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Lesson 1: “Health” of the export market and challenges for Vietnamese enterprises

Báo Công thươngBáo Công thương27/08/2023


Trade Promotion Agency: Improving the capacity to develop export markets for businesses Naming the 3 largest cinnamon export markets of Vietnam in the first 6 months of 2023

How is the "health" of export markets today?

According to Ms. Nguyen Thao Hien - Deputy Director of the European - American Market Department, in 2023, the impact of the prolonged Covid - 19 pandemic along with the general global economic recession, Vietnam's import and export activities to the European - American market will be negatively affected. High inflation in key markets such as the United States and the EU will lead to a sharp decline in consumption trends.

Bài 1: “Sức khỏe” của các thị trường xuất khẩu và những thách thức cho doanh nghiệp Việt Nam
Export turnover of Vietnam's key commodities mostly decreased in the first months of 2023 due to decreased aggregate demand and high inflation.

Further clarifying this issue, Mr. Tran Minh Thang - Head of the Vietnam Trade Office in San Francisco (USA) said that in the first 6 months of 2023, Vietnam's exports to the United States reached 44.46 billion USD, down 22.1% compared to the same period in 2022. Sharp decreases were in seafood, wooden products, textiles, footwear of all kinds, phones, components...

“There are many reasons for the decline in export turnover, of which the two most important reasons are the decline in aggregate demand in the United States; and the difficult US economy, high interest rates, high inflation leading to unstable personal finances, therefore, consumers are more cautious when making purchasing decisions,” said Mr. Thang.

Ms. Do Viet Ha - Representative of the Vietnam Trade Office in the Federal Republic of Germany said that the two-way trade turnover between Vietnam and Germany in the first 6 months of 2023 reached 5.47 billion USD, down 12% compared to the same period in 2022 (according to data from the General Department of Vietnam Customs). Vietnam's main export products to Germany are coffee, footwear, textiles, mobile phone components of all kinds, etc. The export turnover of these products in the first 6 months of the year all decreased. According to Ms. Ha, the German economy is facing difficulties due to the current very high inflation of 6-7%, which has a strong impact on tightening spending on non-essential products.

Similarly, Mr. Tran Ngoc Ha - Head of the Vietnam Trade Office in Hungary also said that Hungary's economy is in recession. GDP in the first quarter of 2023 decreased by 0.9%, the economic situation continued to stagnate; total retail sales continuously decreased. Compared to the same period last year, import turnover in the first months of the year in Hungary decreased. The reason for this situation is due to the Russia - Ukraine conflict, the energy crisis, and the economic impact after Covid - 19. As a result, import demand decreased, production costs increased, production capacity decreased, people cut spending a lot, and domestic consumption decreased.

Bài 1: “Sức khỏe” của các thị trường xuất khẩu và những thách thức cho doanh nghiệp Việt Nam
The EU will apply many standards on sustainable development, this is an existing challenge for Vietnamese exports.

What difficulties and challenges are Vietnamese businesses facing?

In the Chinese market - Vietnam's current largest trading partner, Mr. Nong Duc Lai - Vietnam's Trade Counselor in China said that technical barriers and food safety and quarantine measures in this country are increasingly strengthened and stricter. Besides, there is competition between Vietnamese goods and goods from the host country. In addition, the ability of Vietnamese enterprises to access large distribution and retail systems in the host country is still very limited; Vietnamese enterprises still lack market information and the needs and tastes of consumers in the importing country.

According to the representative of the European - American Market Department, the current consumption market in this region has signs of recovery but still contains many potential risks. Major markets such as the United States, Germany, France, the United Kingdom, etc. have grown again but very slowly, inflation is still high. The Russia - Ukraine conflict is still prolonged, affecting the stability of Europe in particular and the world's total demand in general. The trend of strong globalization leads to policies to protect the market, protect domestic production, countries are promoting green development strategies or encouraging measures to combat climate change, leading to the application of many requirements and technical standards related to green development and sustainable development.

“For example, this September, the EU is the first major economic region to apply a cross-border carbon adjustment mechanism. It will initially apply to 16 products, and by 2026 it will be applied widely,” Ms. Hien informed.

Mr. Tran Minh Thang said that currently, US importers are diversifying their supply sources. This means that the same product will seek different suppliers to minimize the risk of future supply chain disruptions. “Vietnam is a leading exporter in the textile, footwear, and leather industries, so it will certainly face pressure to share market share with countries with smaller market shares,” Mr. Thang said.

Bài 1: “Sức khỏe” của các thị trường xuất khẩu và những thách thức cho doanh nghiệp Việt Nam
Vietnam's leather and footwear industry is facing the risk of having to share market share in the United States as importers of this market tend to diversify their supply sources.

The representative of the Vietnam Trade Office in Germany pointed out that the challenge when importing to Germany is that the import requirements of this market are very strict, especially the requirements on food hygiene and safety, and the requirements on technical standards for imports. "The sanctions for imported goods that violate the law are very strict. Goods found to be in violation can be destroyed on the spot," said Ms. Ha, adding that the level of competition in the German market is very high. Currently, the EU has 42 FTAs ​​in effect with 79 partners and offers GSP preferential mechanisms to 67 developing and underdeveloped countries. Vietnamese goods are also facing fierce competition with Chinese goods. In addition, Vietnamese products do not really ensure stability and quality, are limited in form, design, and variety; transportation costs due to geographical distance also reduce the competitiveness of Vietnamese goods.

“The Hungarian market is largely dominated by multinational corporations, large corporations, and international retail distributors. Domestic retailers mainly take Vietnamese goods from EU distributors for resale. Hungary does not have a seaport, so all import costs into the country are very high. These are the main disadvantages and challenges for Vietnam to export to this market,” said a representative of the Vietnam Trade Office in Hungary.

To be continued...



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