Local beer and beverage products will face fierce competition if the country does away with the import tax for beer and beverage products this year, which it must do in order to join the Trans-Pacific Partnership (TPP).

The current tax rate is 50 percent for beer and alcohol and 30 percent for non-alcoholic beverages such as juice and soda.

While joining the TPP would give Vietnam the chance to attract more investment, it would also pose a significant challenge, said Luong Hoang Thai, head of the Ministry of Industry and Trade's Multilateral Commercial Department.

Many TPP member countries such as the US , Japan , Canada , Mexico and Chile have advantages in exporting beverages, so without an import tax, local products might not be able to compete.

Two local companies, the Sai Gon Beer Corporation (Sabeco) and Hanoi Beer Company (Habeco), account for two-thirds of the local beer market. But they might be threatened by cheaper imports of popular foreign brands like Sapporo from Japan and ABInBev from the US.

The main reason people stick to local brews is because they are cheap and of decent quality, Thai said, warning that when living standards inevitably improved, many people would shift to foreign beers – especially if they were sold at cheaper prices.

Meanwhile, global beverage firms Pepsi and Coca-Cola have dominated the local non-alcoholic beverage market. Tan Hiep Phat is the only domestic beverage producer that can stand up to their market power.

According to the Vietnam Alcohol, Beer and Beverage Association, Vietnamese consumers drank 2.38 billion litres of beer last year, 8 percent higher than 2011, and 4.22 billion litres of non-alcoholic beverages, a 9 percent increase.

Those figures reveal Vietnam 's strong potential as a market for alcohol, beer and other beverages, Thai said. He recommended local firms improve the quality of their products and cut prices to hang onto their market share.

Additionally, local firms should study demand for alcohol, beer and beverages in other TPP countries and seek to expand their markets there, he said-VNA