The commodity export in Vietnam showed extraordinary resilience in 2021 despite the heavy impact of Covid-19. The turnover increased up to USD 336 billion, 19% higher than 2020. Even though the border was closed to prevent the widespread of the Covid-19 virus, Vietnam still managed to regulate its export operation and achieved impressive revenue at the end of the year.
In 2022, Vietnam expects to increase its turnover by 6 – 8%, equivalent to roughly USD 400 billion.
The given facts show how strong the export in Vietnam is. Vietnam is known to export multiple products such as clothing, electric devices, furniture, and more. European countries and other developed territories like the US, Japan, and China always import Vietnamese products because Vietnam offers a very competitive price with high-quality manufactured items. Therefore, if you’re an entrepreneur who wants to explore the opportunity in Vietnam, look no further because Vietnam is the place to be.
Cashew nuts, wooden furniture, and rattan/wicker/bamboo/sedge products are some of the sections that make Vietnam’s name on the global market.
Vietnam is well-known as one of the key exporters of cashew nuts to many countries in the European region and some countries on the other continents like China and the US.
Thanks to the high demands in nut consumption in the EU and the US, the cashew nuts manufacturing industry in Vietnam had had such a fantastic year in 2021 despite the Covid widespread. The total turnover of cashew nuts in 2021 was USD 3,63 billion, equivalent to 577,400 tonnes of exported nuts. The US accounts for 30 percent of total exports. The EU and China also take a large portion of the export turnover, contributing 24 percent and 14 percent of the total turnover.
Right now, all the countries that imported cashew nuts from Vietnam are opening their borders to welcome global trade. It’s positive that Vietnam will have a great year ahead in 2022. As expected by the Ministry of Industry and Trade, cashew nuts exports to the EU are estimated to increase by approximately 15% in volume and 10% in value, which are equivalent to over 155,000 tonnes of cashew nuts, worth 900 million, compared to the year of 2021, which was 135,000 tonnes, worth USD 816 million.
Moreover, the advantages of FTAs are the backbone of Vietnam’s commercial trade opportunity in the future. For example, the tax rate to export to the EU was reduced to 0% after the EU-Vietnam Free Trade Agreement (EVFTA) took effect on August 1st, 2020. Before the EVFTA’s validity, the tariff that Vietnam had to pay for cashew nuts exported to the EU was between 7% – and 12%.
Along with EVFTA, there are other agreements like the UK-Vietnam Free Trade Agreement (UKVFTA), the Comprehensive and Progressive Agreement for The Pacific Ocean (CPTPP) that came into effect just recently, opening the door for Vietnam to export its products to the European region, America, and China.
Cashew nuts exports to China also bear a lot of growth prospects because China has a high consumption of nuts annually. Cashew nuts became the main ingredient in the Chinese diet. The Chinese government even made a “Dietary Guidelines for The Chinese People” as part of their health policy.
Many furniture enterprises are full of orders until the third quarter of 2022. The furniture industry was reported to reach almost USD 4 billion within just the first three months, up 3% higher than the same period in 2021. Vietnam is looking toward a bright future in the furniture industry.
This sourcing tour video will bring you to one of the hottest industrial zones of Vietnam : Binh Duong to discover the 3 top verticals Vietnam is known for. This video will bring you to a medium scale furniture factory so you can discover the opportunity of sourcing furniture in Vietnam as well as the challenges in the supply chain due to high costs of transportation.
According to Mr. Nguyen Chanh Phuong – Vice President of the Handicraft and Wood Industry Association of HCMC (HAWA), despite the lack of orders in 2021 due to the widespread of Covid, 2022 will still be promising because the demand is still on the rise. Vietnamese furniture enterprises are currently filled with orders until the third quarter of 2022. The country is also looking forward to continuing its production until the end of 2022.
Mr. Phuong also stated that Vietnam is preparing for the upcoming Vietnam Furniture Trade Week – Vietnam Furniture Matching Week (VFMW) 2022. Right now, small and medium-sized furniture enterprises are constantly searching for a connection to expand their partnership. Such a program would be a meaningful activity so that they can meet up with potential partners to advertise their products. Moreover, this promising partnership opportunity will help many companies reach each other much easier during the political tensions between Ukraine and Russia, Covid-19, and the logistic disturbance. To get more insights about the furniture industry and how to get started in sourcing indoor and outdoor products in Vietnam, you can read this updated resource on Movetoasia.
The logistics cost has been climbing high lately, making each container to other countries 3 to 4 times more expensive than in the past. For example, a container to Europe may cost somewhere between USD 6,000 – USD 8,000, while those going to the US range between USD 10,000 – USD 12,000. In some rare cases, buyers have to pay around 25,000$ for a container to ship from Cat Lai port of Vietnam to the East Coast of the US.
Wicker, rattan, bamboo or sedge products
Vietnamese are talented at making accessories by using natural materials. “Non La” is an example. Such an item represents Vietnamese culture to its neighbor and partner countries. Vietnam began to develop other categories of using natural materials to produce high-quality and environment-friendly items like accessories, chairs, tables, and more.
That’s why products using wicker, rattan, bamboo, and sedge are popular in Vietnam. It’s no surprise Vietnam is ranked 2nd (after China) among the countries that export the largest amount of rattan and bamboo in the world, with an average growth of around 9%/year since 2016.
Within just the first month of 2021, the export of rattan, bamboo, sedge, and carpet products grew strongly, reaching 107,65 million USD, up 9,4% compared to December 2021. This market in Europe also made some astonishing achievements, which reached approximately 28 million in January 2022. The figure in the US market is twice as high, reaching almost USD 48 million, up 13,1% compared to the last month of 2021.
Thanks to the FTAs, it has been much easier for Vietnam to export its rattan, bamboo, sedge, and wicker products to countries like the US, Japan, and European countries. These countries have the highest consumption rate of these specific products.
Vietnam expects to reach over USD 1 billion in 2022, which is 20 – 30% higher than in 2021.
The rattan/bamboo/wicker/sedge exports industry in Vietnam will have a great year ahead of it.
Step-by-step manufacturing procedure in Vietnam
Before we come to the step-by-step process of setting up a factory in Vietnam, it’s necessary to think about choosing the right supplier. Everything within the business core hugely depends on the quality of the materials, the specifications, and the Minimum Order Quantity.
These criteria determine the productivity of your factory and tons of other factors that affect the success of your business.
There are two options:
1. Using a sourcing agent
It’s a challenging process to find a suitable supplier or factory in Vietnam for your business. As a foreign business owner, it may take months to search for the right partner before your factory officially enters service. Therefore, a sourcing agent will hook you up with the right partner in a short time.
You can also do a factory tour to visualize the overall market situation: How the products are being manufactured? What is the quality of each of them? What are the locations of the factories? Etc. Moreover, if you’re interested in collaborating with the factory, you can contact their sales representative for a bulk deal and export those products.
For sourcing inquiries in Vietnam, finding the right factory to work with or even hiring a third party QC to be sure of the quality of the production, you can find more details and sourcing resources, providing in-depth information about manufacturing and exports from Vietnam.
2. Setting up from scratch
If you have multiple years of experience running a factory yourself, it’s reasonable to establish your empire. You may also want to connect with another factory and consider a Joint Venture.
Let’s have a more detailed overview of how it works if you wish to set up a factory in Vietnam.
Basic guidelines to setting up your factory in Vietnam
Finding the right spot to establish a factory in Vietnam is no piece of cake. The legal aspects of setting up a factory can take you months to conduct your research. Therefore, it’s recommended to find an agency that could help you get through the process.
However, you cannot rush when it comes to structuring your business. Despite hiring an agency is the quickest and the most efficient way to deal with the legal terms, you should learn about the process in advance to be aware of what you have to deal with in the future.
Below are the five tips to get you started before the main event:
1. Location research
Vietnam has a rich source of land, cheap labor costs, a decent level of work experience, and is accessible to other countries within the Southeast Asia region . Such strengths attract multiple billion-dollar companies to come and set up their factories.
However, the price of land in Vietnam is usually the concern. Moreover, how much you have to pay for the land largely depends on where you set up your factory. Therefore, location is always at the top of the research list.
And, looking for the right location does not solely depend on the money. Your producing demand is another main factor that affects the decision. So, you should make a list of questions related to your business goals and decide based on your expectations. There are a few questions that usually come in handy in most cases:
- How can the location benefit your business goals?
- Are you setting up a factory to export to other countries?
- How big is your factory?
- How much are you willing to pay?
A common choice is to setup your manufacturing factory in the industrial zone since it has an ideal transportation system, good tax incentives, and sufficient legal documents.
There are a few top-ranked locations that may help you begin your research more easily:
- North: Quang Ninh
- South: Dong Thap, Long An, Ben Tre, Binh Duong
- Central: Da Nang
2. The legal details
You can visit the government website and contact the people in charge of consulting foreign business owners with the legal details.
The two licenses you must have to invest and start a manufacturing factory in Vietnam are an Investment Registration Certificate (IRC) and an Enterprise Registration Certificate (ERC). Having a Fire Protection License and Report of Environmental protection is mandatory to run a factory in Vietnam.
Different products require different licenses. When you talk to a government consultant about the legal details, they will also guide you through the information about the licenses you must have to manufacture a particular product.
4. Registered capital
The registered capital is determined by your initial costs. You may start with a basic registered capital and increase it in the future.
5. Buying an existing factory
There are more challenges to overcome when setting up a business from scratch. Many business owners decide to buy an existing business instead of moving up from zero.
However, risks may come regardless of the advantages. If the business that you buy has an impressive annual turnover, a transparent financial statement, and high-quality equipment, you hit the jackpot. On the contrary, you may be there to clean up someone’s mess. Therefore, you should collect a solid database about the company you want to buy and filter the criteria that are or aren’t your concern.
To learn more, Movetoasia provides a 360-degree service so if you are considering setting up your own factory, production or manufacturing plant in an industrial zone of Vietnam, their team can assist you through your whole journey of getting your manufacturing idea started in Vietnam.