Export of key agricultural products of Vietnam: opportunities and challenges in the coming time

Agricultural products are one of Vietnam's important export industries, contributing positively to the country's overall export turnover. However, besides the efforts and achievements, Vietnam's agricultural exports are facing many difficulties and challenges in the context of integration and the Covid-19 epidemic. How to take advantage of opportunities and overcome difficulties and challenges is a problem that needs to be solved.

1. Achievements in exporting key agricultural products of Vietnam

2020 and the first months of 2021 are a difficult time for the world economy and Vietnam cannot avoid heavy impacts, especially on our country's import and export activities. However, the total export turnover of our country in 2020 still reached an impressive number: 544 billion USD, while many countries around the world are still facing negative growth, trade activities are significantly limited. Along with the achievements in preventing the spread of the Covid-19 epidemic, export is considered a miracle of Vietnam and has been recognized by many other countries.

Agricultural products are outstanding export items in the total export turnover of Vietnam over the past time, setting a new record with export value reaching 41.2 billion USD in 2020 and 22.83 billion USD in the first 5 months of 2021. It is an amazing result of Vietnamese farmers and businesses who have made every effort to seize every opportunity even the smallest to bring our country's agricultural products to the world in a very difficult situation due to the Covid-19 epidemic.

Achievements in the export of key agricultural products of Vietnam are recognized in the following aspects:

- Exports of Vietnamese agricultural products have high and stable growth:

Table 1: Export turnover of key agricultural products in 2020 and the first 5 months of 2021

Source: Data from the Ministry of Agriculture and Rural Development

- The structure of the export industry has shifted to meet market demand and improve the country's competitive advantage

The structure of exported agricultural products has changed in the direction of increasing the proportion of wood and wood products, vegetables, and cashew nut and decreasing the proportion of rice, coffee, rubber, and tea. The items with an increased share are wood and wood products (up from 2.6 billion USD, accounting for 16.6% in 2009 to 12,372 billion USD, accounting for 30.03% in 2020), vegetables (up from 438.9 USD) million USD, accounting for 2.8% in 2009 to 3.269 billion USD, accounting for 7.93% in 2020), cashew nuts (up from 846.9 million USD, accounting for 5.4% in 2009 to 3.211 billion USD, accounting for 7.79% in 2020).

- The export market of agricultural products expands and changes positively

In the first 5 months of 2021, Asia still holds the largest export market share of Vietnam with 46.5% of total turnover. Followed by markets: USA (27%), Europe (10.1%), Africa (1.7%) and Oceania (1.3%). The four main export markets of Vietnamese agricultural products are: the US (24.6%), China (22.6%), Japan (6.6%), and South Korea (4.9%).

Particularly for the Chinese market, in the first 5 months of 2021, the amount of fresh fruit exports was 2.5 million tons, equaling 76.2% of the whole 2020. In which, dragon fruit is the fruit with the largest export volume with 1.2 million tons, up 138% over the same period in 2020.

In order to meet import requirements from China, the Ministry of Agriculture and Rural Development has issued 1,703 planting area codes with an area of 178,697 hectares and 1,776 codes of packing facilities for fruit products. Currently, China is considering an import option for sweet potatoes and chili peppers, in addition to 9 fruits that have been officially exported, including: Mango, dragon fruit, banana, longan, lychee, watermelon, rambutan, jackfruit and mangosteen.

Table 2: Vietnam's largest export markets for agricultural products in the first 5 months of 2021

Source: Data from the Ministry of Agriculture and Rural Development

- The share of processed products in exports increased

Because in the recent period, enterprises have increased investment in processing. The industries with high growth in exports of processed products are rubber, wood and seafood, so the proportion of raw exports decreases, and the export of processed products increases. The proportion of processed agricultural products increased from 21.75% in 2008 to 45% in 2019.

2. Restrictions on the export of key agricultural products

Despite many achievements in export in recent years, the export of agricultural products of Vietnam still has many limitations such as:

- Export a lot but low value

Some agricultural products of Vietnam are ranked first in the world in terms of export value of pepper, cashew, shrimp, pangasius, coffee, furniture, and rice, but the ranking in terms of export prices is very low. Specifically, pepper exports ranked 1st in the world, but Vietnam's export price of pepper only ranked 8th; Cashew nuts ranked 1st in the world but the price ranked 6th, rice and coffee ranked in the 2nd and 3rd groups in the world but the export price ranked only 10th. The low export value is mainly due to the fact that Vietnam still exports a lot of raw and semi-processed products (accounting for about 60%).

- Exports are also highly dependent on a few markets

In the period 2010 - 2021, the export of agricultural products depends on two markets, China and the United States, accounting for 47.2% of the total value of agricultural exports in the first 5 months of 2021. The degree of dependence on markets such as China and the United States is increasing. The proportion of Vietnam's agricultural, forestry and fishery export value to China increased from 14.7% in 2010 to 22.6% in the first 5 months of 2021. In which, Vietnam exported over 70% of vegetables and fruits to China. China (General Department of Vietnam Customs).

- The quality of exported agricultural products is not equal

In recent years, the quality of some agricultural products has not been stable, while the requirements of importing countries are increasing, especially the requirements of food hygiene and safety and traceability. There are still many export orders returned due to the use of banned substances during production and processing. The proportion of products produced according to sustainable standards and international certification is still small, only about 10%.

- The percentage of branded products is low

Although there are many agricultural products exported in the leading position in the world, more than 80% have not yet built a brand name, do not have a logo or label of Vietnam. This is a major limitation, reducing product competitiveness and at the same time limiting the deep participation in the retail distribution system of importing countries.

The above limitations stem from a number of objective and subjective reasons:

Objective reasons

The scale of domestic production is small, with 80% of farmers having an area of less than 1 hectare. This limits the production of uniform products, uniform quality. This limits the production of products of equal quality. Export products are subject to fierce competition while supporting resources for agriculture are limited. Total investment in agriculture, forestry and fishery only accounts for 5.69% of total investment capital of the whole society. In the context of strong integration, countries are increasingly raising non-tariff barriers to protect the domestic market. Some countries change their import policies frequently, causing difficulties for Vietnamese agricultural products.

Subjective reasons

The market information and analysis system is still limited, the legal framework has not been fully invested. The public service system has not met the requirements (the inspection, supervision and quality management are still limited, affecting the quality of exported goods). Supporting industry (logistics services) is still weak, especially in transportation and storage. There is a lack of synchronous coordination among sectors and levels in activities to promote the export of agricultural, forestry and fishery products. The policies in recent times have been developed quite fully, but the support is still limited and has not been put into practice, especially promoting businesses to associate with farmers to build raw material areas, invest in deep processing and develop product brands.

3. Opportunities

Economic integration brings great opportunities for Vietnam in expanding markets and exporting agricultural products. With the advantages of agriculture and natural conditions, Vietnamese agricultural products have certain strengths to compete with international agricultural products.

- The international market's demand for agricultural imports increases

According to the forecast of the OECD-FAO in the period of 2019-2028, the world's consumption of agricultural products will increase by an average of 1.5-3% per year in the period of 2019-2028, of which the average demand for meat and fish will increase by 3%, the demand for fish consumption is also forecasted to increase by 2.12%, the demand for cereals is forecast to increase by nearly 2%, the demand for furniture using bamboo materials will increase, and the growth is forecasted in the period of 2019-2028 is 10.6%.

Vietnamese agricultural products exported to more than 180 markets around the world have resonated, especially in big markets such as the EU, the United States, and China. With many advantages in the production of agricultural products, tropical fruits typical of our country's climate and high technical standards, Vietnamese agricultural products have conquered difficult markets such as the EU, Large reserves can supply high demand markets like China. Many agricultural products of Vietnam hold leading positions in world exports such as coffee, rice, tea, cashew nuts, etc.

- Advantage in production

As a country located in the Tropic of Cancer, Vietnam has many favorable conditions for agricultural development and production. With an average growth rate of 3.5%/year, a high level in Asia in general and Southeast Asia in particular, after a long period of food shortage in 1989, Vietnam has gradually become a major exporter of agricultural products in the world. In the period 2008-2017, the GDP growth rate of Vietnam's agricultural sector reached an average of 2.66% per year, 3.76% in 2018 and 2.2% in 2019 and 2020, despite being heavily affected by the Covid pandemic, the growth of Vietnam's agricultural sector still reached 2.65%.

The internal structure of the agricultural sector has shifted in the direction of promoting advantages to suit the market and adapt to climate change, developing according to VietGAP standards with over 62% of communes meeting new rural standards.

- Quick and flexible in exporting

With the increasing scale of investment in agriculture by enterprises today, focusing on operating the stages from production - processing - consumption of agricultural products, in addition, businesses also promote, agile, flexible in trade promotion, opening up many new export markets such as some fresh lychee to Japan, pomelo to Chile, passion fruit to Europe... as soon as the decline in exports to the Chinese market was noticed.

- Opportunities from new generation trade agreements FTAs (CPTPP, EVFTA)

CPTPP and EVFTA are two new-generation trade agreements, the big ambition is to commit most of the tariff lines to 0%, and at the same time, it stipulates a lot of new contents that have never been mentioned in the negotiation of traditional FTAs. The CPTPP and EVFTA will positively impact trade and export activities by promoting trade, investment and technology transfer flows.

In the first month of EVFTA taking effect, Vietnamese agricultural products exported to the EU increased by 15-17% over the same period in 2019. The CPTPP also contributes to a stronger growth in Vietnam's exports. According to the Ministry of Industry and Trade, in the first half of 2020, exports to markets of CPTPP member countries had positive growth such as: exports to Australia increased by 2.3%; Chile increased by 1.6%; Mexico increased by 2.6%... Although the growth rate is not too high, if placed in the context that the Covid-19 epidemic has been greatly affected, causing a sharp decrease in export turnover, this result is relatively optimistic. Previously, in 2019, although the Agreement had been put into effect for less than a year, Vietnam's export turnover with countries in the CPTPP market had a good growth rate, especially the two markets that have not previously participated in the Free Trade Agreement, Canada and Mexico, both increased at 26-29%.

- Science and technology development, technology 4.0

The development of science and technology and the wave of the 4.0 technology revolution also create many opportunities to help the agricultural industry improve its competitiveness and meet the increasing requirements of export markets. The most prominent applications of the 4.0 technology revolution such as digital technology (AI, Bigdata, Internet of Things IoT, Remote Sensing Technology…) help reduce costs, increase quality and productivity effectively. Opportunities to promote the production of high-value products for export.

The development of science and technology, technology 4.0 has promoted online trade promotion activities. According to a report of the Ministry of Industry and Trade, online trade promotion activities have helped Vietnamese exporters save on trade promotion costs while maintaining and developing good relationships with foreign partners across 5 continents, mobilizing all The system of Vietnamese trade counselors abroad has contributed to supporting localities and farmers to consume agricultural products in a timely manner in the situation that it is not possible to carry out actual trade promotion activities abroad.

The Ministry of Industry and Trade has also directly organized and provided technical support and coordinated with localities such as Bac Giang, Son La, Phu Tho, Hung Yen, Yen Bai, Tuyen Quang, Lam Dong, Ca Mau... successfully organized online trade promotion conferences to promote and connect the consumption of agricultural and aquatic products in the crop such as litchi, longan, mango, vegetables, etc. Up to now, this model has become a new and effective form of e-commerce promotion and has spread to most localities, associations and businesses across the country, thereby contributing positively to the export - import results of the country in recent times.

Particularly in some industries such as furniture production, promoting development on online channels such as Alibaba.com is considered a turning point in bringing Vietnamese agricultural products to more international customers. The result is that the group of wooden products has accelerated in the last months of 2020 with an export turnover of over 12.6 billion USD, up 11.5% compared to 2019; The value of forest products has reached over 10 billion USD, the highest ever, and continues to be in the top 10 key export product groups of Vietnam.

4. Challenges

- International economic integration creates strong competition in both domestic and foreign markets

Vietnam has signed to join 13 Free Trade Agreements (FTA), 3 Agreements are being negotiated, which are favorable opportunities for exports, but also face great challenges in terms of competition both in the export market and in the domestic market. Many commodities with low competitive advantages such as sugar cane, livestock products, feed ingredients, etc. will face intense competition from imported products.

- The needs of the markets change and the requirements for quality standards are increasing

Market demand is moving towards energy-saving, environmentally friendly and socially responsible products, requiring that agricultural, forestry and fishery products are properly exploited, thereby providing the corresponding standards on product origin (such as seafood, vegetables, wood). This is also a challenging barrier for the export of Vietnamese agricultural, forestry and fishery products while the system of traceability and exploitation management has not been properly implemented, many new agricultural enterprises are in the process of renovation to integrate with the world.

- The return of trade protectionism

Political conflicts, territorial conflicts in regions and between major economies, changes in trade policies, conflicts, increasing protectionist trends, typically the US – China trade conflict. Increasing technical barriers, trade remedies such as anti-dumping, anti-subsidy, emergency safeguard... are always challenges for exports.

- Uncertainty in policies of importers

Changes in import policies of countries will greatly affect agricultural exports. In recent years, there have been many anti-dumping tax lawsuits filed by the US against Vietnamese shrimp and pangasius products. Or the EU applies a "yellow card" to Vietnam's seafood imports into the EU; the Farmbill Act of the United States (American Farm Law); the change in China's border trade management policy to strengthen the application of measures on traceability of agricultural, forestry and fishery products, tightening the import quotas, temporary import for re-export; Quarantine measures of imported seafood from Korea, temporary suspension of seafood imports from Saudi Arabia, some import regulations from Brazil or policies on importing seafood into Russia... create difficulties for the export of agricultural products of Vietnam.

- Challenges of climate change, natural disasters, epidemics

The agricultural industry always faces many difficulties and challenges from the impacts of natural disasters (climate change leads to more severe extreme weather patterns, hail, saltwater intrusion), disease affects the production and trade of agro-forestry-fishery products. In particular, the recent development of acute respiratory infections caused by a new strain of corona virus (Covid 19) has caused complicated developments and severely affected all socio-economic activities and activities and the trade situation of Vietnam's agricultural, forestry and fishery products with global markets.

Truong Thi Quynh Van

Department of Information, Library and Trade Promotion - VIOIT