Vietnam’s agro-exports need big revamp to regain shine
Vietnam’s agro-exports need big revamp to regain shine
The integration into the global and regional economy, signaled by the free trade agreements that Vietnam has clinched or is going to finalize with foreign partners, will create an opportunity for a big revamp to the sector which is losing shine.
“We want to import Vietnamese shrimp, not ice,” Minister of Planning and Investment Bui Quang Vinh quoted an official of a member country in the Eurasian Economic Union (EEU) bloc as telling him at the signing ceremony of a free trade agreement (FTA) last month.
On May 29, Vietnam signed an FTA with the EEU, which includes Russia, Armenia, Belarus, Kazakhstan, and Kyrgyzstan, in Burabai, Kazakhstan in the presence of Russian Prime Minister Dmitry Medvedev and his Vietnamese counterpart Nguyen Tan Dung.
The free trade deal covers more than 90 percent of all goods traded between the EEU and Vietnam, Reuters quoted Viktor Khristenko, chairman of the Eurasian Economic Commission's board, as saying.
By signing the FTA, the EEU aims to increase its foreign trade turnover with Vietnam to at least US$10 billion in five years from $4 billion in 2014, Khristenko said.
Minister Vinh quoted the official’s statement at a meeting of the law-making National Assembly in Hanoi this week.
He said to the attendees that the official had told him Vietnam should export shrimp without much ice included, as ice is already in surplus in his country.
Many batches of Vietnamese shrimp shipped to the country often have too much ice inside, the official said, adding that it is a very embarrassing fact.
In late April, European exporters said at an export forum in Brussels that Vietnam had to detail the ice-glazing ratio (ratio of ice glaze to gross weight) and humidity of catfish flesh on the package to improve its transparency and gain consumer trust.
Once a spearhead
Earlier this year, the Ministry of Industry and Trade reported that Vietnam had posted record high revenue of US$25.7 billion from agro-forestry and seafood shipments in 2014, a 12 percent rise compared to 2013.
Exports of agro- and aquaculture products are among Vietnam’s leading cash earners, as they made up over 17 percent of the country’s total export turnover last year.
Agro-forestry and seafood exports accounted for as much as 14.8 percent of the total export revenue in 2014, according to the ministry.
However, the situation turned upside down in the first five months of this year.
According to the Ministry of Agriculture and Rural Development, shipments of agricultural and forestry products in May were estimated at $2.37 billion, bringing the sector's export value in five months to $11.4 billion, down 7.3 percent compared to the same period of 2014.
One of the reasons for the decline, according to the Vietnam Association of Seafood Exporters and Processors (VASEP), was local currencies in many export markets, especially in Europe, have sharply depreciated against the dollar in the first five months.
As over 90 percent of Vietnamese seafood enterprises choose the dollar as the currency for payment for their foreign partners, the appreciation of the greenback against other currencies in Vietnam’s export markets, such as the EU, Japan, and Australia, has negatively affected the competitiveness of the enterprises and their goods, VASEP said.
This has forced Vietnamese seafood exporters to lower their prices so as not to lose their customers there, according to the association.
Even when the State Bank of Vietnam decided to devalue the local currency, the Vietnamese dong, last month, the situation has yet been improved much.
Some agro-produce exporters told Tuoi Tre (Youth) newspaper they would make more money because of the dollar price increase, but many importers are concerned about additional costs, as they have to spend more Vietnamese dong buying dollars to import goods and pay their dollar-denominated debts.
Another issue is that many export products have failed to meet the quality and hygiene standards of their foreign markets.
Saudi Arabia was the latest foreign market to issue warnings about many agricultural and food products shipped from Vietnam violating food hygiene and safety standards, while similar advisories from other key export markets of the Southeast Asian country were given in the first five months of this year.
Many agricultural and food products from Vietnam, including black pepper, were contaminated with pesticide residues, the Vietnamese Ministry of Industry and Trade said on its website.
In April, VASEP asked local seafood exporters to keep an eye on the antibiotic residues in their exports following the refusal of the U.S. Food and Drug Administration (FDA) to grant import licenses for many frozen shrimp shipments from Vietnam and other countries in the first quarter of 2015.
In the first three months of this year, the FDA found 140 shipments of frozen shrimp containing high rates of antibiotic residues from India, Malaysia, China, and Vietnam.
Of these, 96 shipments were imported from Malaysia, 25 from Vietnam, 13 from India, five from China, and one from Indonesia.
This year, Vietnam targets to export $32 billion worth of agricultural products, a tough target as export revenue in the first five months dropped 5.1 percent year on year to $8.5 billion, according to the Ministry of Industry and Trade.
Let us do it right
Telling the story after the EEU trade pact was inked, Minister Vinh said that he wanted to remind local businesses and officials that they should look at themselves again and have a right attitude toward doing business and managing the national economy in this age of further economic integration.
“We should do business with dignity and transparency, as there is a good chance now,” he said, adding that Vietnamese businesses will hurt themselves if they continue to do business in the old way, with old manners.
Minister Vinh said the trade pact with the EEU should be seen as a motivation for Vietnamese firms to get prepared for more business opportunities, as the bloc has a combined GDP of over $4 trillion.
"We signed that pact with five countries at once, including major power Russia. We should be very proud to see our country is now well positioned,” the official said.
“They earnestly suggested Vietnam open the market after assessing its particularly important economic status in Southeast Asia.”
Vietnam has pledged to implement signed trade agreements and to conclude 14 free trade pacts with 55 foreign partners, including 15 members of the G-20, with a view to creating a basic foundation for the Southeast Asian country to integrate deeper into the international community and widen future cooperation opportunities, Prime Minister Nguyen Tan Dung said at the mid-term Vietnam Business Forum in Hanoi on Tuesday last week.
