percent from a year earlier. He said difficulties facing Vietnamese coffee firms also include strong competition from foreign purchasers in the country.

From passiveness to activeness

Mr Tran Thanh Hai, Deputy Director of Export Import Department under the Ministry of Industry and Trade, said the passive exporting status of Vietnam’s agricultural and aquatic products leads to the instability of export volume and price. Therefore, greater focus should be placed on enhancing the quality and brand name of agricultural and seafood products for export to build long-term trust of partners and raise competitiveness in international markets. The Government also assigned the Ministry of Agriculture and Rural Development to work with relevant agencies to assess existing difficulties and obstacles of each agricultural export item to define those in need of support and suitable support solutions.

Mr Truong Thanh Phong, President of the Vietnam Food Association (VFA), said Vietnam needs to redefine the export targets of many agricultural products, including rice. For example, the country may limit rice export at 6 million tonnes a year rather than pursue a bigger volume year after year. The cultivation sector necessarily works with exporter associations to keep track of exportation and consumption to gauge market demand and make recommendations of preferred crops and livestock to farmers in order to earn a greater value. The Ministry of Finance drafts and submits to the Government the amendments to Decree 54 on reduced procedures to add coffee and other exported agricultural products to the list of support and grants export credit term extensions. The State Bank of Vietnam (SBV) also guides credit institutions to seek solutions to support companies involved in coffee and other agricultural exports. Mr Pham Tat Thang, an economist, said Vietnam should restructure its agriculture; although this may result in slow growth in the first years, it would ensure greater sustainability for its products.

Making inroads in potential markets

South Korea, Romania and Europe are big importers of agricultural products and Vietnam must demonstrate its competitive advantages to these potential markets. In the Romanian market, Vietnam’s agricultural products now have a certain position. According to experts, South Korea is a potential market Vietnam should be focus on but it, like Japan, is very demanding and has strict standards for imported agricultural products. Besides, South Korean agricultural importers prefer long reputed relationships. If such countries as the US, China and Thailand have penetrated and occupied this market, it is not easy for a latecomer like Vietnam to gain a significant market share from these nations.

The first barrier to Vietnam’s exported fruit and vegetables to South Korea is the very strict regulations on imported fruits and vegetables here. Accordingly, all kinds of imported fresh fruits and vegetables importers must have plant quarantine certificates issued by South Korean authorities. Currently, only Vietnamese seafood has a worthy market share, together with China and Japan. According to a representative of Lotte Group, one of leading importers in South Korea, Vietnam’s agricultural products with huge potential for exporting to South Korea include seafood (shrimp, squid, anchovies, pangasius conchophilus, red tilapia, crab, octopus), fruits (coconut, passion fruit, dragon fruit, mango, mangosteen, rambutan, papaya, guava), and vegetables (chilli, carrot, garlic, ginger, mushroom, broccoli, lettuce, cabbage).

Vietnam has an advantage in that many South Korean companies which import products from China and the US want to shift their orders to Vietnam in order to diversify supply sources to avoid reliance on only a few markets and minimise risks. According to South Korean investors, Vietnam’s agricultural products are cheaper than those from Thailand and China. Moreover, Chinese products have recently been found containing hazardous substances, resulting in a certain disrespect of its products. Wintertime in South Korea lasts up to five months; hence, fresh vegetables are usually very expensive during this time. South Koreans make a lot of kimchi in November and December; therefore, the demand for cabbages, gingers and fresh chillies is huge.

In recent years, the significantly improved relations between Vietnam and South Korea promise lower import duties for Vietnam’s agricultural exports. According to some traders familiar with this market, exporters of Vietnamese agricultural products should establish direct relationships with South Korean partners or seek their trusted agents to understand more about market criteria, consumer tastes and rapid import procedures. In addition, Vietnamese need to pay more attention to product quality, eliminate contaminations and defects in export shipments, and establish and defend brand names and labels (with detailed information about importers, names and origins of products), health certificates and food safety certificates displayed in Korean language.

Source: VCCI