简体中文
(NHAN DAN ONLINE)In recent years Vietnam has been speeding up international economic integration with the most recent milestone being the conclusion of the Trans-Pacific Partnership (TPP), which is expected to bring both opportunities and challenges for the agricultural sector.
Vietnam’s produce will have wider market access with lower tariffs, but at the same time will face more intense competition from countries with advanced agricultural technology. The domestic agricultural sector needs to reflect and re-assess its strengths in order to come up with appropriate measures to accommodate a new playing field.
The 12 TPP member countries have a population of around 600 million, accounting for 40% of global GDP and 30% of global trade. With the participation of large markets such as Japan and the United States, this trade agreement promises to provide ample opportunities with the establishment of new supply chains. As a TPP member, Vietnam can adjust its agricultural export and import structure in a more flexible manner.
Benefits from a new wave of investment
The TPP membership will draw more foreign investment in agriculture as a wide range of tariffs will be eliminated. In fact, investment in agriculture in Vietnam has been meagre and on the decline in recent years. In 2014, pledges in 513 agricultural projects accounted for only a tiny 1.4% of total foreign direct investment. According to some economists, when the TPP comes into effect, countries which do not have an advantage in agricultural development will shift their investment to Vietnam, given that the barriers to protect local agricultural production will be removed. In addition to creating jobs and increasing income, foreign investment projects will help Vietnam’s agricultural sector adopt new technology to replace ineffective traditional methods.
Former Vice Chairman of the Vietnam Association of Seafood Exporters and Producers (VASEP) Nguyen Huu Dung says free trade agreements, including the TPP, will not bring many benefits in terms of tariffs because most of Vietnam’s seafood exports to 165 countries around the world are raw or pre-processed and already enjoy very low or even zero tax rates.
However, since the TPP will lower the tariffs on processed products, seafood enterprises can benefit if they focus on adding more value to their exports. The TPP could also offer bigger opportunities for importers of raw seafood from other member countries because Vietnam has nearly 500 processing plants equipped with advanced technology but is woefully short of raw materials.
Vietnamese enterprises can also capitalise on new technology and substantial financial resources from potential investors in other TPP member countries. New approaches to corporate management are another aspect of the TPP that can benefit local businesses. However, this means that domestic enterprises will have to cede part of their market share and hand over the advantages to their foreign partners. It might be even worse when struggling enterprises could be acquired partly or completely by foreign companies.
The former VASEP vice chairman is upbeat that the greatest benefit to Vietnam is the substantive change to domestic businesses in terms of technology, quality, product, management and marketing, thanks to cooperation with foreign partners within the TPP.
Pressure from a fierce battlefield
Big opportunities always come together with big challenges. The numerous weaknesses of Vietnam’s agricultural sector will be revealed when the TPP comes into effect and the domestic market will turn into a real battlefield with a great deal of pressure from foreign enterprises.
One of the greatest challenges to Vietnam’s agricultural exports is the creation of stricter non-tariff barriers which come in line with import duty reductions. In order to penetrate large markets, Vietnam’s major exports such as rice, coffee, pepper, cashew and seafood need to overcome stringent technical barriers and safety checks. Otherwise, Vietnam’s goods will not be able to find a way into these markets even when the tariffs are eliminated.
In the seafood industry, price is now a fresh challenge. India’s shrimps are much cheaper than Vietnam’s thanks to lower breeding and raising costs; Vietnam can hardly compete with India even if the tariffs are cut to zero. The scenario looks even bleaker when non-tariff barriers are taken into account in which Vietnamese shrimps will face more stringent safety requirements as well as anti-dumping and countervailing measures.
Vietnam’s animal husbandry will also face many difficulties because of its small-scale production, high costs and low quality, according to Dr Hoang Thanh Van, head of the Department of Animal Husbandry at the Ministry of Agriculture and Rural Development. Greater competition could knock out local enterprises on their home turf, especially those heavily reliant on government subsidies and those with out-of-date technology and business plans, which could lead to an even smaller number of agricultural businesses. According to some estimates, there are around 35,000 enterprises operating in the farming sector, accounting for only 1% of total enterprises in Vietnam. What is worth noting is that most of them are small and ultra-small enterprises, which do not have enough resources to compete with bigger companies from abroad. If these companies are not quick to adapt themselves, they are destined for failure and bankruptcy when in the face of giants in the TPP region.
The TPP facilitates the export of Vietnamese farming produce to many countries, but at the same time makes it easier for foreign produce to enter the Vietnamese market. Opportunities aside, deeper integration also means greater challenges because the quality of many agricultural products from regional countries is much better than those from Vietnam. It is projected that domestically produced meat, fruits and dairy products will hardly be able to compete even in the domestic market.
