Russia-Ukraine conflict represents a challenge for exporters

Monday, Mar 14, 2022 12:47

Workers at a seafood processing plant in the southern province of Ba Ria-Vung Tau. — VNA/VNS Photo

There are going to be both ups and downs for Vietnamese exporters as the Russia-Ukraine conflict intensifies, said industry experts and policymakers.

Economist Nguyen Tri Hieu said Russia's demand for Vietnamese products, especially agricultural products, seafood and electronics will likely see a sharp rise as supply from elsewhere suffers from disruptions caused by the ongoing conflict.

Even if Vietnamese exporters stop sending their goods to Russia there are alternative markets to help absorb the damage as the Southeast Asian country signed a number of important trade agreements in recent years including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the European Union–Viet Nam Free Trade Agreement (EVFTA).

"This is a good time for us to put a concrete effort in improving product quality, safety standards and conform with international norms and regulations to find ways into new markets," Hieu said.

The conflict, however, will hurt a number of Vietnamese exporters in the short term, especially those who view Russia and Ukraine as their major markets.

Doan Hoang Chien, director of Kien Cuong Seafood, one of Viet Nam's largest seafood exporters to Russia, said his firm has stopped all shipments to Russia since the country was cut off from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), citing numerous difficulties in processing and receiving payments from Russian customers.

Chien said it has been a huge blow as Russia accounts for more than 30 per cent of Kien Cuong's business. Fortunately, he said, all shipments delivered prior to the Tet Holiday (starting February 1) were paid and finished.

Sai Gon Tam Tam JSC was another seafood and agricultural product exporter that has to stop doing business with Russia and Ukraine.

Pham Quoc Binh, deputy-director of Sai Gon Tam Tam, said the firm was forced to send all shipments to storage as shipping companies refused to make deliveries. Binh said his firm has not been able to find other buyers.

Truong Dinh Hoe, general secretary of the Vietnam Association of Seafood Exporters and Producers (VASEP), said the conflict is unlikely to hurt the country's seafood export in the long term as both Russia and Ukraine are minor markets of Vietnamese seafood products.

VASEP, however, said it has always considered the two markets to have a lot of potential for growth and so far around 50 Vietnamese seafood firms have reported they suffered losses due to the conflict.

The firms have been working closely with Russian and Ukrainian buyers on terms of payments for shipments that have been delivered. Meanwhile, they were forced to store undelivered shipments and recalled in-transit shipments.

In the meantime, the Ministry of Industry and Trade has issued a warning to all Vietnamese exporters regarding delays in customs clearance and payment due to the conflict.

Two-way trade between Viet Nam and Russia reached US$7.1 billion in 2021. While an 26 per cent increase year-on-year, it only accounted for less than 1 per cent of Viet Nam's import/export. Ukraine, in comparison, was even smaller at just $720 million.

The pain, however, will come from indirect consequences of the conflict, said businesses.

Chien said shipping cost, already at a record-high level, will likely climb even further as global oil price surges, cutting deep into exporters' profit. He said extremely high shipping costs were a huge problem for Vietnamese exporters last year and has not been resolved.

In addition, weaker demand due to slower recovery post-pandemic, uncertainties of the future and a rise in input materials will all further complicate and inflate costs for businesses. — VNS

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