Australia, potential market for Vietnamese farm produce

09:09 | 05/02/2017 Trade

(VEN) - Australia has been a good destination for various kinds of Vietnamese farm produce such as mangoes and litchis. This market is willing to import high quality products at high prices. For these reasons, Australia is considered a potential market for Vietnamese exports, especially in the context of free trade agreements involving both countries taking effect.  

australia potential market for vietnamese farm produce
There are opportunities for Vietnamese farm produce to enter the Australian market

Opportunities for Vietnamese farm produce

Australia opened its market to Vietnamese litchis in 2015, and shortly after that, many other countries such as France, the US, and Malaysia also allowed litchis shipment from Vietnam. In the last two years, Vietnamese litchi farmers did not have to face price drops when harvesting a bumper crop.

Australia is an important market for Vietnamese litchis and many other kinds of farm produce such as mangoes, dragon fruit, and passion fruit. It is one of the most fastidious markets worldwide. Once accepted in Australia, farm produce can easily enter most other markets. With their per-capita incomes standing at the highest level in the world, Australian consumers are willing to pay high prices for high quality products. Vietnam has exported several ten tonnes of litchis to Australia at prices ranging from 200,000-400,000 per kg. Vietnamese Trade Representative in Australia Nguyen Hoang Thuy hopes for higher export volume thanks to better preservation technology, which assure the freshness of litchis longer so that they could be transported by sea.

Following litchis, Vietnamese mangoes were licensed to enter the Australian market in September 2016. After the successful export of the first batch of green mangoes, domestic businesses have exported ripe Cat Chu mangoes to Australia (these ripe mangoes were preserved with Australian technology). It is expected that Vietnamese dragon fruit could penetrate the Australian market in the near future.

Apart from fruit, shrimp is another key Vietnamese export to Australia. According to the Vietnamese trade office in Australia, this market has very high demand for seafood with import value growing strongly in recent years. Vietnam currently is the fourth largest seafood supplier for Australia, behind Thailand, China, and New Zealand. However, Vietnamese products just account for 11.2 percent of Australia’s seafood imports. Shrimp is the most consumed type of seafood in Australia. Annual shrimp sales in this market have reached 50,000-60,000 tonnes.

However, Australia currently imports mostly boiled or spiced shrimp. Therefore, in November 2016 the Vietnamese Ministry of Agriculture and Rural Development and the Australian Department of Agriculture and Water Resources agreed to establish a joint working group to discuss and deal with matters related to mutual goals and cooperation priorities in order to boost bilateral trade in farm produce in the coming period. One of the major tasks is seeking ways to export Vietnamese fresh shrimp to Australia. Vietnam expects to become the first fresh shrimp exporter to this market.

Expectations from RCEP, AANZFTA

Nguyen Hoang Thuy said that Vietnam and Australia are becoming each other’s important trading partners. Bilateral trade increased from US$3 billion in 2005 to about US$5 billion in 2015. While Australia ranks eighth among Vietnam’s export partners and 12th among its import partners, Vietnam is Australia’s 14th largest partner in terms of both import and export. Vietnam has seen a continuous trade surplus with Australia, which reached nearly US$1 billion in 2016.

Despite unpredictable future of the Trans-Pacific Partnership (TPP), a trade deal involving both Vietnam and Australia, bilateral trade is expected to increase when other free trade agreements take effect. The Regional Comprehensive Economic Partnership (RCEP), which involves 10 ASEAN countries, China, India, Japan, the Republic of Korea, Australia, and New Zealand, currently is one of the most anticipated FTAs.

As the first FTA of the entire Asian region, which represents almost half of world population and about 30 percent global gross domestic product, the RCEP, though covering a smaller scope than the TPP, is expected to loosen tariff regulations and promote trade in goods and services as well as investment between Vietnam and Australia and the entire RCEP bloc in general.

Vietnam can also expect good things from the FTA between ASEAN and Australia, New Zealand (AANZFTA). Under this agreement, Australia and New Zealand pledged to eliminate 100 percent of tariff for Vietnamese exports provided they meet technical requirements from the two markets. The AANZFTA hence is expected to create impetus for Vietnamese exports to Australia.

However, Nguyen Hoang Thuy warned domestic businesses of a lot of non-tariff barriers including strict quality and food safety regulations, sanitary and phytosanitary or SPS measures, and technical barriers to trade or TBT. She also advised them to take the initiative in seeking information about the Australian market and preferences for Vietnamese exports under these FTAs. At the same time, they should diversify and improve the quality of export products to enhance their competitiveness in the Australian market.

Notably, businesses need to have good knowledge of Australian regulations on product quality, food safety, and bio-safety. Control systems should be set up and technology improved to ensure high quality of export products. These efforts will help Vietnamese businesses protect their brands and make their products firmly positioned in the Australian market.

Lan Phuong