Businesses, management agencies team up to boost exports to Eastern Europe

The Eastern European market still holds a small proportion of Vietnam’s total export turnover

During the recent Vietnam-Eastern Europe Trade Forum held in HCM City, representatives from several associations and businesses expressed their regret that they have been unable to expand their market shares in Eastern European. Some businesses have even been forced to give up on it entirely and turn their attention to other promising markets.

Phan Thi Thanh Xuan, vice chairwoman and general secretary of the Vietnam Leather, Footwear and Handbag Association, said the Eastern Europe market is important to the domestic leather and footwear industry as it has created favourable conditions in which the industry has enjoyed robust development so far.

A notable example of this is that during the period of outsourcing for the Russian market, Vietnam was able to acquire a lot of techniques used in leather shoes products.

Pham Xuan Hong, President of the Ho Chi Minh City Textile and Garment - Embroidery Association, attributed the development of the garment and textile to the Eastern European market.

Thirty years ago, Eastern Europe was the leading export market for the local leather and footwear industries, followed by the Western European market. Currently, Vietnam earns most of its turnover from textile and apparel exports to the US, Japan, and the EU markets while exports to the Eastern European market only account for a small proportion.

When a Free Trade Agreement (FTA) with the region was signed, several textile and apparel businesses expressed their hope that this traditional market could be revived, as it has fewer requirements than other markets.

At present, some 20 businesses have maintained contact and outsourced export goods for the market with only a small amount of orders.

Hong pointed out some of the challenges facing firms in the Eastern European market, particularly as regulations on payment currencies in these countries’ monetary system do not align with that of Vietnam.

For example, when exporting goods to the Russian market, domestic enterprises cannot receive payment in Russian Rubles as they use US dollars when doing international transactions and banks are unable to open a letter of credit.

Tran Dang Chung, Chairman of Milton Company in Russia and former president of the Vietnamese Business Association in Russia, said businesses operating in the Eastern European market often run up debts for five to six months due to long procedures, which affects the operation of businesses.

Do Ha Nam, deputy chairman of the Vietnam Coffee and Cocoa Association and chairman of Intimex Group, said that the group had previously sold coffee products to the Russian market and exchanged goods back to Vietnam as a means of resolving difficulties regarding payment issues.

Mr Nam noted that many transnational countries in the Western European region have enjoyed strong sells when hawking their goods to the Eastern European market. They are willing to allow businesses in the region to owe money as they have the backing of banks which guarantee the debt.

Therefore, both regions enjoy strong business amongst each other as firms in Eastern Europe are able to owe money for a longer period of time.

However, Mr Nam advised domestic firms to improve their product quality to ensure stable growth in the market. In fact, the export of local goods to the market remains unstable due to their quality.

According to a representative from the Polish Business Association, local businesses should take advantage of more than 100,000 Vietnamese people living and working in Eastern Europe to support their operations.

Ta Hoang Linh, head of the European-American Markets Department under the Ministry of Industry and Trade, advised businesses to take a proactive approach to ensure their business operations run smoothly.

He elaborated that when businesses encounter difficulties, they should share them with the MoIT in order to seek advice on what measures to be taken to overcome these hurdles.

To support businesses to make inroads into the market, the MoIT is due to launch Vietnamese Goods Week event in Moscow this September, he added.

Nguyen Khanh Ngoc, deputy head of the European and American Market Department, had a positive outlook on the highly lucrative market, saying that trade turnover between Vietnam and the region has bounced back in recent times.

Currently Vietnam's exports to the market account for nearly 3 per cent of its overall exports. The nation earned a turnover of US$3.3 billion in 2015, US$3.7 billion in 2016, over US$5 billion in 2017, and US$6.5 billion in 2018.