Recently, the Vietnam Trade Promotion Agency (Vietrade) under the Ministry of Industry and Trade hosted a seminar entitled “Russia – Ukraine Markets – New Export Opportunities”. This was an opportunity for Vietnamese businesses to update themselves with the latest information about the markets, trade promotion programmes, experiences and issues related to foreign trade and business transactions with Russia and Ukraine, to guide export activities in the future.
Delivering a speech to the seminar, Vietrade Deputy Director Le Hoang Oanh said Russia, a vast market with over 143 million consumers, has a broad demand for imported goods. However, export potential to this traditional market has not been tapped because Vietnamese enterprises lack interest because of information shortage. Ukraine, a neighbour of Russia, is an emerging market with a rapidly growing purchasing power which is catching the special attention of many Vietnamese exporters.
According to Vietnamese customs data, the two-way trade turnover between Vietnam and Russia exceeded US$1 billion in the first five months of 2013, of which US$718.9 million belonged to Vietnam and US$325.2 million belonged to Russia. Key exports to Russia included coffee, tea, fresh and frozen fruits and vegetables, meat and seafood. On investment, Russian invested US$924 million in 83 projects in Vietnam as of May 2013 and Vietnam pumped US$1.7 billion into 16 projects in Russia.
In 2012, the bilateral trade revenue between Vietnam and Ukraine reached US$313 million, and the former bagged US$220 million. A Ukrainian Embassy official in Vietnam hoped the two-way trade turnover would top US$600 million in 2013 thanks to efforts of both sides. As of March 2013, Ukraine had 12 investment projects with a total registered capital of US$27.3 million in Vietnam, ranking 60th among 98 countries and territories with investment capital in Vietnam. So far, Ukraine has invested in warehousing, transportation, processing and manufacturing industries and scientific and technological activities.
Speaking of Vietnam’s export opportunities to Russia, especially seafood and beverages, Mr La Van Chau, former Vietnamese Commercial Counsellor in Russia, said: Russian people are shifting to use fish products for daily meals because of health and consumption culture. Each year, Russia imports over 2 million tonnes of fish products, of which frozen items account for 70 percent and fresh items make up 22 percent. This suggests that Russia continues to be an attractive market for Vietnamese goods and that Vietnamese businesses should popularise their products in Russia, Mr Chau stressed.
Mr Duong Hoang Minh, Deputy Director of the European Markets Department under the Ministry of Industry and Trade, said Vietnam’s FTA negotiations with the Customs Union of Russia, Belarus and Kazakhstan will offer huge advantages for Vietnamese enterprises. Goods exported to Russia are free to flow into Belarus and Kazakhstan. In addition, Vietnamese firms can approach some other CIS (Commonwealth of Independent States) countries. However, language barriers, transporting distances and difficult payment methods hesitated to penetrate into Russia and Ukraine. Therefore, they should actively attend fairs and exhibitions in Moscow because this city gathers 57.7 per cent of Russia’s imports and accounts for 8 percent of this country’s population with per capita income of US1,100-2,500 a month, Mr Minh noted.
Mr La Van Chau, former Vietnamese Commercial Counsellor in Russia
Vietnamese businesses will have a lot of favourable advantages penetrating the Russian market, where demand is huge and diverse. Besides, Russia has become a WTO member; thus, Vietnamese goods will have more comfortable tariffs, especially on items of Vietnam’s competitive advantage.
However, they will also face some difficulties. Non-tariff barriers will be higher because Russians’ consumption culture improves. In addition, corruption and bribery are rampant, while administrative procedures remain a major obstacle.
They should boost marketing and popularity of product brands on mass media in Russia like television, newspapers and magazines. However, the expenses for this are significant. Besides, they ought to take part in trade fairs and exhibitions to find reliable partners and approach large distribution centres and networks. Particularly, as Russia attaches much importance to food safety and hygiene, seafood exporters must obtain animal and plant quarantine certifications from both countries.
Mr Chu Xuan Kien, Deputy General Director of Hanoi Trade Corporation (Hapro)
Russia and some neighbouring markets (Ukraine and Belarus) are always huge, important and potential markets for exporters and importers of Vietnam in general and of Hanoi Trade Corporation in particular. But, we still face a number of difficulties like limited access to sale networks, especially big supermarket chains, strong competition from other countries, and administrative procedures.
Besides, payment method negotiation is quite difficult for enterprises. Freight transportation is a huge difficulty because distance and time affect the quality of products, especially agricultural products.
To overcome these difficulties, Vietnamese businesses should focus on renovating packing process and approaching distribution networks to reduce costs.
Mr Hoang Tien Son, International Transport Manager, Foreign Trade Freight Forwarding and Warehousing JSC (Vietrans)
Currently, Vietnam is one of the first partners to negotiate the free trade agreement (FTA) with the Customs Union of Russia, Belarus and Kazakhstan. Russia’s WTO membership and Vietnam’s FTA negotiations with the Customs Union are favourable conditions for Vietnamese businesses to boost exports to this market and open up more new ones.
Attending trade fairs and exhibitions is an effective method to penetrate this market. However, businesses must be careful to avoid legal violations in Russia.
Vietrans provides consolidation services for many major exhibitions. Vietrans only hires professional shippers for exhibit transportation. If exhibitors want to have their goods transported separately, they should not use consolidation services because their goods will be packed with general freight. All overland shipments must be transported directly to exhibitions. If they are shipped to other locations, their exhibits may be sent to exhibitions late and incur more costs.