15:00 | 10/07/2018 Cooperation
The Middle East and Africa, with a total population of more than 1.6 billion people and large purchasing power, are emerging as potential markets for Vietnam’s agriculture and aquaculture products as traditional markets have approached the point of saturation. However, the new markets are rather difficult to access due to a number of specific issues, such as cultural or religious differences, food habits and business practices that require suitable access.
|Participants at the seminar discuss solutions to promote the export of Vietnamese agricultural products into the potential markets of the Middle East and Africa|
The information was presented at conference on promoting economic diplomacy to facilitate Vietnam’s agricultural and fishery exports to the Middle East and Africa, organized by the Ministry of Foreign Affairs (MOFA) in Hanoi on July 5.
Potential but difficult to access
Speaking at the seminar, Do Quoc Hung, Deputy Head of the Asia-Africa Market Department, Ministry of Industry and Trade said that the Middle East - Africa includes more than 70 countries with over 1.6 billion people, with a great demand for imported goods, especially agricultural and aquatic products, to meet domestic demand due to the harsh natural conditions for farming and aquaculture. In 2017, the import value of agricultural products and food of African countries was US$38 billion and what number is expected to increase to US$110 billion by 2025. In the Middle East, last year, imports of food were estimated at US$43 billion, and are expected to increase to US$70 billion by 2025. This is seen as a potential opportunity for Vietnamese exporters.
Over the past few years, exports of this commodity to the Middle East - Africa have been flourishing, with total exports of agriculture and fisheries reaching over US$1.3 billion in 2017. The figure is still very modest compared to the potential, however. In particular, according to Hung, the biggest barrier for Vietnamese businesses exporting to Africa is the payment method. African importers often to buy goods under deferred payment contracts, in the form of Cost, Insurance and Freight (CIF) and choose not to open a letter of credit (L/C) due to the high cost. This is an unsafe payment method that is not accepted by Vietnamese exporters.
In addition, according to Tran Van Cong, Deputy Head of the Department of Agro-product Processing and Market Development, Ministry of Agriculture and Rural Development, Vietnam's agricultural products are facing fierce competition in Africa currently. Some firms accept deferred payment, while Vietnamese enterprises demand immediate payment, causing many partners to switch to import options from foreign firms that accept deferred payment.
In addition, the lack of information on the market and partners also presents many obstacles for Vietnamese enterprises when approaching the Middle East - Africa markets. Vietnam has just nine embassies and five trade offices in Africa, making it difficult to introduce and verify partners’ capacity, and visa applications.
The two parties have not signed any FTAs, while Vietnam's export methods have not met the consumption habits of Islamic countries in terms of packaging, distribution, tastes, Halal Food certification, combined with the high risk payment method, making it a barrier for Vietnamese agriculture and fishery products to the large, potential markets.
Economic diplomacy helps promote exports for Vietnamese agricultural products
Speeding up exports to new potential markets such as the Middle East and Africa is a new direction for Vietnamese enterprises, but the problem is how to solve the difficulties and challenges mentioned above for Vietnamese products to reach the markets.
According to Doan Phuong Lan, Deputy Head of the MOFA’s Department of General Economic Affairs, as the representative office of Vietnam in foreign countries, her ministry has been coordinating with relevant State agencies in support of Vietnamese enterprises through public-private partnerships in the host countries, as well as advising and supporting market information through diplomatic activities for economic purposes.
Through 17 Vietnamese representative offices in the areas, Vietnamese enterprises can receive assistance in verifying partner capacity in order to minimise risks in the investment process and expand cooperation. In addition, the offices can also help businesses to connect with local authorities and reputable local business associations to enhance trade promotion activities.
For localities where Vietnamese representative missions are not yet established, Lan also emphasised the role of local Honorary Consuls, as well as the overseas Vietnamese communities in the foreign countries to provide accurate and complete information on the market.
On the same point, Hung said that information plays a big role in promoting trade and investment activities. He urged both sides to pay attention to the development of information and communications in order to create a rich and reliable source of information on the market, thereby raising the awareness of both sides’ businesses regarding each other’s great potentials.
He also recommended to actively promote bilateral cooperation through the Joint Commissions/ Intergovernmental Commissions between Vietnam and countries in the Middle East and Africa, in addition to promoting the brand development for Vietnamese agricultural and fishery products in the regional countries.