Exporting products to depressed markets

Major Vietnamese export markets like the US, Japan and the EU are falling into depression.
One of the areas in which the Government will stimulate investment this year is products of high export value. However, the World Bank has forecast that the volume of goods transacted in the market this year will decrease by 2.1 percent. In developing countries, export growth will shrink to 3 percent, a sharp contrast to the average growth rate of 15 percent over the past five years.
At present, cassava starch exported to China is sitting idle at northern border gates. Some Vietnamese products such as watermelon, fresh areca nuts, litchi and rubber have faced the same problem over the past years as Vietnamese businesses continue operating inefficiently due to lack of transparency in terms of market.
Businesses need to master information sharing on their capacity for production and supply as well as their ability to deliver products in each period. Unfortunately, such information is too sketchy for businesses to make sound decision regarding a number of agricultural products in stock.
Prime Minister Nguyen Tan Dung related at a recent agriculture and rural development conference that when he asked about the shrimp and rice cultivation in one province, for instance, local party and administration leaders gave different answers. They seemed unclear as to when and how much products would be sold to earn record profits.
This typical example of poor information forecasting is a common occurrence in Vietnam. When a plan to develop tra and basa catfish in the Mekong delta region was launched in October, 2008 the fisheries association in An Giang province – the nation’s leading catfish producers they found that much important data for 2009 and 2010 was either outdated or contradicted.
This year the National Assembly set an export growth target of 13 percent, instead of 19 percent. However, market experts said that the target is still too demanding for Vietnam to achieve as the World Bank forecast the export growth rate in developing countries at 3 percent.
National export activities are being seriously affected by the world economic slowdown. A private business in northern Hai Duong province, which exported thousands of tonnes of roast suckling pigs to Hong Kong, Taiwan and some other markets reported that its export volume has fallen steeply in recent months because these markets simultaneously stopped importing such meat. Consequently, a number of farmers who supply suckling pigs to the business also fared no better.
Some seafood export businesses said that many importers cancelled their orders this year due to a declining demand. Therefore, many processing factories in the south have to narrow their production and many workers have lost jobs. This is a manifestation of the impact of the global financial meltdown on the domestic market.
In the international integration process, tariff barriers are to be removed across the board while non-tariff barriers will become more complicated. It means that the world market is more open for Vietnamese products but much more demanding in terms of meeting requirements concerning quality and branding. For example in the European markets, fruit, which meets certain specification for both size and colour can be sold in the supermarket.
Nguyen Ngoc Son, Vietnamese ambassador to Switzerland, said that although mangoes imported from Thailand and Pakistan are not as delicious as the Vietnamese mango, they are available in the market.
According to Swiss importers, Vietnamese mango tastes better but the quality is too variable so it does not meet the requirement for bulk orders. The first batch of fruit is good but the following batches come up short because some Vietnamese businesses do not deal in good faith and break contracts with clients, badly affecting the whole Vietnamese business community.
For example, last year, Vietnamese cashew nut businesses refused to deliver goods to clients under signed contracts in order to avoid initial losses and consequently they had to pay a high price for this by selling them dirt cheap when importers refused to import anymore.
Major Vietnamese export markets such as the US, Japan and the EU are falling into depression. Meanwhile Vietnamese footwear imported to the EU won’t enjoy the Generalized System of Preferences (GSP) tax any longer while Chinese garment products imported to the US have had their tariffs removed. However, these demanding requirements provide an opportunity for businesses and entrepreneurs to show the world what they can do.
Despite the decline in the export market due to the impact of the global economic downturn and the strict requirements of traditional markets, many enterprises are still actively finding markets and accelerating exports. For example, Vietnamese businesses are focusing on low-income customers in the US who are looking for cheap products. Businesses share their experience that demand for goods in the African market is high.
In addition it is an easy market to enter and imposes few technical barriers and tariffs. However, businesses are hard-pressed to find suitable payment methods. Many small products have high export value and potential products include suitcases, bags, umbrellas, rubber products, iron, and electric wires and cables.
A number of support policies have been devised for export businesses, including helping them access preferential loans from banks, cutting loan rates, giving credit guarantees for some agricultural products and creating favourable conditions for them to reduce prices and improve their competitive edge.
The more difficult the world market is the more risks businesses will face. Therefore, businesses should be very careful in their operations. In addition to Government support, associations should play key role in providing information for businesses.
Another important information channel that businesses ignore is the Vietnamese trade office overseas, which can provide accurate information about foreign partners, helping domestic ones minimize risk when signing contracts. Further, businesses should know how to find new markets for old products.
(Source: VOV)

Mexico, Indonesia Sign Oil Cooperation Deal

Mexican President Felipe Calderon and his Indonesian counterpart Susilo Bambang Yudhoyono announced an oil cooperation agreement between the state-run oil companies of the two countries. The announcement came after a meeting between the two leaders in Mexico Monday.
Petroleos Mexicanos and Pentamina Indonesia agreed to cooperate in development, scientific and technological investigation, and exploration and drilling. Calderon and Susilo, both of whom attended the G-20 summit in Washington, also said that another agreement in the agriculture, education, and diplomatic training sectors was signed between the two countries.
The Indonesian Export Development agency opened its representative office in Mexico, it was reported. It is expected that the office would help Indonesian products to enter the United States through trade agreements.
The two leaders are also due to travel to Lima, Peru over the weekend for the 21-nation Asia-Pacific Economic Cooperation (APEC) meeting.
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Global gloom darkens over Vietnam

The whirr of 200 sewing machines fills a Vietnamese factory hall, where workers and bosses hope desperately that the wheels will keep spinning once the global downturn hits home.
Row upon row of workers, most of them women, are busy making handbags, backpacks and briefcases for customers as far away as Germany, Hungary and Mexico in this plant, set amid rice fields on the outskirts of Hanoi.
They are the backbone of Vietnam’s post-war success story, part of an army of low-wage laborers who have transformed a poverty – stricken command economy since Vietnam in the 1980s embraced the model of export-led growth.
For more than a decade, textile and apparel exports have helped drive national economic growth rates above 7.5 percent – lifting the fortunes of businesses such as the Ladoda Company, whose staff grew to 400 from 15 in 16 years.
But now – with the dark clouds of recession gathering over the United States, Europe and many of Vietnam’s other export markets – many of the workers here have started to worry that tougher times may lie ahead.
“I heard on TV and the radio that the world economy is in bad shape,” said 33-year-old Nguyen Thi Thuy, who supports two children with her performance based wage of around VND1.7 million (US$100) a month.
“I am sure it will affect Vietnam and our company in some way.”
It is a concern shared by the management of the company, although both Thuy and her boss said that through hard work and innovation this family-run business hopes to dodge the bullet of a global downturn.
“We are worried,” admitted deputy director Dinh Tuan Anh, the owner’s son. “The crisis has really affected our business plans.”
Orders from some overseas clients had started falling months before the Wall Street meltdown, Anh told AFP, while domestic woes, including double-digit inflation and expensive bank loans, had piled pressure on the company.
“In June our Czech client placed an order for only 2,000 to 3,000 backpacks,” he said. “They used to order 5,000.
“A US client used to place orders for up to VND300,000 ($18) per backpack. Now they want backpacks for VNDVND60,000. They have told us to reduce the detailing on the products to make them cheaper.”
Adam Sitkoff, executive chairman of the American Chamber of Commerce in Hanoi, expects things could get worse before they get better.
“There’s no question you’re seeing a slowing in worldwide growth,” he said.
“Economies aren’t expanding, businesses aren’t expanding, the value of assets is going down. People are going to be more fearful and have less money to spend. That affects exports from emerging markets.”
Vietnam – which weathered the 1997-98 Asian crisis better than many neighbors because of its relative isolation – has since become far more globally integrated and last year joined the World Trade Organization.
“Vietnam’s single largest export market is the United States,” said Sitkoff. “Almost 45 percent of Vietnamese exports to the US are clothing and shoes.

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Export growth to US slows

Vietnam’s export growth to the US, its largest market, eased in April as shipments of footwear and seafood struggled to expand.

US-bound sales rose 22 percent to US$3.64 billion in the four months through April from a year earlier, after increasing 23 percent in the three months through March, according to figures from the US International Trade Commission.

A slowdown in shipments to the US may make it harder for Vietnam to cut a trade deficit that has sparked concerns the country may have to devalue its currency.

Vietnamese export growth to the US has been curbed by a downturn in the American economy, Moody’s Economy.com said Thursday in a report.

“Preserving or enhancing exports to the US has to be a key part of any export promotion strategy in Vietnam,” said Ayumi Konishi, Vietnam country director at the Asian Development Bank in Hanoi.

“But for Vietnam to reduce the trade deficit, emphasis should be given to controlling imports as well as to promoting exports.’’

Vietnamese imports from the US more than doubled through April to $1.05 billion from $436 million a year earlier, as shipments of cars to Vietnam surged fivefold to $173 million.

“The higher car imports show that people in Vietnam are looking for other ways to preserve the value of their assets, instead of putting their money into the stock market,’’ said Konishi of the ADB.

Vietnamese footwear exports to the US rose 13 percent through April to $375 million, down from a 17 percent pace through March.

Shipments of shoes have been hurt by Vietnamese inflation, which reached 25.2 percent year-on-year in May.

Lack of workers

“Higher prices for shoes make our exporters less competitive,’’ said Diep Thanh Kiet, vice chairman of the Shoes and Leather Association of Ho Chi Minh City.

“The second problem is a lack of workers. After Vietnam joined the World Trade Organization, workers had more choices to move to other businesses and others have gone back to the countryside.’’

Inflation has also resulted in more worker strikes, which has further crimping footwear exports, Kiet said.

Thousands of workers at a Nike supplier in the southern province of Long An stopped working for a week in April in a wage dispute.

Seafood shipments to the US climbed 12 percent through April to $207 million, down from an 18 percent rate through March.

Vietnamese shrimp and catfish exports are subject to anti-dumping duties in the US market.

Anti-dumping duties

“The main issue with the US market is the dumping duties,’’ said Gil Watts, a HCMC-based senior consultant to the Vietnam Aquaculture Association.

“Exporters would jump back to the US market if they could, because the prices there are higher than most other markets.’’

Shipments of apparel, Vietnam’s top export to the US market, rose 28 percent through April to $1.49 billion.

Garment exports to the US were up 31 percent through March and 45 percent through February.

“Inflation and the lack of workers is not only affecting the footwear companies but also garment companies,’’ said Kiet.

Furniture shipments advanced 25 percent to $445 million, while exports of crude oil to the US almost doubled by value to $205 million from $103 million.

“The export value of crude oil increased strongly in spite of production capacity constraints, benefiting from high international prices,’’ the World Bank said in a report released this month.

Coffee exports to the US rose 4 percent through April to $130 million.

“Coffee exports from Vietnam have been intensely price-sensitive throughout the 2007-2008 season, picking up when the price is strong, tailing off when prices ease,’’ Fortis Bank SA/NV and VM Group said in a report sent this month.

A slowdown in Vietnamese coffee exports reflects “the increased financial ability of coffee traders within Vietnam to withhold coffee until they are able to sell at prices they find compelling,’’ Fortis and VM said