Vietnamese goods are loosing domestic market share to imports

A survey on Vietnamese high-quality goods conducted in 2017 showed that such goods were favored by 51 percent of consumers, while they were usually bought by 60 percent of consumers. 

But the figures unexpectedly dropped to 27 percent and 32 percent, respectively, in the 2018 survey.

Analysts commented that the rapid development of foreign-invested distribution networks is behind the increased presence of import products in the Vietnamese market. 

Therefore, when Vietnam began opening the retail market to foreigners, they warned that if foreign investors can control the distribution channels, the domestic production will be seriously affected.

Meanwhile, big players from Thailand, Japan, and South Korea have been expanding their networks in Vietnam through Lotte, B'smart, Robinson, Nguyen Kim, Aeon Mall, Family Mart, 7-Eleven and Circle K chains.

More Vietnamese goods have been weeded out from the shelves at supermarkets, while many manufacturers have raised their voice denouncing retailers, saying they are deliberately refusing to distribute their products.

A report of the Ministry of Industry and Trade showed that modern and traditional retail chains account for 25 percent to 75 percent of market share, while foreign invested enterprises account for 30-40 percent of the modern retail channel.

Le Dang Doanh, a renowned economist, speaking at a workshop held by VEPR, expressed his concern about the invasion of import products as a result of the import tariff cut, which has dislodged Vietnamese products from the home market.

Doanh warned that 16 FTAs (free trade agreements) will be implemented in 2018, under which the import tariffs of many goods categories would be cut to zero percent. This would cause a loss of revenue to the state budget and put pressure on domestically made goods.

He said that 2018 ‘won’t be an easy year for Vietnamese manufacturers’ as the import tariff of zero percent will be applied to a high number of products from China and South Korea.

Under the ASEAN - China Trade in Goods Agreement for 2018-2022, the import tariff on many import items from China, has been cut from 5 percent and 10 percent to zero percent since 2018. 

The items include chicken, coffee, tea raw materials, sweets, processed foods, chemicals, antibiotics, textile raw materials, apparel fabrics, clothing, iron and steel products, machinery, electrical and electronic equipment.

Vietnam’s trade deficit has decreased in recent years and the country had a trade surplus in 2017. However, economists say the trade deficit may return at any time and the risk of foreign goods flooding the domestic market still exists.

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Thanh Lich