Vietnamese exporters feel the pinch as EU crisis deepens

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The financial crisis in Europe and resultant weaker consumption is posing a great danger to Vietnamese exporters, many of whom have been heavily dependent on the market.

Truong Thi Le Khanh, general director of Vinh Hoan Corp., a seafood processor and trader, said shipments to the EU are now on a decline.

As the crisis bites deeper into European markets, many exporters are feeling the impacts too, Khanh said.

She said prices of raw materials have surged sharply but her firm, which mainly processes and exports tra fish, had difficulty asking for higher prices from European buyers.

Up to 35 percent of Vinh Hoan's export revenues came from Europe and the dependence is hurting the company, Khanh told Thanh Nien.

EU is the second largest market for Vietnamese exporters, after the US. The bloc imported products worth US$13.2 billion from Vietnam in the first 10 months, accounting for 16.8 percent of the country's total exports, according to the General Statistics Office.

The value represents an increase of 49.3 percent compared to the same period last year.

However, Vo Tri Thanh, deputy head of the Central Institute for Economic Management, a government think-tank, said the increase was actually because prices were higher this year, not necessarily because exporters have sold more.

Other experts also warn that the export growth achieved so far is not stable, considering that prospects for the EU remain negative.

Economist Le Dang Doanh said the European debt crisis is worsening and several countries have to tighten their belts.

"The situation can get even more complicated and Europe will see very low economic growth," Doanh said. He added that some Vietnamese export staples like furniture, footwear and clothes will feel the impact more than food products.

"Exporters need to make changes to make sure they cater to the real demand, but most importantly they should look for new markets," Doanh said.

Vo Truong Thanh, general director of Truong Thanh Furniture Corp., said the EU now accounts for only 25 percent of his company's sales with an estimated annual revenue of $26 million, down from the usual 50 percent share.

"We have to try to offset the fall by boosting exports to Japan and the US," he said.

Dang Quoc Hung, vice chairman of the Ho Chi Minh City Handicraft and Wood Industry Association, said exports of wood products to the EU have fallen around 10 percent compared to a year ago.

Local woodwork companies usually secured enough contracts from European buyers for the next quarter around this time of the year, but now many have not received a single order yet, Hung said.

For some exporters the risk of European buyers becoming insolvent is not one they are willing to take.

Nguyen Van Dau, general director of An Giang Fruit, Vegetables and Foodstuff Join Stock Company, said its exports to the EU are expected to drop by half to just $4-5 million this year.

"The EU is a large market, but right now it's necessary to be careful with payments," he said. "Most EU partners want to have their payment deadline extended, so exporters are reluctant to sell in large quantities."

"We have to be cautious with risks, otherwise we'll die together with them when they collapse," he said.

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