Vietnam - Outlook for industry

The domestic leather and footwear industry must improve production processes in order to increase competition, Deputy Minister of Industry and Trade Nguyen Nam Hai has said, predicting significant challenges lay ahead for the sector in the coming months.

Hai said the industry was seeing signs of recovery with output and growth rates maintaining at a stable level last month. Sales of artificial leather footwear products grew 64.6 per cent over the same period last year, and sport shoes were up 28.3 per cent.

Hai said the dependence on imported materials, which accounted for up to 80 per cent of all production materials, hindered the industry's development.

Direct export activities remained limited due to the dependence of capital, technology and foreign markets, meaning most exports were sold through intermediaries.

He also noted that many enterprises outsourced part of the production process, which stifled efficiency. Import policy changes in major markets such as the US, the EU and Japan, calling for stricter quality, environmental standards and corporate responsibility, had caused further challenges for the industry.

Hai urged companies to shift from processing to producing and selling products systematically themselves to boost sales on the domestic market and seek high exports, and explore potential investment and material supply contracts with emerging markets such as South America, India and Brazil.

He also urged companies to generate added value for products by directly introducing them to importers and major retailers, creating well-designed models, improving delivery and post-sale services.

Special attention should also be paid to developing human resources, enhancing product quality and reducing costs, he said.

HCM City Leather and Footwear Association general secretary Nguyen Van Khanh warned that a current shortage of labourers, a result of low wage levels, was causing more difficulties for businesses.

He said companies in HCM City lacked about 15-20 per cent of the desired number of workers in the first two months of the year, while many firms had seen a 10-20 per cent decline in the number of contracts compared to the same period last year.

"Enterprises should care more for workers. They should also forecast and assess business partners in order to be well-prepared for production, including labourer resources," he said.

Khanh suggested paying more attention to the domestic market. "The local market is very large and has generated jobs for thousands of workers but many businesses show little interest in it - each firm should develop a market share here; the Vina Giay and Thai Binh Shoes companies have done this very well."

Paper

The paper industry was also witnessing a similar situation related to material resources.

Vietnam Pulp and Paper Association general secretary Vu Ngoc Bao said domestic pulp sources could now meet only about 60 per cent of local paper factory demand.

Domestic products were mainly printing and rolled-writing paper, supplied to processing factories, while more advanced products like notebooks represented only a small portion of the market.

The Ministry of Industry and Trade said material sources would be an important factor in the development of the industry and new plants including Phuong Nam, An Hoa and Thanh Hoa and the second phase of the Bai Bang Paper Plant would soon be put into operation.

General director of the Viet Nam Paper Corporation Vu Thanh Binh said the company would speed up investment projects including forest planting, timber processing and equipment installation in order to boost production.

"Paper companies need to focus more on market affairs," said Deputy Minister of Industry and Trade Ho Thi Kim Thoa. "They should expand distribution systems, avoid concentrating on only several big agents in order to limit intermediaries and cut costs."

"Another important point for them is to invest more in research to launch products that are good quality and meet consumer demand," she added.

Industry insiders predicted this year would be hard for the seafood industry due to climate change causing lower stock numbers and poor master plans for processing and sea farming.

Vietnam Association of Seafood Exporters and Producers (VASEP) general secretary Truong Dinh Hoe said export market development and food sanitary and safety would be major challenges for the sector, in addition to material sources.

He noted the price of domestic shrimp was now 10 per cent higher than that of imported shrimp, which worried companies as they couldn't raise selling prices.

Le Van Quang, chairman of Minh Phu Seafood Group, said many firms had to take full advantage of technology in order to cope with material price hikes.

Hai Nam Co general director Nguyen Thi Thu Sac said the industry still faced problems because many fishermen still used small vessels.

Deputy Minister of Agriculture and Rural Development Vu Van Tam said the ministry would intensify support policies for fishermen and seafood farmers this year to deal with those problems, and hold a seminar to listen to enterprises in the coming months.

Tam also urged VASEP to spur the exchange of information among authorities, companies and seafood farmers for proper policies to be created.

Garments

The Vietnam National Textile and Garment Group said it was also increasing efforts to replace material imports by investing in material production projects, which would help develop about 5,000ha of forest.

Fourteen of the group's major firms and the May 10 (Garment 10) corporation recently signed a commitment to reduce costs by a minimum of 5 per cent this year, a move they announced following market restructuring.

Garment 10 general director Nguyen Thi Thanh Huyen said every company in the sector was struggling to cut any costs it could in order to avoid losses in the face of increasing energy prices, high interest rates and reduced export prices.

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