Algeria market most important trading partners - potential land for Vietnamese businesses

DNHN - Algeria, as one of Vietnam's most important trading partners in Africa and a member of the African Continental Free Trade Agreement (AfCFTA), is a market that is both promising and challenging. knowledge for Vietnamese enterprises.

Commerce partnership between Vietnam and Algeria

Algeria is one of Vietnam's first African partners. According to the Algerian Agency for the Promotion of Foreign Trade (ALGEX), bilateral trade between the two countries will reach 140 million USD in the first six months of 2022 and 262.5 million USD in 2021. Trade balance Trade between Vietnam and Algeria benefits our nation, as Vietnam consistently trades in excess to Algeria. Despite Algeria's recent efforts to diversify its economy, increase exports, and limit imports, Algeria remains a potential market for Vietnamese goods.

Algeria's import demand for goods is extremely diverse, with a large number of Vietnamese exports including coffee; common metal; seafood; telephone; rice; chemistry... Coffee is a typical example; Algeria must import all of its coffee, approximately 130,000 tonnes worth $30 million, to meet domestic demand. Vietnam's leading export to Algeria is unroasted coffee, which accounts for over fifty percent of the country's market share. Additionally, green tea is considered a potential product when the demand for this product increases, particularly among young consumers. In addition to the traditional tea drink with mint, tea bags are gaining popularity.

Each year, Algeria imports approximately 100,000 tonnes of rice, representing over 1% of the country's food consumption structure. Imported rice consists of white rice, broken long grain (5%), parboiled rice, and basmati. Vietnam always maintains a high export turnover of iron and steel products, reaching 12.37 million USD in 2020 and 8.6 million USD in 2021. It is anticipated that Algeria's iron and steel import demand will increase rapidly shortly as the country implements numerous housing and road projects...

Mr. Hoang Duc Nhuan, the Commercial Counsellor of Vietnam in Algeria, also noted that there are still some Algerian products in high demand that Vietnamese companies can export more of, including chemical products, packaging materials, etc., wood and furniture, auto parts and accessories, and household appliances. On June 5, 2023, the Vietnam Trade Office in Algeria received information about Algerian businesses searching for packaging raw materials due to a lack of such materials. Consequently, 58% of Algerian businesses reported a deficiency in raw materials in this market. The most imported materials by Algerian businesses are polyethylene (30% of businesses) and polypropylene (19%). This is also a chance for Vietnamese businesses to consider collaborating with Algerian firms that import raw materials (more information is available here).

Challenges for Vietnamese businesses

Although Algeria is a market with ample space and opportunities for Vietnamese businesses, they must also pay attention to the existing obstacles.

The import tax is high, particularly for non-Algerian raw materials. For instance, the import tax on coffee is 63%, green and black tea is 53%, spices are 83%, cashew nuts are 83%, shoes, and sandals are 53%, and iron and steel are 53%. Algeria is also not a member of the World Trade Organisation (WTO), so tariff barriers are still very high, with obvious protectionism, and many products are subject to a 30 percent domestic consumption tax and a 200 percent room tax. Therefore, Algeria encourages foreign businesses, and Vietnamese businesses, in particular, to cooperate and invest in this country's production.

Risks associated with insufficient partner comprehension: The Vietnam Trade Office in Algeria has issued a warning about Vietnamese agricultural exporters falling victim to fraud. Consequently, a Vietnamese company exported five containers of cashew nuts to Algeria via a South African intermediary business in August 2022. The South African intermediary company paid a 10% deposit on the goods' value. But when the goods arrived at the port of Mostaganem (Algeria), the customer, Algerian company Eurl ATS Food, was unable to clear customs because the Algerian Ministry of Commerce has included this company on its list of commercial fraud enterprises since June 2022. To avoid a similar situation, the Vietnam Trade Office in Algeria advises businesses to conduct thorough customer due diligence before conducting business, such as requesting a copy of the business license; tax code; Passport page with a photo of the company's legal representative, and asking the authorities to verify. Even if you have worked for a long time and must verify the import partner's information, you should not place your trust in the brokerage firm. Methods of payment should include an irrevocable letter of credit (L/C) with confirmation or bank collection (DP, CAD at sight) with a minimum deposit of 20%. Since Algerian banks do not permit deposits from within the country, it is possible to require customers to make deposits abroad.

Actively study the culture, laws, and requirements of your market: Algeria is a Muslim country, so its citizens do not consume alcoholic beverages, pork, or products derived from animals and birds that have been Halal-certified. Prioritizing direct customer contact at trade shows, seminars, and through deals. Due to the business culture in Algeria, patience is required when dealing with Algerian clients, as partners are frequently slow to respond.

To avoid being blacklisted and affecting the entire Vietnamese business community, businesses must respond when a partner makes a request and maintain a steady supply of goods. Quality standards to ensure partners' credibility.

Phong Linh