Vietnam fights to retain export shine

Much of Vietnam’s foreign trade picture depends on whether it can rein in the pandemic in time. Photo: Le Toan

For more than a month, Garment 10 Corporation, one of the leading companies in the textile and garment industry in Vietnam, had to follow strict social distancing and labour requirements, leading to shortages that have delayed orders in the third quarter for the US and European markets.

“It is very difficult for us to complete our export orders for the rest of the year because the pandemic continues to linger. The stay-at-work model restricted us to maintain only around 30-50 per cent of our workers, while we are always threatened with closure should there be an infection,” said Than Duc Viet, general director of Garment 10.

The company is one of many exporters that are facing difficulties in production. Meanwhile, the last months of the year are typically very important for manufacturers and exporters because of the high trade volume and orders promised for the next year.

As one of the billion-dollar export industries of Vietnam in the first months of the year, the textile and garment industry was expected to accelerate and reach its export target of $40 billion. While the rate of vaccinations for textile workers remains limited, many businesses in the industry are at risk of losing orders, according to the Vietnam Textile and Apparel Association.

Unfulfilled orders

The supply chain disruptions in the southern provinces forced some sectors to adjust their goals for the whole year. The textile and garment sector was adjusted from the original target of nearly $40 billion to about $32-33 billion. The footwear sector also had to adjust its target from $22 billion to just over $14 billion, while the wood industry lowered its expectation from $15 to $12.5 billion.

Nguyen Chi Trung, chairman of footwear maker Gia Dinh Group JSC, complained that his company signed orders with customers for the end of December, but as raw materials arrived late, prices have increased by 10-30 per cent, and labour shortages due to restrictions caused further headaches.

“Should this go on for longer, orders will not be fulfilled or heavily delayed, and some customers could cancel orders,” said Trung.

Meanwhile, seafood exports in August reached $588 million, down nearly 28 per cent on-year, in which exports to the US and European markets decreased 16 and 50 per cent, respectively, over the same period in 2020. Other markets like the United Kingdom, Canada, China, and Australia also decreased by 48, 37, 36, and 35 per cent, respectively, according to the Vietnam Association of Seafood Exporters and Producers.

“Even if businesses are allowed to return to normal production after September 15, their ability to meet orders for the year-end season remains limited, and new orders will still be difficult to fulfil,” said Le Van Quang, chairman of aquatic product producer and exporter Minh Phu Group at a recent meeting with the government.

According to the Ministry of Industry and Trade (MoIT), Vietnam witnessed a total import-export turnover of over $428.8 billion in the first eight months of 2021, up 27.2 per cent on-year. In this, exports earned over $212.55 billion, up 21.2 per cent on-year. This was due to the high growth rate in previous months. However, looking at the last two months, exports have decreased.

Exports fell by nearly 1 per cent on-month in July and nearly 6 per cent on-month in August. These declines being deemed somewhat worrisome because in the last months of the year, the demand for shopping and consumption increases in markets around the world.

Pham Van Hien, director of LTP Import Export BV, one of the leading importers and suppliers of Asian-European foods and beverage in the Netherlands said, “Our company expected to place a lot more orders than before, and we have been regularly monitoring freight rates. However, now the important thing is not the freight, but the delivery times for the end of the year.”

Looking for a way out

Tran Ngoc Quan, Vietnam trade counselor for Belgium and the EU, said, “Vietnam is an important link in the global chain as we have 17 free trade agreements (FTAs). Only disease control will help the global supply chain and Vietnam’s recovery.”

To this end, Quan said, the MoIT has stepped up deals in vaccine diplomacy, including significant contributions from brands. During a recent trip by Chairman of the National Assembly Vuong Dinh Hue to the EU, he worked with partners and brands such as Nike, Adidas, and Puma.

“The problem is ensuring that Vietnamese production continues. The opportunity for us is still great to take advantage of the FTA with the EU, at least as soon as we’re getting rid of COVID-19 and show signs of recovery,” said Quan.

Hoang Quang Phong, vice chairman of the Vietnam Chamber of Commerce and Industry, said that the pandemic has caused a great shock to the business community. On the other hand, it has pushed digital transformation to unblock global supply chains disrupted by the pandemic. The digital transformation is no longer a goal but an imperative for businesses, especially in manufacturing.

“Businesses should not rely too much on supportive measures. It is time for businesses to consider redesigning their methods and finding new possibilities to restructure and manage their operations,” Phong suggested.

Viet from Garment 10 said, “The pressure is on to implement the digital transformation, whether businesses like it or not.”

He also said that businesses are waiting for a recovery plan that allows for smoother movement of workers, ensures production and vaccinations.

Vietnam has risen to become one of the countries with high global competitiveness over the decades. It has formed a number of key industries such as electronics, iron and steel, textiles and garments, and footwear, among others. This has created an important foundation for long-term growth, as well as the modernisation and industrialisation of the country.

However, the country’s main export products remain labour-intensive. The ministry is developing an import-export strategy for the 2021-2030 period, which will be submitted to the government for consideration and promulgation in the near future. Along with that, the structure of the industries is expected to shift in favour of sustainable development towards industrialisation, modernisation, job generation, and trade balance.