Vietnam - Manufacturing Industries Still In Troubled Waters

Manufacturing industries including textile, garment, fertilizer, paper, steel, leather and footwear suffered a sharp decline in January-February production against the same period last year, said the Ministry of Industry and Trade.

Textile production dipped 8.2% year-on-year, sport shoes dropped 5.4% and paper slid 4.3%. Notably, fertilizer production in the first two months fell by a staggering 54.5%.

According to the Domestic Market Department under the trade ministry, the total flow of goods and services in February amounted to VND186.5 trillion, dropping 3.8% versus January. This proves that consumer demand is dwindling, pushing up inventories.

“While inflation is showing no clear signs of waning, domestic consumption has slackened. This is a tough macro-economic issue,” an official of the market department said at a ministry conference in Hanoi on Monday.

“Normally, the total flow of goods and services surge in line with inflation and consumer price index (CPI), but now they go in an opposite direction. This is a big question for the Government and ministries regarding macro-economic management.”

According to this official, enterprises are finding it hard to seek capital and at the same time struggling with rising inventories and higher prices of gas and coal sold for paper and cement producers. These factors will continue to leave a huge impact on the manufacturing sector in March and thereafter.

The trade ministry noted export orders for the textile and garment industry in 2012 had been unstable and might shrink. Exports to the traditional markets have declined, but in return apparel exports to China have been on the rise.

Meanwhile, leather footwear production is still choppy due to the industry’s heavy dependence on external factors such as capital, materials, technology and markets. Most products are exported via a third party as direct sale remains limited.

Moreover, the leather-shoe industry has been running short of 20% labor since the end of the Lunar New Year holiday in late January.

While export is in trouble, import spending in the first two months of the year is estimated at US$15.9 billion, a year-on-year increase of 11.8%. The import bill of local businesses reached US$7.7 billion, down 6.4%, whereas that of foreign-invested enterprises rose 36.8% over the year-ago period to US$8.2 billion.

This shows it is domestic enterprises that have absorbed the impact of the monetary tightening policy by cutting imports of equipment and materials as a result of soaring production, management and financial costs. Meanwhile, the foreign-invested enterprises were still in good shape.

The country’s January-February export revenue soared 24.85% year-on-year to US$15.3 billion, with the FDI sector’s exports, excluding crude oil, estimated to account for US$8.6 billion, a hefty rise of 49%.

SGT

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