Heavy Pressure on Industry and Trade

Several main of the industry and trade sector in February declined but the cause was blamed on a weeklong Lunar New Year holiday. The industrial production value in February is over VND50 trillion, only equal to 98.7 percent of the value in the same month of 2009. The growth of industrial production value was still lower than the rate before the economic crisis.

 

The February export revenue was estimated at US$3.9 billion, down 22.2 percent compared to a month earlier, bringing the total export earnings to US$8.9 billion in the first two months, up only 0.1 percent over the same period in 2009. Foreign-led sector made up an estimated US$4.2 billion, excluding crude oil, up 39 percent year on year. The rise in export value was attributed to higher exporting prices while the volume was on the fall. Price inflation was calculated to add US$600 million to export turnover.

 

Import spending in February 2010 was predicted at US$4.7 billion, down 21.1 percent compared with the previous month, bringing the import expenditure to US$10.6 billion in the first two months, up 39.6 percent over the same period in 2009. Thus, the two-month trade deficit was US$1.74 billion, equal to 19.6 percent of total import turnover and nearing the cap of 20 percent expected by the National Assembly.

 

Some difficulties in promoting exports were presented and discussed at the meeting. Mr Le Quoc An, Chairman of Vietnam Textile and Apparel Association, said the export turnover of garments and textiles exceeded US$1.5 billion in the first two months but the situation seems to worsen as global cotton prices are growing to a record high, which will surely hurt the overall target of the garment and textile industry.

To ensure export growth in 2010, one of urgent measures is to solve the labour shortage of the industry, especially in industrial parks and export processing zones. “To deal with that difficulty, the Vietnam Textile and Apparel Association has recommended businesses to reallocate production facilities to suburban areas and rural areas, aiming to curb labour shortage problem and reduce costs,” said Mr An.

Mr Hoang Huy Tap, Deputy Director of Bac Ninh Department of Trade and Industry, also said that, inflation risks and growing actual lending interest rate have augmented costs. Several companies have to borrow usurious interest rate, about 2.5 to 3 times higher than the already high rate at banks. Moreover, most of stimulus packages already ended in late 2009.

 

In the coming time, many nontariff barriers and other sophisticated trade safeguard measures like Lacey Act in the US will be enacted to tighten control over the origin of products. The US Department of Agriculture (USDA ) is implementing Agriculture Bill 2008 (Farmbill). In the Eurozone, the Forest Law Enforcement, Governance and Trade (FLEGT) issued to check the legality of shipments will also raise significant difficulties for Vietnamese exported wood products to this market. The EU also continues to extend antidumping duty on metal rings bearings and leather-capped shoes from Vietnam.

In spite of many difficulties, but according to Minister Vu Huy Hoang, during the Lunar New Year, or Tet, provinces and cities had delivered goods to remote areas and supported poor and disadvantaged families. Activities to stabilise prices and ensure supply of goods for Tet were also done relatively well. In reality, there was no major price escalation following the largest holiday in Vietnam.

 

Regarding electricity supply, the Department of Electricity Regulation has collaborated with the Electricity of Vietnam (EVN) to meet basic electricity demand for production and consumption. EVN has cooperated with local authorities to implement measures to prevent drought and store water to ensure enough water in winter-spring crop in the north. From now until June is dry season. The power group will try to mobilise all sources of power supply to ensure enough electricity for production and consumption activities.

 

Concerning trade promotion, Director of Trade Promotion Agency Nguyen Thang Hai, said the Trade Promotion Agency (Vietrade) also collaborated with other associations and local authorities to actively prepare for trade promotion activities in traditional markets as well as potential markets like Russia, ASEAN countries, Africa, Middle East. The agency also worked closely with business associations like s garment and textile, leather and footwear and seafood associations to enhance the effectiveness of trade promotion activities. However, according to recommendations from some associations, the budget for trade promotions needs to be increased for Vietnamese goods to penetrate more international markets.

Mr Hai also reported that the Prime Minister has approved in principle for 13 trade promotion projects with an expense of VND15 billion, bringing the total fund for the national trade promotion activities in 2009 to VND90 billion.

 

Minister Vu Huy Hoang said that, in the near future, the minister will coordinate with localities to continue expanding production and business activities to offset the decline in industrial production in February to achieve the overall goal in 2010 and accelerate economic growth to 6.5 percent. In addition, investments for infrastructure construction will be accelerated.