- Green Growth
- Your Consultant
|Mavin Group is one of the leading Australian businesses taking advantage of the CPTPP's benefits in Vietnam|
A few weeks ago, Vietnam-Australia joint venture Mavin Group officially put into operation its 1,000 square metre warehouse in the Mekong Delta province of Tien Giang’s My Tho city.
Mavin also inaugurated a 49,000sq.m, $30 million feed mill in the nearby province of Dong Thap last May, which was its fifth feed mill in the country. So far, the group has invested $120 million in Vietnam.
Mavin’s chairman David John Whitehead told VIR that the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is considered one of the key enablers for Mavin to do business in Vietnam.
“The CPTPP provides great opportunities for Vietnamese agribusinesses. The reduction or removal of tariff barriers creates an even playing field for manufacturers and producers in both import and export markets,” he said. “Mavin has positioned itself over the last 15 years to be an international-standard player in the Asia-Pacific region, and it is professional companies like us, that want to do business in an environment that is more transparent and internationally competitive. So, the CPTPP gives us great opportunities to import and export in the market with players from Australia and Japan.”
Recently, Yutaka Yamamura, vice president of Food Company at Japan’s Itochu Corporation, met with Minister of Agriculture and Rural Development Nguyen Xuan Cuong. The former said Itochu is conducting a market study in Vietnam, planning to buy domestic agricultural products and then distribute them in Japan and other foreign markets. Itochu is now importing frozen vegetables from Vietnam and wants to increase this trade.
Itochu has also been co-operating with Thailand’s CP Group since early 2015. CP, which is boosting the import of Vietnamese agricultural products to export to Thailand and other overseas markets, is planning to export chicken from Vietnam to Japan.
Nguyen Lan Phuong, partner of Baker McKenzie, and Vo Y Binh, associate of the law firm, wrote to VIR that the CPTPP can be “viewed as an opportunity for Vietnam to attract foreign investment into its agricultural market.”
“With higher standards, reduced tariff rates, and increased transparency in the livestock industry, foreign and domestic enterprises alike may choose to increase investment in the areas of genetics and husbandry,” they said.
Investors from Japan are among the CPTPP members looking to take advantage of the deal in Vietnam. For example, Japanese-backed Koyu & Unitek was established in 2014, focusing on producing chicken in southern Vietnam and beginning to export chicken products to Japan since last September. This is also the first company based in Vietnam to export these products to Japan.
According to investment consulting firm Seiko Ideas Corporation, Japanese investors want to expand agro-forestry-fishery investments in Vietnam because it would be pressured by the CPTPP. Specifically, under the deal, Japan must open its agricultural sector to many sensitive items. As a result, Japanese agricultural products will have to compete in price with other countries’ agricultural products, which will make it difficult for small, inefficient, and costly producers. Therefore, Japan has boosted investment in Vietnamese agriculture as Vietnam is a CPTPP member with great potential in this sector. When exporting to Japan, the tax rate will be 0 per cent. Besides, this can meet the condition that export products must have 70 per cent of materials coming from the CPTPP.
According to Seiko Ideas, while Japan needs a key partner for agricultural development, Vietnam needs a relevant “padlock” to exchange agricultural technology in agriculture and has many advantages over other CPTPP countries.
Domestic firms are also expecting benefits from the CPTPP. For instance, Vietnam NTC JSC is busy making preparations to begin expanding its warehouse system at the end of June 2019. The 2,000sq.m system in Hanoi will be used by NTC to hold and preserve meat products imported from Canada, Australia, and New Zealand. “We import meat from India and the US, and will now expand import markets to Canada, Australia, and New Zealand,” NTC’s director Nguyen Tao Chuyen told VIR. “Some types of meat products from these three new markets will enjoy 0 per cent import tax rate from 2019 under the CPTPP.”
However, according to the Ministry of Agriculture and Rural Development (MARD), the domestic agricultural sector, especially animal husbandry, will face difficulties due to truncated import tariffs under the CPTPP.
Specifically, upon the CPTPP’s entry into force, import tariffs on many livestock products like beef, pork, sheep, goat, poultry, and many types of frozen aquatic products, as well as dairy products, animal feed, and poultry eggs will begin to be gradually reduced to 0 per cent within 3-10 years.
“Products from nations that are strong in livestock production like Canada, Japan, and Australia will come to Vietnam massively. This will have a negative impact on domestic livestock production,” explained an expert from the MARD’s Livestock Production Department.
“Moreover, under CPTPP commitments, any product with a registered national brand name can be exported to all CPTPP nations without quota, provided that it meets the importing nation’s conditions. Not only raw products, but also finished products from the CPTPP member states will be imported to Vietnam,” the expert said.
Right after the CPTPP took effect, the Canadian government issued a report on how the CPTPP can benefit Canadian businesses in the agricultural sector in Vietnam and other markets.
“The CPTPP will provide new market access opportunities for Canadian pork, beef, fruit and vegetables, malt, cereals, animal feed, maple syrup, wines and spirits, baked goods, confectionery, and processed food and beverages,” the report said.
“Gains from tariff elimination and improved market access for Canadian agriculture in the CPTPP are especially significant in the markets of Japan, Malaysia, and Vietnam,” stated the report. “In these markets, Canada currently faces high tariffs and has no preferential access. The average tariffs that Canada faces in these countries are 17.3 per cent in Japan, 17 per cent in Vietnam, and 10.9 per cent in Malaysia.”
Phuong and Binh from Baker McKenzie also said that as a signatory of the CPTPP, Vietnam’s livestock products will be challenged.
Specifically, the chapter on national treatment and market access for goods commits CPTPP parties to eliminate agricultural export subsidies and lower tariffs. This is significant for Vietnam which has high tariffs in place for certain meat and seafood products. Vietnam’s current tariff rates for certain products (ranging from under 5 per cent to around 30 per cent) will eventually be reduced to 0 per cent.
“When this takes place, the livestock products of other countries, including Canada and Japan, will flood into Vietnam, resulting in domestic products becoming less competitive,” the expert said.
However, Whitehead of Mavin told VIR that the great challenge for animal husbandry in Vietnam right now is not the CPTPP itself, but disease control. Foot and mouth disease and African swine fever pose grave threats to livestock farming. “For Vietnam to actively play a part in CPTPP export, we must convince our CPTPP partners that our farmed animals and their meat products are disease-free. Only then will we be able to compete effectively,” he said. “One of the challenges to Vietnam is that the CPTPP imposes high standards of governance and transparency.”
Despite these challenges, Mavin’s strategy and business plan has always looked to the future to serve the Vietnamese domestic market, while considering opportunities for exports. “We see the CPTPP and perhaps the future inclusion of the US, as providing great opportunities for companies like us to show that Made, Manufactured, and Grown in Vietnam is a great thing, a sign of quality and stability in the market,” Whitehead said. “We take note of history when ‘Made-in-Japan’ was regarded as a symbol of low quality in the past, only to be a mark of high quality now. So, we are confident and excited about the opportunities that the CPTPP offers to businesses in Vietnam generally.”
According Vietnam’s Ministry of Agriculture and Rural Development, Vietnam’s agro-forestry-fishery export turnover hit a record $40 billion last year, up from over $36 billion in 2017. The key export markets included China (22.9 per cent of Vietnam’s total export turnover), the US (17.9 per cent), Japan (19.1 per cent), ASEAN (10.64 per cent), and South Korea (6.9 per cent).