Opportunities for Vietnamese businesses in the Middle East market

Ample fiscal space for Vietnamese businesses

On March 17, Ho Chi Minh City Investment and Trade Promotion Center (ITPC) held the seminar "Golden opportunity for exportation from to Middle Eastern countries after the Covid-19 pandemic".

Mr. Nguyen Tuan, ITPC Deputy Director, said that the Middle East (16 countries included) is rising as a potential export market for Vietnamese enterprises, having a large population of approximately 400 million people and a high living standard.

Vietnam has had trade relations with the Middle East specifically the six member countries of the Gulf Cooperation Council (GCC). These six GCC member countries have implemented a Customs Union (CU) and agreed on applying a common import tariff since January 2003. The tax rate is approximately 5%, effective throughout the region for most products.

According to Ambassador Extraordinary and Plenipotentiary of Vietnam in Kuwait Ngo Toan Thang, trade barrier in the market is the requirement of the GCC countries for certificates of standards, quality inspection, and labels issued by the Gulf Standards and Metrology Organization (GSMO), Halal certificates for imported agro-fishery products.

Mr. Thang believed that opportunities for Vietnamese enterprises in the GCC market are wide open with many advantages.

“GCC possesses large purchasing power and high solvency thanks to abundant financial resources. GCC's import-export product structure is suitable for Vietnam's strong and popular export products, not to mention that the GCC's import tax is quite low."

Mr. Tuan assessed that the Middle East is a potential market for Ho Chi Minh City and has a lot of room to exploit. Ho Chi Minh City's export turnover to Middle Eastern countries has increased steadily in recent years, with items such as seafood, vegetables, fruits, coffee, pepper, textiles, computers, electronic components, phone components.

“Vietnamese enterprises in general and Ho Chi Minh City in particular still face many difficulties when accessing the Middle East market such as lack of information, barriers in logistics and international payments. Businesses need to request support from diplomatic agencies in the region, as well as trade and investment promotion agencies such as ITPC," said Mr. Thang.

The agricultural industry of the Middle East is underdeveloped due to the harsh natural conditions. The manufacturing industry finds it difficult to develop, so this area still has to import a lot of food and consumer goods. Another advantage for Vietnam’s enterprises when exporting to the Middle East is the 0 - 5% import tax rate for goods imported from outside GCC.

The golden key to the Middle East market

Ms. Nguyen Thi Ngoc Hang, Marketing Director of Halal Certification Office, HCA Vietnam said that the Middle East is a market with a special business culture that often requires Halal certification.

Possessing Halal certification means having an enormous advantage in this market. Businesses can meet the requirements to export products to Muslim countries and gain the trust of Muslims to buy and use the products without hesitation.

Ms. Hang noted that when businesses decide to participate in the Halal certification program and prepare to register, they need to apply the Halal practice in production, paying attention to choosing Halal materials.

Agro-fishery companies need to pay special attention that the Halal assessment process will be very strict when it comes to the production process for Haram products. Enterprises need to choose the products participating in the certification, the factory location and appropriate certification program in accordance with their specific needs.

During the Halal assessment, the evaluation agency will conduct the traceability of raw materials and all ingredients included in the production process, so it is important to note that businesses need to be very careful in this stage. After being certified, enterprises also need to be careful when releasing new products or changing raw materials. They must ensure Halal integrity in the production process.

For companies that require Halal products but produce products related to banned substances (pork, wine, beer), there is a specific requirement that production lines that used to make products related to pork are required to be cleansed according to Islamic rituals before proceeding to produce Halal products (only done once).