Covid-19 prompts greater focus on developing domestic markets

09:03 | 07/04/2020 Trade

(VEN) - With a population of almost 100 million, Vietnam is a large, potential market for domestic manufacturers, especially in the context of the expanding Covid-19 pandemic.  

covid 19 prompts greater focus on developing domestic markets
Many farm produce enterprises are focusing on trade promotion in Vietnam

Enterprises indifferent to domestic market

Economists note that along with Vietnam’s stable economic growth, per capita income is growing and resulting in increasingly improved living standards. This, in turn, generates more consumer demand for everything.

In 2019, although it exported products worth more than US$40 billion, the agro-forestry and fisheries sector imported goods worth US$30 billion plus. For example, fruit and vegetable exports reached US$3.5 billion but Vietnam still imported fruit and vegetables valued at US$1.75 billion. There is a growing presence in Vietnam of farm produce from Thailand, China, the US, New Zealand, and Australia.

Economists compare the 100-million-people Vietnam to the total market of five to seven European countries. They offer as an example the potential of increasing demand for interior decoration products and services given the development of the real estate and housing market prompted by good economic growth. More apartments also means great development opportunities for the wood furniture industry. The Vietnamese furniture market is worth an estimated US$5 billion, about half of the country’s wood and wood product export value. In recent years, Vietnam has become a potential market for foreign furniture businesses.

Domestic textile and garment enterprises are still focusing on exports and making products according to the orders of foreign partners, while Vietnamese businesses that supply the domestic market are facing tough competition from foreign rivals. Foreign fashion brands almost dominate the medium-to-high grade textile and garment market segments in Vietnam, while Chinese products are overwhelming the low-price goods market.

Quality products needed for domestic market

Export markets are severely affected by the Covid-19 outbreak. The implementation of new-generation free trade agreements (FTAs), and the EU-Vietnam Free Trade Agreement (EVFTA) and the EU-Vietnam Investment Protection Agreement (EVIPA), which are expected to take effect in July 2020, will sharply increase the presence of imports in Vietnam. This will lead to increasingly tough competition in Vietnam between domestic and foreign textile and garment companies, and domestic enterprises, with their small size and modest competitiveness, will find it hard to survive.

The Buy Vietnamese Goods steering committee recently recommended that businesses develop domestic markets with their growing demand for goods. They proposed adapting the campaign in accordance with the new situation, specifically ensuring more efficient implementation and paying greater attention to e-commerce development. The committee also proposed strict sanctions and fines for those that abuse the reputation of Vietnamese goods (including fraudulent use of Vietnamese goods labels) to cheat consumers and illegally earn a profit.

Pham Thiet Hoa, Director of the Investment and Trade Promotion Center (ITPC) of Ho Chi Minh City said enterprises should acknowledge the domestic demand and develop the domestic market before endeavoring to export their products. With domestic consumers nowadays demanding higher quality farm produce, businesses need to provide better products if they are to succeed in the domestic market. It is important for enterprises to strengthen trade promotion in Vietnam to make their products known and familiar to more and more local consumers.

Many businesses say they have begun to focus on developing the domestic market after focusing on export development for a long time.

According to Le Xuan Quan, Chair of the Handicraft and Wood Industry Association of Dong Nai Province (DOWA), his company tries to ensure a balance between domestic and export markets even as hundreds of producers in the provincial wood industry are prioritizing export development. Building a sustainable production connectivity chain has become a top priority of the association. The association and its members will develop exhibition centers to introduce products and production capacity of member enterprises, and channels through which members’ products are distributed to domestic markets, Quan said.

Thanh Thanh