Local firms hunt for a competitive advantage

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Viet Thang Garment Joint Stock Company director Le Nguyen Ngoc said the textile-garment sector was critically short of input materials since early 2011 with the price of domestic market raw cotton having jumped 50-60 per cent in 2011, but it could only feed half of the actual demand.

“Meanwhile, imported materials incur a high duty of 12 per cent. In this context, businesses would run out of profits if they produced items for sale on the local market,” Ngoc said.

He said in 2011 his firm mainly involved in export processing, while temporarily halting selling to the domestic market.

A Vitas representative said though the sector posted strong growth of 20 per cent in local sales in 2010, that growth was not sustainable.

This was seen through the fact that scores of firms curtailed domestic production and just focused on export processing in the face of escalating material costs.

The possibility of Chinese made textile and garment items coming back to inundate the Vietnamese market is looming large unless local firms are offered preferred imported material duties to boost domestic production.

Seafood processing and exporting firms are in the same boat.

According to VASEP deputy secretary general Nguyen Hoai Nam, seafood exporters’ prime concern now was not the lack of export orders but material scarcity which would linger until September 2011.

A number of seafood producers and exporters in the Mekong Delta such as Nam Viet Group, the Cuu Long Seafood Import Export Joint Stock Company run a perfunctory production due to lack of materials amid high import duties ranging from 10-20 per cent.

In this context, VASEP proposes tax exemption for imported seafood materials to boost export. It argued that world’s leading seafood exporters such as China, Thailand, India and Malaysia enjoyed low imported material taxes from zero to 0.5 per cent only.

Responding to businesses’ concerns, the General Department of Taxation asked competent government agencies to apply suitable tax and fee levels on some kinds of export items to help moderate businesses’ profit rates.

It also considers tariff exemption or reduction for some imported materials which cannot be sourced locally such as those of the textile-garment and seafood sectors.