III.

Opportunities and challenges for Vietnam

1. Opportunities:
Firstly, along with special tariff preferences in VJEPA for this category which is an
opportunity for Vietnamese exporters of agricultural products.
Agricultural exports comprise nearly a quarter of Vietnam's total exports to Japan, and
maintaining and expanding these exports will be a key component of sustaining economic
growth and reducing poverty in Vietnam.
Two years after VJEPA came into effect, numerous of Vietnams goods have increased their
presence in the Japanese market by taking advantage of preferential tariff treatment. Many of
Vietnams main items such as agricultural, forestry and aquatic products have advantages in
Japan, enjoying the tax rate of 0 percent as soon as the VJEPA came into effect. The industrial
goods exported to Japan also have a low tax rate from 0-5 percent.
VJEPA greatly helps Vietnamese exporters to Japan. First, Japans tariffs on Vietnamese exports
to this market will be lowered sharply. Specifically, 86 percent of Vietnamese exports to Japan
will be subject to a zero percent tariff in the first year of VJEPA enforcement and this itinerary
will take 10-15 years for completion. This means that Vietnamese businesses can save money if
they sell products to Japan.
Experts said that 86 percent of agricultural, aquatic and forestry exports from Vietnam to Japan
will

enjoy

tax

incentives

within

10

years

after

the

VJEPA

takes

effect.

Vietnams shrimp exports to the Eastern Asian country will be exempt from duty immediately
while

its

octopus

exports

will

be

eligible

for

this

privilege

five

years

later.

Japan is the largest import market for Vietnams frozen shrimp, which had, by the end of June,
raked in nearly 200 million USD from Japan-bound exports, making up 32 percent of the counter
To make a smooth entry into Japans market, aquaculture sector experts have recommended that
Vietnamese exporters pay more attention to the quality of aquaculture exports, strategies on
aquatic processing, brand name awareness and trade promotion.
Japan will also create more favorable conditions for Vietnamese farm products including seafood
exports to this market to meet the requirements, regarding food quality, hygiene and safety.
Vietnamese exporters will be able to meet Japanese administrators to learn how to access the
Japanese market more easily. These are practical benefits for Vietnamese businesses.
Statistics of Japan External Trade Organization (JETRO) showed that every year, Japan imports
about 70 percent of its agricultural products, including corn, soybean, processed agricultural
products and fruits; and 20 percent of seafood, with shrimp as the main product. This is an
opportunity for Vietnams agricultural processing businesses. Currently, Vietnams manufacturers
have created many value-added products such as flour fried shrimp and split shrimp used to
prepare sushi.
In addition, on the sideline of VJEPA, Vietnam and Japan will launch several important projects
to create many other benefits. These include a Ministry of Agriculture and Rural Development
project to establish a food hygiene and safety center, which will examine Vietnamese goods
before they go to Japan. The Vietnamese Ministry of Industry and Trade and the Japanese
Ministry of Economics, Trade and Industry have signed an agreement to develop an assistance
project towards the support industry in Vietnam. There has also been a manpower training
project for Vietnam with an emphasis on the health sector.

Secondly, engaging in trade with the Japan create an opportunity for Vietnam to access and
open up many industry.
Vietnam and Japan are about to sign an agreement on the cooperation to develop six industries,
including food processing, agricultural machines, electronics, shipbuilding, energy saving,
environment protection and automobile manufacturing.
In recent years, many of Vietnams goods have managed to enter Japan and gained a strong
foothold in this market, including seafood, garments, furniture, coffee, plastics, leather,
footwear, wire and cable, electronic products and components.
Thirdly, Japans role as a major donor, source of investment and inputs, and export market
provides potential advantages for Vietnam in Japanese markets.
In 2011, although Japan suffered from the devastating earthquake and tsunami and severe crisis,
cooperation in economy, trade, industry and investment between the two countries still
developed. According to the General Department of Customs, Vietnam-Japan bilateral trade
turnover reached US$21.1 billion, up 26 percent year on year; of which export turnover
of Vietnam to Japan was US$10.7 billion, increased 39 percent compared to 2010. In the first
three months of 2012, Vietnams exports to Japan reached US$3.1 billion and imports US$2.5
billion.
On investment, in the first three months, Japan was the leading investor among 26 countries and
territories having investment projects in Vietnam, with total newly registered and added
investment capital of US$2.3 billion, accounting for 88.8 percent of total investment capital
in Vietnam.
According to the authority of Can Tho processing and industrial complex, in the first 9 months of
2009, there were 21 new projects with registered investment of 203 million USD, and 9

expanded projects with the adding amount of 65 million USD. Up to now, Can Tho complex has
attracted 187 projects with the total registered capital of 1.6 billion USD, of which the working
capital accounts for 541 million USD (34%), a 4% rise in comparison with that of the first 6
months.
2. Challenges
First are the strict technical standards of industry and agriculture.
Besides, the distribution system in Japan is quite complex, the goods have higher prices than
imported ones when they come to the market due to many intermediaries, so enterprises must
suffer price pressure to meet importers demand, while most input costs increase.
The Japanese quality requirements are very strict. The food consumption motto of Japan is "safe
and nutritious fresh". So, in order to break into the Japanese market, Vietnamese exported goods
must attain the required standards given by the Japanese importers. Agricultural products account
for a large proportion of Japanese imports from Vietnam. Along with special tariff preferences in
VJEPA for this category which is an opportunity for Vietnamese exporters of agricultural
products, great attention should be paid to safety standards of food hygiene or otherwise, it could
be very difficult to get into this market. So, the strict requirements for quality, hygiene and food
safety are big challenges for Vietnams enterprises.
According to Mr.Vo Thanh Ha, Head of Northeast Asia Division, Asia-Pacific Market
Department (Ministry of Industry and Trade), those are the biggest difficulties and challenges for
Vietnamese enterprises when entering the Japanese market. Vietnams goods must meet the
standards to circulate. He recommended that to enter the Japanese market, Vietnamese
enterprises should obtain information and understand Japanese business customs. Besides, the

preparation of customer information prior to the fair industry in Japan will help achieve effective
negotiation and more cost savings.
Not only that, exports to Japan also cost much money with rising costs of design, engineering,
maintenance, and transportation, because Japanese customers pay attention to quality, reliability,
convenience and after-sales service.
The understanding of Japanese culture and business customs is also very important. Using
business cards, company catalogues and being punctual are crucial elements to create trust with
Japanese businesses in the first meeting.
Second are the huge giant of competitor.
The rapid rise of efficient Asian agricultural producers, such as China and Thailand, will spell
greater quality and price competition for Vietnamese farmers and businesses in Japanese
markets. In addition, Japanese sanitary regulations for agricultural product imports have grown
more stringent over the past five years. A strong collaboration among Vietnamese policymakers,
farmers, businesses, and scientists will have to improve the countrys agricultural system to
respond to increasing competition and meet higher standards for agricultural exports.
Another point is that the Vietnamese enterprises must also calculate and reduce costs to compete
with other cheap supply sources (from India, Pakistan and Bangladesh). A short term goal is to
win market share and build relations, and a long term goal after crisis is effectiveness.
In addition, to prepare for access to the Japanese market, Vietnamese enterprises will have to
compete with enterprises of other countries in Japan, especially China. Vietnamese enterprises
are still weak at market access, it is therefore necessary to set up a distribution system right in the
Japanese market.

Being aware of this issue, the Vietnam Trade Promotion Agency has developed trade promotion
activities to support and guide Vietnamese enterprises such as market research, training courses/
conferences/workshops to help our businessmen to build their own brands, improve
competitiveness, enhance and expand exports into the Japanese market. This is an effort to
ensure that all the elements for the two countries' bilateral trade reach effective results, not only
for Japanese commodities to get into Vietnams market, but also for Vietnam's goods to penetrate
the Japanese market.

http://www.vietrade.gov.vn/en/index.php?
option=com_content&view=article&id=1034:overview-of-vietnam-japanrelationship&catid=20:su-kien-xuc-tien-thuong-mai&Itemid=64
http://www.vietnambreakingnews.com/2012/05/japanese-market-opportunities-and-challenges/
http://bearecon.com/portfolio-item/danida-vnm-jpn/
http://www.vietmaz.com/2013/10/vietnam-had-never-had-such-great-opportunities-like-now/
http://viipip.com/homeen/index.asp?module=newsdetail&newscode=1832
http://www.khucongnghiep.com.vn/en/new/tabid/123/articleType/ArticleView/articleId/268/VJE
PA-came-into-effect.aspx

http://www.vietnambreakingnews.com/tag/the-vjepa/