Opportunities to increase orders from the European market

29/09/2023    19

Despite facing numerous challenges related to new requirements and standards, Vietnam continues to be a destination that attracts special attention from investors and importers from the EU. This opens up opportunities for Vietnam to regain growth momentum after a period of decline due to the global economic impact.

Many new challenges

Since the beginning of 2023, the risk of economic recession, inflation, and high-interest rates significantly impacting the consumption and import of goods in the EU has had a notable effect on trade between Vietnam and this market region. According to statistics from the General Department of Customs, in the first eight months of 2023, the two-way trade turnover between Vietnam and the EU reached US$38.8 billion, down 8.6% compared to the same period in 2022, with exports to the EU reaching US$29 billion, a decrease of 9.5% compared to the same period in 2022. According to the Ministry of Industry and Trade (MoIT), the international situation is predicted to continue being complex and unpredictable, especially political instability at regional and global levels, harboring many risks of economic recession and supply chain disruptions. The possibility of the EU economy slowing down and inflation, although adjusted, still at a high level, will significantly affect consumer spending. In particular, the demand for non-essential goods in the EU is likely to decrease, affecting import demand.

Additionally, the EU is intensifying the application of non-tariff measures, especially tightening regulations and technical standards related to the environment, climate, green transition, and sustainable development. Meanwhile, Nguyen Thao Hien, Deputy Head of the European-American Market Department at the MoIT, noted that many Vietnamese enterprises have been limited in terms of scale, technology, and capital to continuously meet the changing regulatory requirements from the EU market. Especially regulations related to sustainable development, environmental protection, and labor.

According to Hien, this year, the EU will apply two important laws that will have a significant impact on Vietnam's export enterprises. Firstly, the Carbon Border Adjustment Mechanism (CBAM) will be pilot applied in October with six sectors and, after 2-3 years, will end the pilot phase and expand to other sectors and fields. Secondly, the Anti-forest destruction and protection act was announced in May 2023, under which goods that do not prove that they are not produced on deforested land will be subject to a 4% tax.

Furthermore, another EU draft law, although not yet in effect, has specific provisions in the EU member states such as France and Germany, concerning supply chain control. This law applies within the EU territory but is directly related to all enterprises participating in the supply chain for the product line. Therefore, Hien recommended that enterprises need to be well-prepared well in advance.

Regaining Growth Momentum

Despite the considerable challenges ahead, Vietnam still has many opportunities to regain its growth momentum in the EU market. Firstly, the advantage of the EVFTA with 70% of tariffs immediately reduced to 0% and a roadmap of 3-10 years to bring 100% of tariffs to 0%. Meanwhile, Hien perceived that fundamentally, the product structure between Vietnam and the EU did not conflict but complements each other. In addition, according to statistics from the European Statistical Office, Vietnam's export turnover to the EU only accounts for 1.7% of the total import turnover of this market. While the EU is currently the world's third-largest import market. Therefore, Vietnam's 1.7% has not yet penetrated deeply into the EU market.

Furthermore, in recent years, the EU, along with some other major trading partners, has adjusted its trade policies, focusing on the Indian Ocean and the Pacific region. In this regard, the leadership role of Vietnam in ASEAN cannot be denied. This is why many investors and importers from the EU are showing great interest in the Vietnamese market. "Recently, we have witnessed the shift of supply chains to the ASEAN region, including Vietnam," said Hien.

From an investor's perspective, Vanlentin Tran, CEO of Andros Asia - a French agri-food processing and export group, has also committed to staying and expanding in Vietnam. Vanlentin Tran evaluated that with a diverse source of high-quality tropical fruits, Andros has acquired two processing plants in the Mekong Delta region for fruit exports. To date, Andros has purchased nearly 30,000 tons of fresh fruit and exported 11,000 tons of fruit. Among them, selling 3,000 tons of red dragon fruit to the American coffee brand Starbucks is one of Andros' typical success stories in bringing Vietnamese fruits to the world market. Valentin Tran said that Andros Asia's plan for the near future was to further boost fruit processing activities and value-added products.

Hoang Tri Mai, General Director of Airbus Group Vietnam, Laos, and Cambodia, also stated that Airbus was closely working with Vietnamese companies on new orders related to the production of components and aircraft parts, expanding the supply chain further to meet the highest standards of quality, safety, and sustainable development. Specifically, Airbus is collaborating with Artus (Meggitt) Vietnam in HCM City to supply electro-mechanical equipment for the A320, A330, and A350 aircraft; and with Nikkiso Vietnam in Hanoi for the production of composite structures for A320 Sharklet aircraft and components for A330neo and A350 aircraft.

According to Mai, the positive development prospects and Airbus's increased aircraft production will further boost the activities of Airbus suppliers in Vietnam and open opportunities for potential companies to collaborate. These companies need to meet Airbus's strict requirements for competitiveness, product quality, operational standards, and sustainability commitments in the aviation industry.

Source: Customs News