Businesses must raise their game to make inroads into Australian market

Although Vietnam and Australia are FTA partners and enjoy advantages of slashed tariffs, Vietnam’s export growth to the Oceanian nation remains limited.

Despite having huge market potential, Vietnamese businesses have yet to make significant inroads into the Australian market.

The Australian market is widely considered more demanding than that of the United States and the EU due to strict non-tariff barriers and high standards with regards to purchasing goods.

Although the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) opened up a wealth of opportunities for Vietnamese goods, services, investment, and labour, the nation’s export turnover to Australia has yet to increase with only US$4.5 million in 2018 in comparison to 2008’s figure of US$4.591 million.

Missed opportunities

At a recent conference themed “Australia’s market potential from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) perspectives”, Phung Thi Lan Phuong, head of the FTA Division of the WTO and Integration Centre of the Vietnam Chamber of Commerce and Industry (VCCI) said although both countries are FTA partners and enjoy advantages of slashed tariffs, Vietnam’s export growth to the Oceanian nation remains limited. The country’s exports are even limited when compared to other partners that have not signed a FTA with Australia.

The nation’s 2018 exports to Australia accounted for only 1.84 per cent of total export turnover, a relatively small proportion when considering the size of the market.

Compared to other export markets, Australia was only the nation’s 13th largest export market in 2017, with export value much lower than major export markets as the US, China, Japan, and the Republic of Korea.

Among the 10 ASEAN member states that have signed the AANZFTA, Vietnam ranks fourth behind Singapore, Thailand, and Malaysia in terms of export turnover to the Australian market.

Moreover, Vietnam is merely the 14th largest importer to Australia, accounting for just 1.74 per cent of their total import turnover in 2017.

Lan Phuong noted that while average export growth from Vietnam to markets worldwide stood at 15.1 per cent in the 2008 to 2018 period, the country’s average export growth to Australia made up only 2.3 per cent.

However, Vietnam's

export structure does not correlate well with Australia’s import structure. Several traditional export products of Vietnam such as farm produce and garments and textiles are commodities that Australia rarely imports.

Ms Phuong emphasized that these statistics show that Vietnam’s exports to Australia have endured sluggish growth in recent times. Despite the fact that domestic goods enjoy preferential tariffs to the Australian market, Vietnam’s overall export turnover still accounts for only a very small proportion of the country’s total export turnover.

Radical reforms needed among businesses

The representative from VCCI also pointed out that Australia has little demand for many of Vietnam’s products. Moreover, the country represents a a fastidious market that sets strict requirements on imports, making it difficult for Vietnamese goods to penetrate the market despite enjoying preferential tariffs.

According to the nation’s trade office in Australia, the market there has some of the most stringent regulations in terms of food safety and hygiene in the world.

Furthermore, they has also put up a number of technical barriers on product standards and labeling, which have caused difficulties for domestic export products when trying to enter the market.

Many batches of domestic goods have been returned as they don’t meet the regulations set forth by the Australian market.

In order to capitalise on the opportunities that have arisen from the CPTPP, Dinh Thi My Loan, chairwoman of the Vietnam Retailers Association, advised businesses to devise long-term business strategies and undergo radical reforms aimed at improving product quality in order to meet the demands of consumers.

Loan also underlined the importance of a perse range of products and as well as consistent product quality in order to enhance the competitive edge of Vietnamese goods within the Australian market as well as avoiding technical barriers in the future.

She suggested that local businesses attach greater importance to the development of brands for export commodities and improve their local knowledge of regulations. Notably, the quality of goods must be ensured as opposed to quantity and low prices.

Nguyen Anh Duong, Head of the Central Institute for Economic Management (CIEM)’s Macroeconomic Policy Department, suggested that Vietnam should enhance the capability of businesses in the fields of agriculture, industry, and services in order to adapt to Australian regulations and culture.

The representative from CIEM also underscored the significant role that associations play when it comes to addressing obstacles faced by the business community. Such bodies can devise proper policies that can aid in supporting businesses as well as working alongside the government to introduce Vietnamese goods to Australia.