Garment is one of key Vietnamese products exported to Japan. Photo baotintic.vn

HCM CITY (Biz Hub) – Businesses in Ho Chi Minh City have made good use of incentives under the Vietnam–Japan Economic Partnership Agreement (VJEPA), and seen high growth in exports to the north-eastern country.

Under the agreement, average tax rates on Vietnamese goods exported to Japan and vice versa will be gradually cut to 2.8 percent and 7 percent by 2018 respectively.

While key export markets like the US and EU are suffering from economic hardships, the reduction of barriers to Vietnamese goods thanks to the VJEPA has helped enhance exports of Viet Nam and HCM City in particular.

From 2009 to 2010, Japan was the fourth largest market of HCM City , after the US , New Zealand and Singapore . However, with 12 percent of the city's total export turnover, it ranked second just after the US in 2011 and 2012.

Deputy Director of the HCM City Department of Industry and Trade Huynh Khanh Hiep said the city's spearhead exports to Japan are textiles, garments, footwear, handicrafts, aquatic and wood products. It is expected to export US$492.2 million worth of textiles and garments by the end of August, up 5 percent from a year earlier.

Footwear is also estimated to bring in US$97million, an increase of 28.9 percent for the first eight months of this year.

Hiep attributed the achievement to tax incentives under the ASEAN–Japan Comprehensive Economic Partnership Agreement (AJCEPA) and the VJEPA that Vietnamese businesses have been benefiting from.

The VJEPA was inked in 2008, forming a stable legal framework facilitating bilateral trade and investment. Within 10 years, Viet Nam and Japan will remove taxes, paving the way for the construction of a full bilateral free trade area.

According to Nguyen Thanh Vinh, a representative of the HCM City Garment, Textile, Embroidery and Knitting Association, to make full use of trade opportunities with the country, Viet Nam needs to accelerate the development of supporting industries for export products.

Deputy General Secretary of the Vietnam Association of Seafood Exporters and Producers To Thi Tuong Lan urged the country's seafood industry to make the most of tax incentives when exporting to Japan . In particular, it should expand its processing industry by handling aquatic materials that are imported from ASEAN countries and re-exported to Japan .

Opportunities also open up as Japanese firms switch their investment from countries like China and Thailand to Viet Nam , she added.

Vice Chairman of the HCM City Handicraft and Wood Industry Association Tran Quoc Manh said while the AJCEPA and the VJEPA offer plenty of tax incentives, it is vital for businesses to produce high-quality goods with greater value and diversity to improve their competitiveness in the Japanese market. —VNS