Rebuilding Japan not an easy market, local firms find

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Traditional export bugbears will remain impediments as Vietnamese enterprises eye a new market opening

Workers at a shrimp processing factory in southern Vietnam. Japan is one of the key markets for Vietnamese shrimp and cuttlefish.

Japan's recovery from last month's devastating quake and tsunami is expected to create many opportunities for Vietnamese exporters to increase shipments to the country, but whether they will be able to do so is an open question.

Experts say that the difficulties currently facing exporters shortage of raw materials, capital for production and inability to meet strict quality requirements will continue to hamper local exporter's efforts to take advantage of opportunities presented by Japan's reconstruction work.

They say that Japan is likely to increase imports of many products like food, garments, furniture and other wood products.

"The demand for seafood is expected to be greater than supply, as many processors in Sendai were seriously destroyed by the catastrophe, and they no longer have product reserves," said Le Cong Duc, deputy general director of Vietnam National Seaproducts Corporation. "The country is likely to increase import of these products."

With the surrounding seas affected by radioactivity following the nuclear meltdown, Japanese consumers are wary of eating local seafood, said Duc. "Many Japanese customers are urging us to deliver products as soon as possible," he added.

Vo Ta Tuan, head of the sales for furniture maker Constrexim, said his firm did not receive any contracts from Japan last year, but some partners had returned after the catastrophes.

"We are negotiating contracts. Everything is going smoothly, and we are planning to produce some samples for our customers," he said.

Earlier, Japanese traders used to import interior woodwork products from Vietnam, but are now purchasing semi-finished products to be completed at home, Tuan said.

Nguyen Ton Quyen, secretary general of the Vietnam Timber and Forest Products Association, said: "Japan's woodwork demand, which used to be large, is expected to increase. Thus, we are working with the commerce department of the Vietnamese embassy in Japan to find out which products are needed so that we can provide the information for our members to tap the market."

Nguyen Dinh Long, deputy head of the Institute of Policy and Strategy for Agriculture and Rural Development, said exporting rice to Japan used to be very difficult for Vietnamese firms because of the country's strict quality standards.

"With the demand for rice rising, we can now break into the market," he said.

Difficulties aplenty

Duc of Vietnam National Seaproducts Corporation said material supply was not abundant at present because of unfavorable weather last winter in the northern region.

Higher fuel prices in the domestic market have also hindered fishermen from working, reducing the material supply even further, he said. "Due to limited material sources, we have not signed new contracts with Japanese partners since early this year, and instead are implementing some contracts signed last December."

While his firm was seeking ways to increase its material supply, that was not the only problem preventing exporters from tapping the Japanese market more strongly.

"Input prices, from fuel to materials, have risen sharply, but our selling prices have not increased correspondingly. So, it is very difficult for firms exporting to the market," Duc said.

Japan is now their main market consuming 50-60 percent of their products, mainly shrimp and cuttlefish, he said.

Tuan of Constrexim said export prices to Japan may increase, but it would not match the hike in input cost. "Japanese businesses may agree to higher prices, but the increase would not be significant. They would never let trading partners make undue use of their difficulties to raise prices."

He said input costs have gone up mainly because of the higher exchange rate between the Vietnamese dong and the US dollar, and because of higher interest rates.

Most of the materials needed for the woodwork done by his company are imported now, he said.

"With interest rates of 19-20 percent, it is difficult for firms to earn a profit. We try to avoid losses," he said. "Our only goal now is to retain the market share."

Meanwhile, the director of a garment firm in the central province of Khanh Hoa said his firm is not interested in the Japanese market because of its strict requirements and low prices.

"Although there are orders from Japanese partners, we are not taking them. Their orders are not big, while their requirements on product quality are very high, and their prices are low, so our shipments don't make any profit," he said. "We take orders from the US and EU only."

Two-way trade between Vietnam and Japan increased 24 percent to over $16 billion in 2010. Vietnam's exports to Japan reached $4.8 billion, up 24 percent, according to the Ministry of Industry and Trade.

Japan was Vietnam's second biggest export market last year after the US. Vietnam's main exports to Japan are food products, garments, footwear and woodwork.

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