Vietnam's farmers and manufacturers contrive to survive without ChinaUpdate: 3/16/2015
A farmer harvests sweet potatoes in the Mekong Delta's Vinh Long Province. Photo credit: Tuo
Chinese dealers stopped showing up to the Vinh Kim Market, the largest fruit trading outpost in the Mekong Delta, in June, blowing a huge hole in sales.
Prices have been cut to less than a dollar per kilogram for durian or some 50 cents a kilo for dragon fruit.
The ongoing territorial dispute in the East Sea has crippled demand, vendors say.
This isn't the first time politics have hurt business and Vietnamese traders say they're beginning to pursue new markets .
Dealers from the delta have advertised star apples, dragon fruit and sweet potatoes in ASEAN countries like Cambodia, Thailand, Malaysia, and Indonesia as well as in India and the European Union.
Cambodia has proven the best customer given its proximity and willingness to purchase low-quality products, traders said.
Tran Huu Danh, director of a fruit export company in the province, said he used to sell 90 percent of his dragon fruit to China, but trade has been gummed up by the geopolitical spat.
Consequently, Danh has expanded his business to Thailand, Malaysia, Indonesia and India.
He said ASEAN markets favor Vietnamese dragon fruits, while India promises to be a big buyer.
“India is a big, easygoing market that's expected to grow in three or five years," the director said. "India could narrow our dependence on China, which is the goal of mine and other businesses.”
Vietnamese dragon fruit has been a hit in many picky markets, including the US, Japan, South Korea, Canada, EU, and most recently New Zealand.
A source from Vietnam Food Association said China has grown to become Vietnam’ biggest rice importer in the last two years and currently buys more than 60 percent of the country's rice exports, Tuoi Tre newspaper reported.
On the other hand, Vietnam depends on China for 30-50 percent of its animal feed, fertilizers and pesticides.
Huynh Quang Dau, the general director of the An Giang vegetable firm, Antesco, and vice chairman of Vietnam Fruits and Vegetables Association, said Vietnamese farmers should focus on improving quality.
Dau said local farms are small and scattered and can't provide consistent quality. Vietnam's ability to control the use of pesticides remains limited, he added.
He said government agencies need to guide businesses and farmers to build larger production areas for single fruits.
Antesco exports frozen and canned fruit to the US, Japan and the EU; their export revenues rose 19 percent year-on-year during the first five months of 2014 to more than US$5 million.The company will soon expand into the Middle East thanks to cheap loans (7-10.5 percent) secured for building processing factories and developing large fields.
“[Vietnam] should view TPP as a golden opportunity to improve production quality and policies.”
Dr Pham Sy Thanh, an expert on the Chinese economy at Vietnam National University
The few companies that have broken into high-end markets, like Antesco, say they are overwhelmed by demand.
Dong Dang Huan, a representative of Thinh Cat Company in Ho Chi Minh City, says it never has enough herbs to fill all the orders coming in from Europe.
Looking for new fiber
Investors in Vietnam's leading garment and textile exporters are busy looking for source materials that aren't Chinese.
Tran Quang Nghi, general director of the state-owned clothing giant Vinatex, said the company has invested a great deal into yarn and textile production facilities.
Its nine ongoing and planned projects -- worth more than VND2 trillion ($94.36 million) -- are set to produce more than 40,000 tons of yarn and 20 million meters of cloth a year staring in 2015.
The company also plans to put more than VND10 trillion into cotton fields, sheep pastures (for wool), and eucalyptus plantations (for rayon).
Le Quang Hung, board chairman of Garmex Saigon that grew by an average of 30 percent annually during the past decade, said local producers will have to depend on Chinese materials to some extent as their major clients in China require them to do so.
His company must use 90 percent Chinese materials for that reason.
He said local businesses can loosen their dependence on China by upgrading quality and breaking into new markets like Russia.
Diep Thanh Kiet, vice chairman of the Vietnam Leather, Footwear and Handbag Association (Lefaso) said Vietnamese businesses rely largely on China for cloth and other materials.
The industry imported $13.54 billion of materials in 2013, including more than $8 billion worth of cloth, 48 percent of which came from China.
Dyes used in Vietnam are all Chinese, Kiet said, blaming local dye manufacturers for being of prohibitively poor quality.
Two industrial zones were planned in northern and southern Vietnam to manufacture component materials for the garment sector, but they remain in the planning stages after ten years, Kiet said.
Dr Pham Sy Thanh, director of the Chinese Economic Study Program at Vietnam National University in Hanoi said limited support industries have forced local business to depend on their giant neighbor to the north.
Thanh said local businesses should stop considering China a reliable source for easy customers and cheap suppliers due to the instability of the market.
He told Tuoi Tre that Vietnamese manufacturers should capitalize on the upcoming Trans-Pacific Partnership Agreement, which would make the country a free-trade partner of big economies like the US, Canada, Australia and Japan.
“[Vietnam] should view TPP as a golden opportunity to improve production quality and policies,” the newspaper quoted him as saying.
By organizing an economy that's better than China's, Vietnam will have its independence, he said.