Growing demand leading to big profits

Illustrative image (Photo: VNA)

Over the past few months, Bulgaria’s Sharkov Inkom Co., Ltd. is boosting its hunt for Vietnamese partners who can supply assorted machinery, tools, and equipment at unlimited volumes. “Vietnam is becoming a good market that can supply products to us,” said a company representative. “We are seeking help from the Vietnam Trade Office in Bulgaria to find partners in Vietnam.”

Sharkov Inkom, a distributor of over 300 producers and importers in Bulgaria, is importing goods regularly from China, Turkey, and Europe.

Also in recent months, Vietnam-Taiwan joint venture Tam Viet Garment Co., Ltd. in Hanoi has been seeing a 10 per cent rise in export orders from Europe, which accounted for 50 per cent of its export turnover last year. “Many nations in Europe have reopened markets and we are negotiating more export goods from them,” said Nguyen Hoang Huong, vice general director of sales at the company. “We have had to recruit more workers to meet deadlines and are expecting a double-digit export turnover for the whole of 2022.”

According to the General Statistics Office (GSO), the top groups of exports of Vietnam in Q1 include mobile phones and spare parts ($14.24 billion – equal to that in the same period last year), electronics and computers ($13 billion – up 9.2 per cent on-year), industrial machinery and equipment ($9.92 billion – up 8.8 per cent), and garments and textiles ($8.84 billion – up 22.5 per cent).

“Many garment firms have reaped big profits in 2021 and Q1 of 2022. Statistics from the Vietnam Textile and Apparel Association showed that the majority of enterprises have obtained export orders until the end of Q3,” said the Ministry of Planning and Investment’s Department for Industrial Economy in a Q1 report on the performance of some major Vietnamese groups. “The garment and textile industry has set an export target of $38-43 billion for 2022.”

The Ministry of Industry and Trade last week showed its optimism over the trade picture over the next few months. After witnessing a trade deficit of $1.96 billion in February and $581 million in the first two months, Vietnam is estimated to enjoy a trade surplus of $1.39 billion in March and $809 million in Q1 – in which domestic businesses saw a trade deficit of $6.16 billion, and foreign firms raked in a trade surplus of $6.97 billion including crude oil exports (see box).

According to a GSO survey with over 5,500 manufacturing and processing enterprises nationwide in the first quarter of this year, nearly a quarter of respondents reported that their number of new export orders in the period has increased, and nearly 41 per cent said orders have remained around the same level. About 40 per cent of the surveyed firms forecasted a climb in their new export orders in Q2, and 45 per cent said they will remain the same as in Q4 of 2021. Only 14.6 per cent predicted a reduction.

The Asian Development Bank (ADB) said that it remains upbeat about Vietnam’s trade picture this year, saying that the fast recovery of Vietnam’s key foreign markets, particularly Europe, China, and the US, will support exports, especially for textiles, garments and footwear, electronics, and mobile phones.

“The impressive vaccination rates will support the bounce-back of manufacturing and services, and Vietnam’s market access from multiple free trade agreements will continue to aid trade and investment,” Andrew Jeffries, ADB country director for Vietnam, told VIR.

The World Bank also said Vietnam’s manufacturing exports will respond to demand for Vietnamese exports. The US, EU, and China are estimated to grow by 3.8, 4.4, and 5.1 per cent respectively in 2022. Manufacturing exports will benefit from steady demand from the US, EU, and Chinese economies as they continue to grow, albeit at a slower pace.

Meanwhile, Huong from Tam Viet Garment also said that in 2022 and 2023, import tariffs on some garment and textile materials will be phased out in South Korea, Japan, Indonesia, and Malaysia under agreements clinched between Vietnam and Japan, Vietnam and South Korea, and under the ASEAN Economic Community commitments. “This will bring many opportunities for firms. With new workers at the new facilities currently under construction, we are expanding production and seeking new partners,” Huong said.