Vietnam seeks new avenues into Cambodia markets

Nguyen Cam Tu, deputy minister of the MoIT, told attendees at conferences in Hanoi and Ho Chi Minh City earlier this month that last year Vietnam recorded combined imports and exports with neighbouring China, Laos and Cambodia of US$27.56 billion.

China accounted for 85% of the combined commercial trade followed by Cambodia at 11% and Laos at four percent, said Deputy Minister Tu.

All things being equal, Deputy Minister Tu said he believes that with some concerted effort local companies have a realistic shot at increasing cross-border exports bringing total trade for 2016 to US$30 billion.

He said total trade in 2015 through the border-crossings was robust, experiencing a 27% year-on-year surge, with Vietnam exports consisting primarily of products from the agriculture, forestry and fishing industries.

Imports through the crossings were diverse consisting of clothing and textile raw materials and intermediary goods from China, agriculture products, consumer goods, machinery and vehicles, to name only a few of the major items.

In past years, Vietnam local companies pretty much had a lock on the Cambodian market, having the largest market share of all ASEAN countries exporting to the market, said Deputy Minister Tu.

However, this year with China’s economy slowing down, he said to expect competition to be much tougher, both from Chinese and Thai businesses, as they look to expand market share to offset the slowdown on their home turfs.

Van Duc Muoi, CEO of Vissan Limited Company, a local food processor in Vietnam, said his company is experiencing significant competition from Chinese competitors in the Cambodian market this year.

Last year, said Mr Muoi, out company’s sausages and dried products sales exploded, but this year we are being overwhelmed by Chinese companies who are offloading product at ridiculously low prices.

“We simply can’t match the low prices the Chinese companies are offering,” said Mr Muoi.

Our growth in establishing distribution centres in the Cambodian market actually stopped advancing in mid-2015 and since then we have been exploring other avenues to increased market share, said Mr Muoi.

“We’ve tried investing in manufacturing facilities in Cambodia,” said Mr Muoi, but to be honest we’re simply tapped out and don’t have the funds needed to take that avenue right now.

Le Anh Dung, deputy CEO of Saigon Cosmetics Joint Stock Company, echoed Mr Muoi’s sentiments about the increased competition.  Our company’s growth has also slowed significantly since the middle of last year, said Mr Dung.

For the whole of last year, we averaged a 20% growth in market share, which has slowed to 10% in the first quarter of this year, said Mr Dung.

New import policy changes under which Cambodia tightened its import of goods have created difficulties for companies like ours as a result of high tariffs, sad Mr Dung, with foodstuffs incurring a 35% import duty.

Vietnamese exports to the market fall into one of four tariff levels (0%, 7%, 15%, 35%), and in addition are subject to a VAT of 10%, resulting in many products being priced right out of the market.

Many Chinese and Thai businesses are flooding the Cambodian market with foreign direct investment resulting in their products not being subject to the high tariffs the Vietnamese companies must incur.

As a result, local companies must find alternative avenues and wait until Cambodia complies with its ASEAN commitments to reduce tariffs to access to the Cambodian market in order to remain competitive.