Agribusiness to Vietnam
Trends and opportunities
The agricultural industry plays a significant role in Vietnam’s socio-economic environment, contributing 17 per cent to total growth domestic product (GDP) in 2015, with total agricultural production reaching US$38.6 billion - an increase of 2.6 per cent compared to 2014. The industry is forecasted to grow 4.6 per cent annually on average between 2016-2020 (Source: BMI, Vietnam Agribusiness Report, Q4 2016).
Vietnam is a leading exporter of rice, coffee, rubber, pepper and cashews. In more recent years, aquaculture and fruit production have also increased and become more export-oriented.
Pork production is expected to increase 19 per cent over 2016-2020, sugar production 23 per cent, especially milk production 61 per cent.
However, Vietnam’s agricultural producers are facing many issues including inefficient infrastructure (technology, seeds, machinery, equipment, insurance, banks, and transport), poor knowledge of good farming practices, limited capital, poor food safety standards, and poor supply chain management. In order to maintain its position as a leading exporter of agricultural products, Vietnam needs to enhance agricultural product quality and yield growth by advanced cultivation technology, farming management system, modern machinery, as well as higher food safety and hygiene standards.
Vietnamese consumers perceive Australian products to be of high quality, allowing them to be positioned as premium products. With its geographical proximity, Australian suppliers are able to respond to market needs quicker than suppliers from Europe and the United States (US). This factor is specifically advantageous for commodities such as wheat, dairy or fresh fruit, given many small to medium sized Vietnamese food processors prefer to buy in small amounts by the container load.
Vietnam is in the top six fastest-growing meat consumers globally. Meanwhile, total meat supply is estimated to grow at only one - three per cent per year and therefore not able to meet the demand, especially beef and poultry (Source: BMI, Vietnam Agribusiness Report, Q4 2016). Reasons for shortage include limited areas for grazing and grasslands, inadequate attention to animal feeds and breeders, and practices of small or family-sized grazing resulting in unstable production and quality. In 2010, Vietnamese importers and consumers welcomed the entry of Australian live cattle. Increased live cattle export from Australia helped alleviate the supply shortage.
According to the Ministry of Agriculture and Rural Development of Vietnam, animal breeders and genetics systems are not sufficiently organised and managed, which leads to exposure to complicated diseases and bio-security bio-safe grazing issues. The Vietnamese Government has developed research centres for genetics and embryos, however, they fail to function efficiently due to synchronization problems between the labs and actual production.
In its development direction towards 2020, Vietnam aims to grow over 11 per cent yearly to reach 500,000 heads of dairy cattle, and 4.8 per cent on average to reach 12.5 million heads for beef cattle (Decision no. 10/2008/QD- TTg by Prime Minister, Strategy to develop animal grazing towards 2020, 16 January 2008). Since January 2013, imports of Australian cattle to Vietnam have increased rapidly with 68,347 heads in 2013 and more than 360,000 heads in 2015, accounting for 12.8 per cent of the total Australian live cattle exports. Exports of Australian feeder and slaughter cattle are supported by the Exporter Supply Chain Assurance System (ESCAS).
Vietnam has seen a rise in demand for imported fruits and vegetables from its younger population as this demographic is prepared to pay more for imported goods as their income levels increases. Horticultural products account for a large portion of total food imports in Vietnam, with US$521 million on imported fruit and vegetables in 2014. As of January 2015, the top five largest fruit exporters to Vietnam were China, US, Australia, New Zealand and South Africa.
Import values for fruits and vegetables to Vietnam reached US$351 million over the first six months of 2016, an increase of 40 per cent compared to the same period in 2014. Apples, pears, table grapes and cherries have become increasingly popular in recent years. However, issues with the supply chain infrastructure hinders greater sales. There is significant opportunity to expand the market for table grapes, dried fruit and nuts, citrus and cherries as cold chain systems develop in Vietnam.
Vietnam was Australia’s second largest export market for fruit before Vietnam suspended imports of fruits from Australia on 1 January 2015. Prior to the suspension, Australian fresh fruit exports to Vietnam were worth US$40.9 million in 2014, especially table grapes which accounted for US$32 million (Source: Fruit World, 27 July 2015).
In August 2015, Vietnam removed table grapes, mandarins and oranges from the suspended list of 38 Australian fruits and imports resumed from Australia to Vietnam. During the first half of 2016, Australian fruit imports value reached US$20 million, four times the value in 2015.
Vietnam relies heavily on imported seeds and nursery plants to maintain its leading position in exporting agricultural products such as coffee, rice, pepper and fruits. In 2014, Vietnam exports of horticultural products reached US$1.2 billion and spent almost half of that to import nursery products, even popular vegetables like pumpkins, tomatoes and gourds. Imported products are well-received despite higher costs compared to domestic ones because they have high production efficiency, stable quality, shorter harvest time, enhanced anti-diseases and weather-adaptation abilities.
Vietnam’s animal feed industry is one of the world’s fastest growing agribusiness markets and in recent years, the industry has seen an increase in foreign investment. According to Nikkei Asia Review, Vietnam’s animal feed market is valued at US$7 billion and expanding at an annual rate of around 10 per cent. The Vietnamese Government has given high priority to the development of industrial farming and expects the use of industrial feed to increase from 56 per cent in 2010 to 70 per cent in 2020 (Source: STOXPLUS, Vietnam Agribusiness Sector Overview).
Cotton and Wool
Vietnam is currently among the top five textile and apparel exporting countries in the world. In 2015, the industry reached A$27.2 billion export value - an increase of 9.43 per cent compared to 2014. To meet its strong demand from the expanding textile industry, Vietnam’s domestic cotton consumption has been increasing at 22 per cent per year over the past five years and will continue to grow at a strong pace till 2020. It is estimated that the number of spindles in Vietnam will grow from 6.5 million in 2015 to 8.2 million in 2017 (Source: USDA, Vietnam-Cotton and Products Annual Commodity Report 2016).
Domestic production of cotton is small, meeting just one per cent of total domestic demand and consumption relies heavily on imported cotton. The country’s top five cotton suppliers are the US, India, Brazil, Australia and Cote d'Ivoire. These five countries make up 70 per cent to 80 per cent of the total cotton supply to Vietnam. Vietnam’s cotton planted area continues to shrink to less than 1,000 hectares in 2015, therefore imported volumes will continue to grow in future.
Since 2012, the Out of Vietnam project at AWI (Australian Wool Innovation) has been supporting the Vietnamese wool processing industry by transferring new technologies and introducing Vietnamese manufacturers to retail buyers in Japan and Korea to support sustainable demand for Australian wool (Source: AWI Market Intelligence, July 2014). The project now includes more than 50 manufacturing partners, including one retailer in Vietnam.
The two most important grains in Vietnam are:
- rice: regarded as a staple food and export
- corn: mostly grown for satisfying the local feed industry and imported to close the gap between local supply and demand.
The pace of urbanisation, rapid development of international fast food chains and westernisation in recent years have led to greater consumer awareness and usage of convenience foods. As a result, wheat-based foods are increasingly consumed. The growth of these industries is a key driving force for demand in milling wheat.
Vietnam is a net importer of wheat with annual demand of milling wheat of 1.5 million tons per year. According to Vietnam Customs, Vietnam imported more than 4 million tonnes of wheat, valued at US$849.5 million during the first ten months of 2016, up 100 per cent in volume and 62 per cent in value. Although Australian wheat is forecasted to continue dominating Vietnam’s imports, it is expected to face increasing competition from Canada, India, Russia, UK and US.
In order to support growth in agricultural production, there has been an increasing use of fertilisers in Vietnam. According to Vietnam’s Ministry of Agriculture and Rural Development, the country imported 4.56 million tons of fertilizers in 2015, worth US$1.43 billion, increasing 20 per cent in volume and 15 per cent in value compared to 2014.
Vietnam imports almost 50-60 per cent of its fertilisers, making it one of the largest importers in the world. The main sources are China (accounting for approximately 46.7 per cent of imports), the Philippines, Japan, Israel, and Middle Eastern countries (Source: VietinBankSc, Industry Report: Fertilizers manufacturing in Vietnam).
Although Vietnam’s aquaculture sector has an increasing share in agricultural GDP, the contribution of aquaculture to national GDP has remained quite stable at around four per cent.
Vietnam exports seafood to 160 foreign markets and has become one of the largest aquaculture producers in Southeast Asia and the world.
On September 16, 2010, Decision No. 1690/QD-TTg approving the fisheries development strategy plan to 2020 was ratified. According to the plan, by 2020, the seafood industry is expected to contribute 30 - 35 per cent to the agro-forestry-fisheries sector’s GDP, with an annual growth rate of eight - 10 per cent. Seafood export turnover is expected to reach US$9 billion and total fisheries output 6.5-7 million tons, of which aquaculture production will account for 65 to 70 per cent.
A lack of advanced technology has greatly influenced the quality and value of exporting Vietnamese aquacultural products. Existing factories have low capacity and limited experience in the sector. Also, there was an increase in the number of shipments being rejected by importing countries due to antibiotic residues and other contaminants being detected during routine testing. There are opportunities for Australian firms to export processing equipment, technology, facilities as well as expertise in sustainable fishery management.
Major exporters of agricultural goods include low-cost countries such as China, India, Thailand as well as higher quality product suppliers such as Australia, New Zealand, France and the US.
Tariffs, regulations and customs
Trade between Vietnam and Australia is directly improved by the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA), which gives preferential tariffs for Australian exporters and investors in Vietnam. Some highlights of the AANZFTA to Vietnamese trade include:
- elimination of a five per cent tariff by 2016 on exports of wheat
- reduction of a 35 per cent tariff to zero per cent by 2018 on exports of frozen shrimps and prawns
- binding of zero per cent tariffs on pure-bred breeding animals and the elimination of a five per cent tariff by 2016 on oxen, buffaloes and other live bovine animals.
For more information, access the Department of Foreign Affairs and Trade’s (DFAT) Free Trade Agreement Portal.
Certain imported products must be inspected before being cleared at customs stations, including:
The Customs Law provides a legal foundation for the operation of the customs sector and creates a favourable environment for import-export activities. Companies that import goods must submit a dossier of documents to the customs authorities. The dossier must include at least the company’s business registration certificate and import business code registration certificate.
Imported goods require the following documents:
- bill of lading
- cargo release order
- commercial invoice
- customs import declaration form
- inspection report
- packing list
- technical standard/health certificate
- terminal handling receipts.
Marketing your products and services
Seeking an appropriate local importer or distributor as a partner is very crucial for Australian exporters to achieve success in their business in Vietnam. Obtaining valuable support from this local partner in relation to setting up the business and dealing with complicated import procedures will lead to easier market access. Australian exporters should undertake thorough market research to identify potential buyers and reliable distributors, as financial information on companies is generally not available.
It is important for Australian exporters to visit the market frequently in the initial entry phase to provide technical or marketing support to their clients or distributors. Local companies usually have limited access to information on suppliers and rarely have budgets to visit Australia, so frequent visits are crucial towards building personal relationships with key decision makers. These will help to navigate potential problems such as late deliveries, quality issues or faulty documentation.
Australian exporters and investors should also be aware of Vietnam’s frequent regulatory changes. Regular updates of policy changes are advised to help exporters adjust their marketing strategies accordingly and timely.
The distribution value chain for industrial sales includes food processing companies and intermediary local traders or consignee importers and international trading firms. Direct sales with frequent market visits are recommended for this market segment. For consumer goods, the distribution channel includes importers, wholesalers and distribution points such as supermarkets and food retail outlets.
The emergence of supermarkets and hypermarkets in major urban centres offers opportunities to Australian suppliers of consumer goods for direct sales.
Vietnam has 11 major seaports, including Ho Chi Minh City in the south, Hai Phong in the north and Da Nang in the centre. More container ports are planned to open and another project is ongoing to reduce traffic congestion in inner Ho Chi Minh City by relocating its eight port facilities to outlying areas by 2020. Container handling activity is focused in the two main shipping centres of Ho Chi Minh City and Hai Phong, including their respective satellite ports of Cai Mep-Thi Vai and Cai Lan. These locations make up 97 per cent of Vietnam’s total container handling volumes.
There are two Vietnamese airports that deal with cargo handling for international markets: Tan Son Nhat Airport (TSNA) in Ho Chi Minh City and Noi Bai Airport (NBA) in Hanoi. A third airport, Long Thanh Airport located approximately 40 km northeast of Ho Chi Minh City Tan Sot Nhat Airport is currently under construction and is expected to be operational by 2020. TSNA has two cargo terminals including Tan Son Nhat Cargo Services (TCS) and Saigon Cargo Service Corporation (SCSC).
The majority of Logistics Service Providers (LSPs) consider trucking costs to be higher and standard of trucking service delivery to be lower in Vietnam relative to China, India, Malaysia and Thailand. Most of the trucking companies are small and operate second-hand trucks that are subject to poor maintenance.
Links and industry contacts
General Statistics Office (GSO)
Information Center for Agriculture and Rural Development
USDA – Foreign Agricultural Service
Vietnam Development Information Center
Government, business and trade
Department of Animal Health
Department of Livestock Production
Directorate for Standards, Metrology and Quality
General Department of Vietnam Customs
Ministry of Agricultural and Rural Development
Ministry of Planning and Investment
Ministry of Public Health
Ministry of Science and Technology
National Agro-Forestry-Fisheries Quality Assurance Department
Plant Protection Department (PPD)
Vietnam Academy of Agricultural Science
Vietnam Investment Review
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