Export growth hides underlying problems

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Structural weaknesses in Vietnam's export growth need to be addressed soon, experts say

Workers at a footwear factory of Thuong Dinh Company in Hanoi. The company targets exports of US$8 million this year.

Serious problems facing shipments of key products because of their high dependence on imported materials, low-priced orders and shortage of skilled labor belie Vietnam's high export growth, experts and senior officials say.

Vietnam's export earnings reached US$44.5 billion in the eight months through August, up 19.7 percent over the same period last year, according to the General Statistics Office.

However, the increasing prices of imported materials used to make the finished product and labor shortages are pushing up costs and lowering production and business capacity, said Deputy Minister of Industry and Trade Nguyen Thanh Bien.

Some key export industries like footwear, seafood, and textile and garments depend heavily on imported materials.

Truong Dinh Hoe, general secretary of the Vietnam Association of Seafood Exporters and Producers said many member companies are not getting enough raw material, especially shrimp and catfish, for production.

He said many firms have not invested in seafood production because of the high risks involved, especially of shrimp that are highly vulnerable to diseases. They focused instead on investing in processing facilities, and this has resulted in many processors in the Mekong Delta and the central regions running at 30-50 percent of their capacity.

These facilities were having to import materials from neighboring countries like Cambodia for production, Hoe said. However, some customers do not want seafood from other countries used for their imports from Vietnam, and this has caused more difficulties.

The footwear, and textile and garment industries also import some 60-70 percent of materials for production, admitted Nguyen Duc Thuan, chairman of the Vietnam Footwear Association.

"The footwear sector has not had a strong supporting industry. Designing and marketing staff have not reached international standards to help domestic products compete in the world market."

Low-priced orders

Another problem facing key export items like footwear, handicraft and agricultural products is that importers frequently place low-priced orders.

According to the Ho Chi Minh City Handicraft and Wood Industry Association (HAWA), many firms, for several years, have refused orders from European and Japanese customers because of the low prices offered while their input costs are higher due to increasing material prices, making the products less attractive than those from Thailand and China.

It is also difficult for handicraft firms to meet orders where customers require many designs for small batches of goods.

In fact, the dependence on designs given by foreign customers is also a problem facing key export industries.

Most handicraft firms are small scale ones in traditional craft villages, so they are limited in the number of orders they can meet in terms of quantity, quality and styles, said Luu Duy Dan, general secretary of the Vietnam Association of Handicraft Villages.

Labor shortage

A shortage of laborers, especially manual workers, is becoming serious in labor-intensive industries including garment, woodwork and footwear, industry insiders say. Many firms are going all out to recruit workers, and in Hanoi's industrial parks, job vacancy announcements are posted everywhere on company gates, trees and electric poles but most go unanswered. Low salaries and hard work have made employment in many firms less attractive to local laborers.

Do Dinh Dinh, general director of the garment firm Hung Long, said demand for Vietnamese garment products from big importers like the EU and the US has soared by 40-50 percent in recent months, but the number of available workers has plummeted, so they've had to turn down orders from many customers.

Dinh said his firm needs an additional 1,000 laborers to meet all of its new orders. Now, the firm has 2,700 employees, but the actual number of people reporting for work on a given day is only 2,400.

Difficulties in accessing bank loans and trade barriers imposed by foreign importers are also impacting Vietnamese exports. Experts have cautioned that some key export commodities face increasing risk of trade barriers, especially antidumping lawsuits.

Former deputy minister of Industry and Trade Phan The Rue said trade barriers imposed on Vietnam would become more "diverse" in the near future.

"In addition to barriers relating to product quality, subsidies for industrial products and food hygiene, regulations on goods' origin and environmental standards are increasing and getting stricter," he said.

Deputy Minister Bien said firms should look for measures to effectively deal with difficulties relating to labor and input material issues so that export growth can be maintained in a stable manner.

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