Trade Promotion to Middle Eastern and African market

Wednesday - 16/11/2016 04:23
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 In recent years, although Vietnam’s exports to the Middle Eastern – African market have been on a steady rise, Vietnamese businesses have yet been able to fully exploit the potential of business cooperation with this market region. Furthermore, Vietnam’s goods are still shown to be less competitive compared to the exports of the same type from China, India, Thailand, Malaysia, …

These are the conclusion from the representatives at the “Commercial promotion to the Middle Eastern-African market” seminar, hosted by Vietnam Trade Promotion Agency (Ministry of Industry and Trade) in the morning of August 18th, 2016.

Increased potential and opportunities

Commencing the seminar, Mr. Ta Hoang Linh, Deputy Head of Vietnam Trade Promotion Agency, Vietnam and Middle Eastern – African countries have established partnerships at an early age, and have always valued the importance of promoting and strengthening friendly relations between the two regions. As of now, Vietnam has established business relations with 70 nations in this region and two-way trade between Vietnam and Middle Eastern-African region in the last 10 years has increased by 8 times from 2 billions USD. Moreover, this is also the huge region of 36 millions km2 and the population of 1,5 billions people, as such, Middle East-Africa show great demand for many goods of the same kind with Vietnam’s primary export such as rice, coffee, pepper, seafood, clothes, shoes and many high-value industrial products such as phones and related components, electronic components, computers and electronic products…. As a result, this has been considered a highly promising and diverse market region for Vietnamese businesses.

Mr. Ngo Khai Hoan, Deputy Head of MoIT’s Department of African, Western and South Asian Markets asserted that Middle Eastern and African countries have huge and easily satisfied demand for consumer products, machineries and manufacturing equipment. In the last period, economy of African countries has grown relatively fast, thus promoting regional and international integration. Some countries have relatively strong economic capacity and high foreign-exchange reserves thanks to the exportation of oil, gas and valuable minerals. Many African countries are entitled to trade preferences from the US (according to AGOA legislation), EU and between countries in the region, in order to extent the trade network with many other countries.

According to MoIT’s evaluation, the primary markets for Vietnam’s exportation include: Egypt, Algeria, Morocco, South Africa, Angola, Mozambique, Nigeria, Ghana, Ivory Coast, Kenya, Senegal, Tanzania, Ethiopia and Cameroon. These are the markets with high population, high GDP, fast economic growth, rapidly increasing trade with Vietnam in the last years and strategic geographic-economic position, gateway of the region.

In regard to the Middle Eastern market region, Mr. Le Thai Hoa, Deputy Head of MoIT’s Department of African, Western and South Asian Markets, assessed that many countries in this region have huge demand for food, farm produce, seafood, consumer products, construction materials, furniture, electrical cable…. and high payment ability thanks to its high financial capacity.

Vietnamese businesses have many opportunities to cooperate with Middle Eastern countries, especially countries in Gulf Cooperation Council (GCC) which maintain a low import tariff of 0-5% for non-member countries. Primary markets for Vietnam’s exportation include: UAE, Saudi Arabi, Turkey, Israel, Iran and Iraq.

Many difficulties and challenge still remains

According to Mr.Ngo Khai Hoan, in Africa, cultural difference, business etiquette, long transportation, risky payments, complex provisions of consular authentication, trade fraud are the many problems which deter Vietnam enterprise from doing business with African partners.

For example, the payment method often used by African businesses is D/P, documents against payment, while L/C method is rarely used. Because many Vietnamese businesses are eager to secure orders, thus accept this method of payment, there have been cases of businesses finding it difficult to take payment after delivering the goods.

In the Egyptian market, for the first 6 months of this year, import tariff for goods in 6 groups of essential consumer products have increased to 20-40% from 10-30%, thus making considerable impact on Vietnam’s export turn-over to Egypt. Likewise, foreign currency difficulty caused by drop in oil price, increase in import price and lowering demand from consumers continue to have negative impact on Vietnam’s exportation. While Vietnamese businesses are not willing to slow-paying order, Chinese businesses allow its Egyptian partner to make late payment, hence making Egyptian importer prefer Chinese goods to Vietnamese goods.

In Angeria, import quota licensing policy, and online importing payment management method are also complicated and time-consuming process for enterprises.

Also, Mr. Le Thai Hoa said, national security problems, political instability, racial dispute, religious conflict, regional conflict, trade embargo on Iran, long civil war in Siria, extremist Islam, terrorism, trade fraud, lack of market information, cultural and religious difference, difference of business etiquette, technological barrier, protectionism in Turkey and Isarel, lack of use of L/C method,… are the many difficulties which prevent Vietnamese businesses from establishing business relation with Middle Eastern partners.

Solution to promote trade

In order to effectively take advantage of the potential and opportunity in this market, and furthermore facing the risks and challenges, the guests at the seminar all had the same opinion that businesses need to reassess its development strategies in order to improve competiveness by converting its available comparative advantage into the product’s value. Furthermore, businesses need to focus on improving and developing distribution channels while actively implementing  trade promotion activites such as market survey, participation in fair and exhibition, make good use of the benefit from FTA, establishing a suitable market entrance strategy, producing high-quality export in accordance with quality standard, environmental standard, countries’ culture and custom, constructing distribution channels, opening representative office and branch office in the market, keep contact with the Embassy, Vietnamese trade network in the region to get professional advice and partnership introduction.

According to Mr. Nguyen Lien Phuong, Director of the LP Academy for Businesspeople, in addition to investing in business relationship, products quality and production, the quality management is also essential, as this is a invisible asset with huge and long-lasting value.

In regard to new businesses venturing into the international market, when planning for development strategy of its international brand, you also need to register the trademark in the local coutnry and especially foreign countries. This is because, according to Mr. Nguyen Lien Phuong, once you have a long-term strategy for product and brand development, accompanied by close connection with related authority, the potential of harvesting the Middle Eastern- African market will extend by a great amount.

This will not only increase the export value of our local businesses but also improve our image of “made in Vietnam” goods. The prestige gained from this market will be an important step for Vietnam to promote exportation to neighbour markets such as Europe and other big markets.

 

Source: Vietnam Trade office in Middle and Africa

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