Exports suffer as recession bites

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The global recession and resultant lower purchasing power has caused difficulties for many Vietnamese exporters.

It has not helped that their heavy reliance on imported materials, coupled with rising input costs, have made their products less competitive in the international market.

The Secretary General of the Vietnam Timber and Forest Product Association, Nguyen Ton Quyen, said Vietnam shipped woodwork products worth US$2.1 billion in the first seven months of this year, a year-on-year increase of 13 percent. In the same period last year, the industry saw export growth of 32.5 percent.

"This is small growth for the industry," he said. "Many firms have refused some orders because they are worried about making losses."

Prices of wood materials have increased 15-20 percent since early this year, while many foreign buyers have agreed to increase prices by just 1 to 2 percent, only for contracts signed late last year, he said.

Lower purchasing power is also a reason for the smaller growth in woodwork exports, Quyen said. EU and Japan, the second and third biggest importers of Vietnamese woodwork, have smaller demand for the products now, he said.

The heavy reliance on imported materials and high interest rates have made prices of Vietnamese woodwork products some 10 percent higher than those from other Asian markets. Some importers have therefore resorted to buying from China, Taiwan and Malaysia because these markets have become more competitive.

The situation does not look like it will improve any time soon.

"We find it hard to be optimistic about exports, if the interest rate, which now stands at more than 20 percent, is not lowered," Quyen said.

The situation is not much different in the garment sector.

"Garment firms are faced with lower numbers of orders as many customers have shifted their attention to China," said Ho Hai, director of garment firm Vinatex Da Nang. 

Some customers have sought other suppliers after being refused by Vietnamese garment producers unable to employ enough laborers to implement big orders a few months ago, he said. "The number of orders may be down by 10-20 percent late this year."

With the rising input costs, local garment manufacturers would not be able to continue their production if they reduced their selling prices. Imported material prices such as cotton have risen by more than 40 percent since early this year, said an industry insider. Profit margins for garment makers are just 3-4 percent only, industry insiders said.

"I expect that the difficulties will last until next year, as the economic situation of EU and the US has not yet improved," Hai said.

Dao Duy Kha, deputy general director of the Vietnam Plastic Corporation, said enterprises in the industry consider themselves lucky if they don't make losses this year. 

In order to boost sales and recoup their capital quickly, most producers of plastic items accept very small profit margins. 

Those unable to access bank loans or bear the high borrowing costs have either narrowed or suspended operations. "Now, some 20 percent of plastic manufacturers have had to temporarily stop production," Kha said.

The paper industry has also been hard hit by reduced orders from big buyers. Ho Que Vien, director of the Da Nang Branch of the Vietnam Paper Corporation, said the number of orders from the US, the main importer of Vietnamese paper products, has reduced remarkably compared to a few months ago.

Vietnam's paper exports went down by 17.5 percent in the first seven months of this year over the same period last year, according to the Vietnam General Department of Customs.

Low profits have made many paper firms uninterested in boosting shipments abroad, Vien said.

He said the situation in the home market is not any better. His company's domestic sales were estimated to fall 10 percent in August compared to a year ago.

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