Vietnam

In 2001 the United States (U.S.) signed a Bilateral Trade Agreement (BTA) with Vietnam. The terms of the BTA included the reduction of many tariff and non-tariff barriers on key consumer-oriented and ingredient exports to the country which included prepared meats. When the BTA eased import restrictions in December of 2004 it also allowed U.S. and Vietnamese joint ventures along with international companies to import products. Previously only domestic companies could import products. Vietnam also joined the WTO on January 11, 2007. According to Vietnam’s accession agreement, they will liberalize the wholesale, retail and franchise sectors eventually allowing totally foreign owned retail outlets and the establishment of franchises in 2009.

The economy in Vietnam has been growing and developing at a rapid rate. The country had been averaging a gross domestic product (GDP) growth rate of 7% over the last decade and since 2006 had a growth rate over 8%. In 2007 Vietnam had a target growth rate of 8.5%. As a result, Vietnam has the second fastest growing economy in Asia. Vietnam has been steadily transitioning away from open-air markets to modern supermarkets with an increase noted from 2 in 1999 to 85 in 2004. Tourism has also been increasing to Vietnam helping to boost the hotel and restaurant industry (HRI). One of the proven best selling products to the HRI sector has been frozen poultry.

With urban per capita income increasing at a rate of 8-10% per year and continued improving living standards has resulted in a growing middle class. The growing middle class and a sizeable young population with increasing exposure to a Western lifestyle has resulted in the traditional trade of wet markets and small household owned shops being challenged by an upsurge in modern trade with the number of supermarkets, convenience stores, min-marts, hypermarkets, large wholesale stores and department stores on the rise. “Modern Trade” currently has 12% of total retail food sales and is expected to continue its 2001-2006 average growth rate of 20% per year.

Even though about 42-45% of total Vietnamese consumption expenditure is for food consisting mostly of staples and basic food items such as rice, meat, salt, sugar, vegetable oil and sauces, consumer surveys are indicating increased spending on meat, eggs, fresh fruits, vegetables, confectionary, snack foods and sophisticated food items.

In order to satisfy increasing consumer demand and slow the rise of market prices the Government of Vietnam issued the directive No. 18/2007/CT-TTg on “Urgent Measures to Restrain Market Prices” on August 1, 2007. The directive requested relevant ministries and agencies implement measures to slow the rise of market prices during the last months of 2007 to achieve the target growth rate of 8.5%. To help achieve this Preferential Import Tax Rates (i.e. MFN Tariffs) were amended effective August 8, 2007 resulting in MFN tariffs of agricultural products including meat, meat offal, eggs, milk products, vegetable oils and materials for animal feed being reduced an average of 30-50%.

Some reductions, including those for chicken meat, go beyond Vietnam’s bound rate commitments in their WTO accession agreement. It is projected U.S. agricultural exports will exceed $500 million in 2008. U.S. chicken exports have grown rapidly recently even with the higher tariffs. Some of the increased exports may have been assisted by the decreasing value of the U.S. dollar the last couple years. No time frame was given for lifting these reductions with some feeling it may be difficult to raise them again. Vietnam continues to experience problems with the H5N1 virus. The virus has been detected in 13 provinces since the start of the year. In an attempt to help Vietnam in its fight against H5N1 the World Organization for Animal Health is donating 20 million doses of vaccine.

Sources: USDA/FAS and various news sources.

Further Reading

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