According to Dao Thu Huong from the Ministry of Finance, under the Vietnam-South Korea FTA, Vietnam committed to cut tariffs on 200 products imported from South Korea, including cosmetics.
This would pave the way for South Korean cosmetics to flock to Vietnam in the time to come. In early 2010, South Korea could only export seven product lines to Vietnam. However, even with the restriction, the cosmetics import turnover from the market was high at $12.7 million.
During that time, preliminary statistics showed that with the high growth rate of 10-20 percent per annum and nearly no rival, foreign cosmetics companies dominated the market worth $150 million a year.
Beauty salon chains have been thriving in Vietnam. Guardian, a brand of Dairy Farm Group, has 39 shops after five years of presence in Vietnam. Orient Beauty Corp, which has distributed SkinFood’s products in Vietnam since 2011, now has 20 shops. Body Shop has developed 20 shops in Hanoi and HCMC since 2009.
Analysts predicted that from 2017-2018, when the import tariff is cut to 20 percent, South Korean cosmetics would be even more commonly used in Vietnam’s beauty industry.
Not only products from South Korea, but cosmetics from Japan, Thailand and Malaysia would also have opportunities to conquer the Vietnamese market as Vietnam has also signed FTAs with many other countries.
With tax reductions for beauty industry products included in free trade agreements (FTAs), Vietnam is seen as a promising market for cosmetics firms and foreign suppliers of beauty-care machines and equipment.
CP Saw, president of Cosmobeauté, said many businesses came to the exhibition to look for clients because they saw great potential in the Vietnamese market.
According to Nielsen, the demand for beauty products in Vietnam was still modest in 2014 with each Vietnamese spending $4 a year on cosmetics, 1/5 of that in Thailand ($20 per head per annum).
Commenting about the market scale, a representative of Phuong Mai JSC, which distributes water filters made by Mitsubishi Rayon Cleansui priced at VND50 million and higher, said not only spas and beauty salons, but consumers also order products, which shows an improved awareness of Vietnamese about health care.
However, though the domestic market is large, it is not the place for investors to set up factories. Nguyen Thanh Thao, deputy chair of the HCMC Cosmetics Association said that some foreign invested enterprises have stopped production in Vietnam and left for Malaysia and Thailand.