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Exporters face tough months ahead

Update: June, 11/2012 - 11:04

In the first five months of the year, Viet Nam's export revenues reached US$42.9 billion, a year-on-year increase of 24.1 per cent. However, things may not go smoothly in the coming months even in sectors considered to be the country's biggest export earners, experts say.

The textiles and apparel industry, for instance, exported goods worth over US$1.1 billion in May. It was the third consecutive month that the industry saw a decrease in export revenues.

Consequently, the industry's export value in the first five months of the year was only US$5.3 billion, up by only 7.7 per cent – much lower than in previous years.

The second and third quarters are known to be the apparel and textile industry's peak season. However, most enterprises are finding it difficult to get export orders. Some enterprises have won orders but their value has decreased significantly.

Meanwhile, the industry is also facing many other obstacles including a shortage of capital and raw materials for production, increasing input costs and environment fees, decreasing purchasing power in both domestic and overseas markets, and increasing inventory volumes.

A similar situation can be seen in the footwear industry. Prolonged economic recession in the industry's main export markets has resulted in a sharp decrease in the number of orders won by enterprises.

Although the fisheries sector still achieved a positive growth rate in the first months of the year, its profits from domestic and overseas business activities have dropped sharply.

Since the beginning of the year, the number of enterprises involved in seafood export has decreased by 40 per cent. The main reason for this slowdown is that they are not able to buy enough raw materials and maintain production, with farmers refusing to sell on credit. Many seafood companies do not have enough capital to pay the farmers.

It is estimated that about 30 per cent of seafood firms are in danger of stopping operations or closing down.

Senior economist Le Dang Doanh says rising input prices of raw material in combination with decreasing consumption in the world market are major obstacles facing Vietnamese exporters.

He said the Government should come up with effective measures to support export firms at this time.

Sugar prices

The Ministry of Industry and Trade has denied allegations that it is at odds with the Ministry of Agriculture and Rural Development over a proposal to shore up the price of sugar by increasing reserves.

In March this year, the agriculture ministry proposed the purchase of 200,000 tonnes of sugar for temporary storage with a zero lending interest rate for companies participating in the scheme.

The trade ministry gave its official reply in May.

The decision issued by Deputy Minister Hoang Trung Hai on May 28 says that there will be no lending rate support for sugar stockpiling. This decision was based on actual market movements and inventories at the time, the trade ministry said.

The ministry said it also suggested against offering the interest subsidy because sugar prices did not drop in February and March and actually picked up in April.

The price is expected to continue to rise further in the coming months given rising demand in the pre-harvest period.

This is because the demand for sugar among households and businesses in summer and the upcoming mid-autumn festival will surge, thus pushing up prices. Hence the trade ministry did not support the proposal to rescue sugar refineries when prices were down.

However, the trade ministry's response came too late, critics say.

They note that the agricultural ministry's proposal for temporary storage of sugar was made in March when a large amount of sugar remaining unsold at factories.

As of May, this quantity was estimated at 344,000 tonnes.

The volume of unsold sugar had declined when the trade ministry sent its official reply turning down the agriculture ministry's proposal.

Due to the slow response from the trade ministry, many sugar refineries sought ways to export about 200,000 tonnes of sugar to China via unofficial channels.

Explaining this move, sugar companies said that in March they lacked funds to buy sugarcane while their inventory was increasing and bank loans were falling due, so they wanted the Government's support to stockpile sugar. — VNS

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