Golden opportunity for Vietnamese exports to Middle Eastern countries after the Covid-19 pandemic

DNHN - On March 17, 2022, at the Export Showroom 92 - 96 Nguyen Hue in Ho Chi Minh City, the Ho Chi Minh City Investment and Trade Promotion Center (ITPC) hosted a seminar titled "Golden opportunity for exporting Vietnam to Middle Eastern countries following the Covid-19 pandemic" to assist city businesses in resuming production, identifying partners, and expanding export markets in the new context.

Speaking at the opening of the seminar, Mr Nguyen Tuan - Deputy Director of ITPC said that the Middle East (including 16 countries) is emerging as a potential export market for Vietnamese enterprises with a population of about 400 million people with a high standard of living.

The Middle East region's trade profited and strengthened following the global economic crisis of 2008-2009, owing to the world economy's recovery and the increase in oil prices. Simultaneously, FDI inflows into this industry grew, from 681.444 billion USD in 2010 to 932.404 billion USD in 2018. Middle Eastern countries' outside investment also increased within the same period, from $234.369 billion to $542.455 billion. 

Vietnam's trade relations with the Middle East region mainly focus on the countries of the Gulf Cooperation Council (GCC) with 06 member countries, namely the United Arab Emirates (UAE), Saudi Arabia and Saudi Arabia. Arabia (Saudi Arabia), Kuwait (Korea), Bahrain (Barah), Qatar (Catalan) and Oman (Oman), have a total population of 65 million (in 2021). 

GCC countries have an open economy, develop foreign trade, attract foreign investment, tourism, services, diversify the economy, promote import and export. GDP per capita is high, in 2021 Qatar is 60,000 USD, UAE is 41,000 USD, Kuwait is 25,000 USD and Saudi Arabia is 22,000 USD. Since January 2003, 6 member countries have implemented a Customs Union (CU) and agreed to apply a common import tariff with a tax rate of about 5% applied throughout the region for most products.

MMrNgo Toan Thang, Ambassador Extraordinary and Plenipotentiary of Vietnam in Kuwait said that 6 GCC countries are all WTO members. Trade barriers in the GCC countries' markets are the requirement for certificates of standards, quality assurance, labels, etc., issued by the Gulf Standards and Metrology Organization (GSMO), and Halal certificates for imported food and seafood products.

In recent years, Vietnam's import and export turnover to GCC countries has increased rapidly and has increased dramatically from 2012 to the present. If in 2012, Vietnam's import and export turnover to GCC countries only reached 2.7 billion USD, by 2021 it has increased 4.6 times, reaching 12.5 billion USMr

Mr. Thang stated that Vietnamese enterprises have numerous potential in the GCC market. Vietnam has a long history of friendship and diplomatic relations with the Gulf Cooperation Council (GCC) members. Additionally, the two sides have a fairly adequate legal framework for developing and strengthening cooperative relations (signed economic, trade, and scientific-technological cooperation agreements with 5/6 countries s, the trade agreement with 2/6 countries; agreement on avoidance of double taxation with 5/6 GCC countries; agreement on investment promotion and protection with 4/6 countries; agreement on air transportation with 5/6 countries; established the Intergovernmental Advisory Committee on Economic Cooperation). 

The diplomatic network functions as a bridge to facilitate trade and cooperation: the GCC has four embassies and three trade offices, while Vietnam has five GCC embassies. Due to vast financial resources, the GCC block possesses considerable purchasing power and solvency. GCC's import-export structure is quite compatible with Vietnam's strong export products and needs, and GCC's import tax is relatively low. 

Sharing more about the Middle East market, Mr Nguyen Tuan - Deputy Director of ITPC said that these countries have a huge import demand (ranging from US$2 billion to US$8 billion) for items such as furniture. wood, plastic products, cereals, textiles, footwear, rubber and rubber products, meat, milk and dairy products, vegetables of all kinds, etc. These are the strong commodities of Vietnam. However, the proportion of these products of Vietnam in the import structure of Middle Eastern countries is still low, not commensurate with the potential of the two sides.

Besides, the agricultural sector of the Middle East is still underdeveloped due to harsh natural conditions; the Manufacturing industry is difficult to develop, so this area still has to import a lot of food and consumer goods. Statistics show that these countries import about 80% of food items, equivalent to about 40 billion USD/year. By 2035, the total import value of food and foodstuffs of Middle Eastern countries is expected to increase to 70 billion USD/year.

Another benefit when exporting to the MiddlEastst is the import tax rate of only 0-5% for goods imported from outside the bloc. Because of this, the Middle East has become a potential market for Vietnam.

In terms of Ho Chi Minh City, the Middle East represents a significant untapped market. Ho Chi Minh City's exports to Middle Eastern countries have expanded considerably in recent years. In the UAE alone, Ho Chi Minh City's total import-export revenue is anticipated to be 340 million USD in 2021, with exports accounting for 230 million USD, an increase of 13% over 2020. Exports from Ho Chi Minh City to Iraq are expected to surpass 130 million USD in 2021, a 21% increase. 

The main products that Ho Chi Minh City exports to the Middle East markets include: seafood, vegetables, fruits, vegetables, coffee, pepper, textiles, computers and electronic components, phone components, etc.

According MrMr. Nguyen Tuan, currently, Vietnamese enterprises in general and Ho Chi Minh City in particular still face many difficulties in accessing the Middle East market such as lack of information, barriers in logistics and international payment. Therefore, businesses need support from Vietnam's diplomatic agencies in the region, as well as trade and investment promotion agencies such as ITPC. 

It is expected that shortly, ITPC will continue to deploy market survey missions, connect trade and meet modern distribution channels in the Middle East, especially the two strong export markets of Vietnam. Vietnam is now the United Arab Emirates (UAE) and Kuwait (Koot).

Sharing about the potential of the Kuwait market, Mr Ngo ToMrThang said that this country has many advantages for Vietnamese businesses. Kuwait is an open market, domestic consumption is mainly dependent on imports and import taxes are low (from 0%-5%) for most goods. Currently, Kuwait has not applied VAT and personal income tax. 

This is also a market with strong purchasing power, with GDP per capita over 25,000 USD per year; with a big proportion of migrant workers constituting the bulk of the population, demand for products is broad in terms of kind and quality and serves as a gateway to other GCC markets. Kuwait's economy is well-resourced internally, is less affected by the global economic slump, and continues to expand rapidly, particularly in the finance, construction, real estate, oil and gas, power, and commodities industries.

On the other hand, Vietnamese commodities such as cellphones, seafood, footwear, agricultural products, food, and household products have acquired a foothold in the Kuwaiti market, with rising competitiveness in comparison to the Chinese and Malaysian markets.

According to ITPC