VCN- From early September up to now, hundreds of Vietnamese incense export enterprises have been in misery and inventory of tens of billions of dong due to the sudden import restrictions from India - the main import market of Vietnamese incense.
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Enterprises will be eliminated
According to incomplete statistics, Vietnam has more than 100 enterprises producing and exporting incense, the export turnover in 2018 was about US$76 million, contributing to the State budget from 70 to $100 million. The main export market of Vietnamese incense is India, the export products of Vietnamese enterprises are mainly raw products.
However, on August 31, 2019, the Ministry of Industry and Trade of India issued a notice to change the import regime for incense products from ordinary imports to limited imports. Accordingly, incense imports need a permit from an Inter-ministerial Committee for each shipment. This notice is effective from the date of signing, without any provisions on licensing criteria and conditions.
According to the enterprises, 90 percent of the value of India’s imported raw incense products come from Vietnam, so Vietnam is the most seriously affected country by this move.
Director of Liem Thanh Trading and Import-Export Company Limited (Ho Chi Minh City) Phan Thanh Luan said before India issued the new regulations, his company exported 10,800 tonnes of goods, worth about $7.5 million to India every month on average. The company was stepping up production because October is the biggest festive season in India, so demand for incense will increase.
However, before the import restrictions of this country, the company has an inventory of 10,000 tonnes of finished goods, worth about $5.6 million and about 30,000 tonnes of raw materials, worth approximately $17.4 million.
In addition to the above losses, enterprises complained the restrictions seriously affected the labour source and related industries.
According to Nguyen Xuan Hop, Truong Giang Equipment Co., Ltd, incense products exported to India have very specific characteristics, unlike any type of incense consumed domestically or in other markets. Therefore, if India stops importing, the company will suffer completely and cannot use the stock for other fields.
Agreeing, Chu Thi Nguyet, Anh Hong Co., Ltd., said the company has produced and exported incense for more than 10 years but has never faced such a situation. Currently the company has about 1,000 employees and has 800 machines to make incense. Worse, due to stable business, the company has invested 30 billion to build factories, so the inventory is VND 20 billion.
In addition, the companies said capital for production mainly comes from loans, if the problem is not solved within a month, the companies shall be eliminated. Further, these companies are in rural areas, due to simple work, employees are mainly disabled, middle-aged people from 40-60 years old. If these companies stop operating, the employees will find it hard to find other jobs.
“Not only Vietnamese enterprises, Indian import enterprises are also complaining because this regulation makes them have no goods to supply the market, they have to buy expensive domestic materials to produce, especially when the peak season is approaching. However, like Vietnam, these enterprises have proposed to the government of India but have not received a satisfactory response," said a representative of Ha Chieu Company.
Facing the difficulties of Vietnamese incense companies, on September 16, at a meeting to find solutions to cope with India’s restrictions on incense imports heal by the WTO Centre and Integration (Vietnam Chamber of Commerce and Industry-VCCI), representatives of a number of Vietnamese authorities have affirmed they will support Vietnamese enterprises in solving difficulties.
Nguyen Thi Thu Trang, Director of the WTO Centre and Integration said India's new regulations are completely unfounded both in the provisions of the WTO and the ASEAN-India Trade in Goods Agreement. Consequently, this measure is an excuse to completely ban the import of Vietnamese incense.
According to Trang, India has been sued for eight among 48 cases at the WTO, two cases have just stopped at consultation and six are in self-mediation. “It feels like India is going to issue measures, if its measures are disapproved, India will agree to stop. So this is a sign for us to believe that State agencies shall successfully negotiate with the government of India,” said Trang.
Deputy Director of Import and Export Department under Ministry of Industry and Trade Tran Thanh Hai said compared to the total export turnover of the whole country, the incense item accounted for aninsignificant rate but it plays great role because this industry operates in rural areas, uses simple materials, even discards of other industries but bring high profits. The Ministry of Industry and Trade will coordinate with the Ministry of Foreign Affairs and other authorities to work with the Indian side to let India understand that Vietnam does not accept such conduct even with small items.
Currently, the Minister of Industry and Trade has also sent a letter to the Ministry of Industry and Trade of India to propose that all contracts signed before August 31 must be continued to be cleared and requirement on permits must be suspended after October 2019 for companies of the countries to handle, and expect India will consider abolishing this regulation.
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Along with measures from the agency, Hai said the incense companies must also "grow" themselves and must understand that international business is not always easy and can meet the protective measures at any time, so companies should prepare reserve plans. In particular, Hai recommended incense companies start establishing associations to create a bridge to share information and create greater voice and strength.
By Huong Diu/ Huyen Trang