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In global crisis, exporters turn to local market
Experiencing a slowdown in export orders, many local companies are shifting their production to the local market in a bid to ensure growth during the global financial crisis.
In an effort to help local companies, the Government has provided a total of VND17 trillion (US$1 billion) in financial support to jumpstart production.
In January, the country’s total retail sales were up by 8.2 per cent over the same period last year, excluding price hikes.
Experts consider the rate to be healthy given the current economic climate, and say that it points to further room for continued consumer spending.
If consumers begin to buy more local products, companies will have more opportunities to sell their products and then have even more capital to pour into their businesses
But economists say it is necessary to find ways to cut prices of consumer goods and services, and improve product quality.
They also emphasise that the employment rate should be stable so consumers can have the financial capacity to spend.
The Ministry of Industry and Trade said it would help support enterprises to manufacture products for the domestic market, particularly those that produce goods that can replace imports. It also plans to assist labour – intensive enterprises.
Industries eligible for the support plan will include food processing, beverages, garments and textiles, pharmaceutical, and building materials, mechanical engineering, ship building and fertilizers.
Industry and Trade Deputy Minister Nguyen Cam Tu said the Government should also increase consumption by creating policies that would help businesses produce more for the domestic market.
Since October 2008, the country’s monthly export value has steadily dropped and stood at under $5 billion level.
In particular, Vietnamese enterprises’ exports achieved only $3.8 billion in January, down by 18.6 per cent as compared with the previous month’s figure, and 24.2 per cent over the same period last year.
The price of rice
In January, while exports for most key commodities fell, rice exports reached 310,000 tonnes, the highest level in 20 years. In previous years, monthly rice exports averaged only 100,000 tonnes.
In addition, contracts involving the export of 2.86 million tonnes of rice have been signed, and the amount of rice exports in the first half of this year is expected to top 3 million tonnes.
The Viet Nam Food Association (VFA) hopes that the current 850,000 tonnes of rice in stock will be used, given the current demand.
Other good news is the price of paddy and rice, which remains relatively high. Last week, prices of high-grade rice (5 per cent broken rice) soared by VND300 per kilo to VND5,500.
VFA experts attributed rising rice prices to a contract calling for the shipment of 0.5 million tonnes to the Philippines.
Manila also plans to purchase about one more million tonnes of rice from Viet Nam. In addition, customers from other countries are also negotiating with Vietnamese exporters.
According to VFA, given the 850,000 tonnes of stockpiled rice and the output of the winter-spring crop – which is expected to be a bumper crop – the entire country will have about 3.2 tonnes for export in the first six months of the year, meeting market demand.
Export prices are also favourable, hovering around $430 per tonne.
Experts said that falling interest rates and the Government’s application of several support measures have encouraged enterprises to increase rice exports.
In spite of such positive signs, experts have told exporters to be cautious and take into account the unusual changes in the volume of rice exports as well as prices in the remaining six months of the year.
They said many countries that have faced drought and lean harvests would likely be importing large volumes of rice, creating strong price fluctuations.
Meanwhile, total output of the country’s rice crops for the rest of the year cannot be predicted because of unforeseen weather patterns, so exporters continue to hedge their bets, at least for now.
Competitive edge
Le Ky Anh, an official of the European Union Delegation of the European Commission to Viet Nam, said that if Viet Nam did not seek ways to sharpen its competitiveness soon, it would be difficult to realise set targets.
Targets for this year include export contribution of 87.26 per cent to the GDP, and between US$11 and 12 billion of disbursement of foreign direct investment (FDI).
Viet Nam’s exports this year are predicted to go through a rough ride because of the global financial crisis. In major markets of Viet Nam’s exports such as the US, the EU and Japan, the crisis has dampened demand. US GDP growth this year is estimated to reach 2 per cent, the EU’s 0.4 per cent and Japan’s, zero per cent or even negative growth.
Worse still, several importing countries are applying more trade barriers to foreign products to protect their domestic markets.
Nguyen Thi Canh, lecturer at the HCM City National University’s Economics Faculty, said that Viet Nam’s competitiveness was much lower than those of regional countries, particularly China and Thailand, which have similar economic conditions.
This limitation has significantly inhibited growth and is partly due to Viet Nam’s Incremental Capital Output Ratio (ICOR), which is higher than many other countries in the region, according to Canh.
A lack of export items with high added value and low labour productivity are also factors contributing to a lack of competitiveness.
Hirota Nakanishi, senior analyst of the Japan Economy and Trade Organisation (JETRO), said Vietnamese companies still lacked an impetus and method to cope with recession.
He said their weakest point was an inability to improve product quality and cut production costs.
He also pointed out the unsatisfactory progress of the domestic support industry, and said that JETRO planned to work with Vietnamese agencies to find ways to develop this industry.
He suggested that improving relations with the country’s major trade partners was of great significance, especially during the global economic downturn and current challenges facing Viet Nam.
Local enterprises’ improved competitiveness would lay the foundation for the entire country to enhance its competitive ability, he added. — VNS
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