Vietnam Market Watch: E-Commerce, Exports to Argentina, and SME Corruption Challenges

November 16, 2016 Posted by Vietnam Briefing Reading Time: 4 minutes

10 billion Dollars Worth E-commerce Sales Targeted by 2020

Vietnam’s Ministry of Industry and Trade has set an online sales target of US$10 billion, or 5 percent of total retail sales, by 2020. The ministry further stated that e-commerce sales are expected to grow significantly in the next five years. Small cities accounted for 25 percent of last year’s US$4 billion in sales, with Ha Noi and Ho Chi Minh City accounting for 75 percent. In addition, Ha Noi accounted for 5.6 percent of all websites. The revenue of e-commerce sales showed a growth of 37 percent from the previous year.

Nevertheless, the ministry stated that e-commerce turnover remains small, compared to China, South Korea and India. While urban residents are familiar with the sector, rural areas still do not do much shopping online. To achieve the US$10 billion target, the government will need to play a major role; the ministry is also developing an online marketplace with a website, with many local businesses keen to be on it. More websites are expected in the future to support local enterprises.

Exports to Argentina Increase, But Challenges Remain

The Department of Vietnam Customs has stated that Vietnam’s exports to Argentina reached around US$284 million in the first nine months of the year – a year on year increase of 3.39 percent. Major products that are exported include footwear, rubber and rubber products, electronics, garments and clothes. Footwear was the top exported item, accounting for 49.42 percent followed by garment and footwear materials at 33.25 percent and garments at 15.83 percent.

Vietnam in-turn imported animal feed, processing materials, plant and animal oil, milk, dairy products and garment materials from Argentina. While the potential is there, exports to Argentina still faces challenges. Distance, lack of market information and different trading strategies are some of these obstacles. To unlock the full potential of the trading relationship, Vietnamese businesses will need to develop long-term strategies and supply high quality products using agreements that are already signed between the two governments.

Vietnamese SMEs Pay Higher Bribes

The Central Institute for Economic Management (CIEM) in a recent survey found that around half of the country’s small and medium-sized enterprises (SMEs) paid bribes to officials in 2015. The report stated that 42.7 percent of surveyed SMEs were forced to pay such bribes to facilitate their businesses. The survey was conducted in ten cities and provinces, including Hanoi, Hai Phong and Ho Chi Minh City. Businesses paid bribes to connect to public services, obtain permits and licensing, deal with tax collectors and handle customs; business that paid tax collectors accounted for 24 percent of the total number.

Around 40 percent SMEs believe that paying bribes is likely to increase in the future. The results show that, while doing business has become easier, challenges remain. SMEs typically face lack of capital, difficulty in accessing finance, limited demand for products, excessive competition and lack of land and space for manufacturing. The bribes are primarily used to alleviate such problems in the short-term. Nevertheless, analysts indicate that government offices will need to assist SMEs by banning informal costs and implementing stringent checks to prevent bribes from being paid.

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