November 27, 2006

Vietnam opens to foreign competition with confidence - and high tariffs

Although Vietnam's ascension to the WTO is expected to be followed by an influx of foreign chickens, local chicken producers have little to fear thanks to local consumer habits.

Under WTO agreements, Vietnam would impose a 20 percent tariff on imported pieced chicken, and frozen by-products, and 40 percent on whole chickens.

Importers say that with the tariffs, it would be likely that Vietnam would see more chicken wings and legs at low prices which would be suitable for fast food.

However, even without the tariffs, most Vietnamese consumers would prefer Vietnamese chicken, particularly the backyard variety, analysts said. Besides, Vietnamese consumers like buying chickens whole, while most foreign-sourced chickens come in processed pieces.

Vietnam has cut tariffs on poultry breeders to encourage local production, which explained a rush in the country to buy foreign poultry breeds for local production.

Breeders are also banking on the day fast food companies begin to proliferate in Vietnam and lead the charge for a spike in chicken consumption.

Despite the WTO agreements, foreign beef would still be and 2.5 times higher than Vietnam-made beef and in fact would be higher than what it was previously.

Vietnam has pledged to cut the tariff on foreign-made beef to 14 percent in five years.

Dinh Quoc Phong, a staff from Metro, the biggest retailer in Vietnam, predicted meat prices would decrease due to abundant supply. However, foreign-sourced beef would continue to be at a much higher than local products.