Viet Nam Trade Office in Australia Newsletter April 2015

Australia to import fresh lychees from Viet Nam

The Australian Department of Agriculture has approved the importation fresh lychees from Viet Nam to Australia from 18 April 2015. All lychees for export to Australia will be prepared, irradiated, certified, and kept secured in accordance with the Work Plan that has been agreed between the Australian Department of Agriculture and the Ministry of Agriculture and Rural Development of Viet Nam.

Ho Chi Minh City, Northern Australia Broaden Agro-Aquatic Partnership

An Australian delegation headed by Deputy Governor Willem Westra van Holthe is in Ho Chi Minh City to seek ways to promote agro-aquatic collaboration with the southern city.

Meeting the guest on April 23, Deputy Chairman of the municipal People’s Committee Tat Thanh Cang said various Australian official development assistance programmes have yielded significant achievements, particularly infrastructure and bridges in the Mekong Delta over the past 10 years. Ho Chi Minh City and the Australian government have also developed a healthy relationship in trading food and agriculture, he added.

In return, the Deputy Governor, who is also Minister for the northern territory’s Infrastructure and Regional Development, praised the Vietnam-Australia friendship over the past 40 years, which has expanded through numerous collaborative programmes.

Opportunity to Boot Viet Nam Seafood Exports to Australia

In 2014, Viet Nam gained US$ 3.99 billion from export to Australia, up 13.7% year on year. Seafood exports from Viet Nam to Australia reached at US$ 239 million, revealing an increase of 16%.

Imports of Australia in 2014 valued US$ 228.7 billion, seafood imports alone were estimated at US$ 1.6 billion, up 5% year on year.

Viet Nam is known as the third largest seafood supplier to Australia, with 13.7% of the market share, followed by Thailand and China, which accounted for 22.9% and 18.1%, respectively.

Statistics from Vietnam Commerce Agency in Australia revealed that shrimp was Viet Nam's most exported seafood to Australia, accounting for 59% of total Vietnam's seafood exports to this market. Frozen shrimp accounts for nearly 25% of Australian market. Shrimp from Viet Nam made up 30% of market share, just after China, which dominated 35%.

Processed shrimps (approximately 51.5% in Australia market) were from Viet Nam. Of processed shrimp exported from Viet Nam to Australia, 65% was canned and another 42% was not canned. Viet Nam seafood exports to Australia has been growing at 41%, which means there are rooms for expansion into this market.

Frozen freshwater fish fillets such as tilapia, perch, carp, eel and snakehead were the second most common seafoods exported to Australia, accounting for 16.3% of total seafood exports and 21.7% of the market share. Exports of the same products from New Zealand to Australia declined while exports from Viet Nam remained positive growth of 7% in 2014.

Frozen pangasius fillets account for 7.2% of Viet Nam seafood exports to Australia. Exports of this species have been increased and this trend will continue in years to come.

An Introduction to Viet Nam’s Export & Import Industries

With its rising costs, China is no longer the go to destination for many businesses, and Viet Nam has arisen as a serious competitor. Recent trends show that the number of orders shifting from China to Viet Nam has seen a significant increase. For example, China’s Pearl River Delta, long known as one of the key factory centers for the world’s manufacturers (particularly those from Hong Kong) has now become too costly for many companies to stay in the region.

In the past three years alone, a growing number of businesses have relocated their operations from China to Viet Nam in an attempt to escape rising costs and an increasingly complex regulatory environment. Located in a strategic position for foreign companies with operations throughout Southeast Asia, Viet Nam is an ideal export hub to reach other ASEAN markets.

Compared with other developing markets in the region, Viet Nam is emerging as the clear leader in low-cost manufacturing and sourcing, with the country’s manufacturing sector now accounting for 25 percent of Viet Nam’s total GDP. Currently, labor costs in Viet Nam are 50 percent of those in China and around 40 percent of those reported in Thailand and the Philippines. With the country’s workforce growing annually by around 1.5 million, Vietnamese workers are inexpensive, young, and, increasingly, highly skilled.

Another driving force behind Viet Nam’s growing popularity is the country’s collection of free trade agreements (FTAs)—most notably, the soon-to-be-signed Trans-Pacific Partnership (TPP) and EU- Viet Nam FTA. Additional FTAs currently under negotiation include the Regional Comprehensive Economic Partnership (RCEP) and the ASEAN Economic Community (AEC). When these trade agreements come into force, Vietnamese exports will be freely accessible to many of the world’s largest markets with few tariffs or restrictions.

Viet Nam’s Trade Position in Asia in 2015

Viet Nam sits in a prime position in Asia vis-à-vis free trade agreements (FTAs) and trade organization memberships. Very few other countries in the region are included in such a plethora of trade agreements. See below for a visual representation of Viet Nam’s position.

Looking briefly at the key FTAs for Viet Nam, if they were all to be ratified then Viet Nam would have FTAs in place with the world’s three largest economies, as well as five more economies within the top fifteen in GDP. By joining all of these agreements, Viet Nam is positioning itself to become a key hub for future global commerce.

If successfully ratified, the Trans-Pacific Partnership (TPP) will significantly decrease trade barriers between the U.S. and Viet Nam. The TPP comprises a region with US$28 trillion in economic output, making up around 39 percent of the world’s total output. The agreement will remove tariffs on almost US$2 trillion in goods and services exchanged between the signatory countries. If enacted, the Regional Comprehensive Economic Partnership (RCEP) would provide Viet Nam with tariff free access to China, India, Australia, Japan, and South Korea. The EU-Viet Nam FTA will cut at least 90 percent of the tariff lines on Vietnamese exports to the EU.

ASEAN is made up of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Viet Nam. Collectively, ASEAN represents a market of some 600 million people, with a combined GDP of about US$2.5 trillion and upwards of US$1.5 trillion in trade flowing throughout the region. Viet Nam is well located geographically to take advantage of this market.

Viet Nam has recently signed the following FTA deals: the Viet Nam- Korea Free Trade Agreement and the Viet Nam-Customs Union of Russia, Belarus, and Kazakhstan Free Trade Agreement.

Expert Analysis: 2015 WTO Obligations for Viet Nam

Viet Nam became a member of the World Trade Organization (WTO) on January 11, 2007. As part of its membership, Viet Nam committed to a number of economic reforms which it would undertake over a period of years. 2015 marks the last of the reforms that Viet Nam must make.

Specifically, the year 2015 will see the following restrictions abolished:

Hotels and restaurants (including lodging services, food catering, and drink services):

Abolished Restrictions: the services provided should be in parallel with investment in hotel 
construction, renovation, restoration, or acquisition.

Services incidental to manufacturing: Abolished Restrictions:

After three years from the date of WTO accession, only joint ventures with foreign capital contributions not exceeding 50 percent shall be permitted. Five years thereon: 100 percent foreign invested enterprises shall be permitted.

How to Establish a Trading Company in Viet Nam

If a business wishes to engage in import and export activities as well as domestic distribution (i.e., retail, wholesale, and franchising trade activities) in Viet Nam, the most common method chosen is establishing a trading company.

Generally, a trading company is inexpensive to establish and can be of great assistance to foreign investors by combining both sourcing and quality control activities with purchasing and export facilities, thus providing more control and quicker reaction times compared to sourcing purely while based overseas.

Trading companies are also the ideal choice for foreign companies that need to source in Viet Nam in order to resell in Viet Nam. Without a Vietnamese trading company, the alternative would be to buy from overseas, and have the goods shipped out of Viet Nam before then reselling back into Viet Nam via local distributors (which would mean additional logistical costs, customs duties, and VAT).

Trading and distribution is still a sensitive sector for foreign investors. Therefore, the licensing process can vary 4-6 months from the date of submitting the application dossier to the licensing authority, until the Investment Certificate can be issued.

To set up a trading company (distribution company) without a retailing outlet or a trading company with its first retailing outlet, the investor must prepare an application dossier to apply for an Investment Certificate and submit to the licensing authority at the provincial level. The application dossiers after that will be submitted by the provincial licensing authority to the Ministry of Industry and Trade (MOIT) for approval. Once receiving the approval by MOIT, the provincial licensing authority will grant the Investment Certificate to the investors. In case the licensed foreign trading company want to have a second retailing outlet or more, they will be required to complete the procedure for setting up a retail establishment.

Source MOIT