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Vietnam food market to benefit under WTO

By Dominique Patton , 31-Oct-2006

Food processors in Vietnam can expect to see higher quality raw materials and lower prices on imported ingredients as the country becomes a full member of the World Trade Organisation.

Vietnam completed its final round of negotiations to join the WTO last week, completing the last details necessary to accession. The WTO's general council is expected to formally approve Vietnam's entry on 7 November, making the country the 150th member of trading organization.



While Vietnam's government has voiced concern that several of its processing industries are unprepared for greater competition, many commentators say the WTO membership will force food producers to become more efficient and raise quality standards.



"The state-owned enterprises have the most to lose," noted Ross Jaax, country representative for the non-profit organization Acdi/Voca. "They won't be as protected as they were before."



However farmers and primary export producers should benefit from a better negotiating position under WTO membership when it comes to fighting anti-dumping tariffs.



The country has been the subject of several anti-dumping actions, many against agricultural products such as shrimp, catfish and fruit.



Increasing trade is also expected to encourage higher quality as international companies invest in local production to raise standards.



"Many companies recognize Vietnam as a cost-efficient supplier but require a higher quality. We've already seen the chocolate makers invest heavily in the emerging cocoa industry to put quality systems in place," said Jaax.



"As more and more companies become familiar with the market here, we should see more of this," he added.



Vietnam's economy grew by 8.4 per cent during 2005 to reach a GDP of VND837.86 trillion ($53 billion), and bringing per capita income to $636 per year. This makes it one of the fastest growing south-east Asian countries.



The country's processed food industry is already growing rapidly with the expansion of the retail sector. The US Foreign Agricultural Service (FAS) says Vietnam imported $330 million of consumer-ready foods in 2005, up from $260 million in 2004, and $252 million in 2003, although the actual level of consumer-ready imports is higher given Vietnam's porous borders and under-invoicing problems.



The country will reduce tariffs on a range of food and agricultural imports not produced in large quantities in Vietnam, such as whey and dairy products, fruits, meat, snack foods, chocolate and cereals.



US agribusiness Cargill estimates the opportunities in the market to be as significant as those created by China's WTO membership.

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