Vietnamese Goods Less Competitive Because Of High Costs, Bad Design

Business costs in Vietnam are higher than in other regional countries

Higher taxes, expenses on import/export procedures, and transportation and logistics costs all contribute to the weak competitiveness of Vietnamese goods. 

Manufacturers complain that they have many other expenses, including loan interest and rent. In addition, stagnation in customs clearance and goods examination affect production costs.

An analyst said that competition in the home market in the last two years has become stiff because of big foreign-invested retail chains.

According to the Ministry of Industry and Trade, modern and traditional retail chains account for 25 percent to 75 percent of market share, while foreign invested enterprises account for 30-40 percent of the modern retail channel.

Import tariffs of zero percent and the strong development of the foreign-invested retail chains have cleared the way for foreign imports to invade the Vietnamese market.

Pham Ngoc Thanh, director of Phuc Lam Consultancy & Trade JSC, said that in order to compete with imports, Vietnamese goods need to be available at large supermarkets. However, it is too costly to get the right to display goods at supermarkets. 

The majority of Vietnamese enterprises are small and medium sized which have limited financial capability.

Businesses are also burdened with under-the-table fees. A VCCI (Vietnam Chamber of Commerce and Industry0 report found that 66 percent of polled enterprises confirmed they have to pay such fees, which amounted up to 10 percent of total costs, higher than five years ago.

At the 2017 Vietnam Business Forum (VBF) held in late 2017, a representative of VCCI said the efforts by ministries to cut some fees could bring modest results. In many cases, the official fees were cut, but the fees that enterprises have to pay are still high.

A survey conducted by the Vietnam High Quality Goods Business Association found that the proportion of Vietnamese consumers who have interest in and buy Vietnamese goods is lower than the figure in 2017. 

An analyst said that Vietnamese manufacturers need to shoulder blame for their inferiority in the home market rather than complain about policies. 

“With low quality and bad design, it is understandable why Vietnamese goods are less favored,” he said.

According to the General Statistics Office, by the end of November 2017, the total goods retail turnover had reached VND3,600,658 billion, an increase of 10.7 percent over the same period the year before.

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Thanh Lich