Impressive Export Growth in 2010

In 2009, Vietnam’s exports declined from a year earlier but the country completed the 2010 plan in October. Specifically, foreign-invested companies raked in US$33.6 billion from exports (excluding crude oil), accounting for 47.45 percent of the total and rising 39 percent year on year. Hence, the export growth is largely contributed by this sector.

 

The volume of agricultural products increased, except for cassava (down 51.4 percent), pepper (down 10.4 percent), and coffee (2.6 percent).

 

Prices of exports boosted value growth. Notably, cashew nut prices rose 21.1 percent; tea, 11.3 percent; pepper, 39.7 percent; rice, 4.8 percent; cassava, 83.6 percent; coal, 53.3 percent; crude oil, 33.9 percent, and rubber, 81.1 percent.

 

Asian markets played the largest role in Vietnam’s export growth as the value was up 30.6 percent and accounted for about 46.6 percent of the country’s exports.  

 

Compared with 2009, five more of Vietnam’s exports brought in more than US$1 billion, namely cashew nut, petroleum, plastic, electrical wires and cables, and transport means, bringing the total number of commodities with over US$1 billion export earnings to 18.

 

Rice is one of the most impressive exports in terms of growth in 2010, with 20.6 percent growth in value to about US$3.2 billion (from 6.8 million tonnes exported). This is also a record value to date. A representative from the Vietnam Food Association (VFA) said the surge of rice exports resulted from steady shipments to traditional markets. Since the early months of 2010, these markets signed contracts to buy 2.5 million tonnes of rice from Vietnam. This year, exporters expect to see another increase in rice price.

 

Meanwhile, exportation of raw materials dropped given that coal export slid 33 percent. Notwithstanding the direct impact on earnings, the decrease will ensure Vietnam’s long-term energy security and sustainable growth.

 

The high jump in export turnover largely helped reduce the trade deficit to more than US$12 billion, a drop of US$450 million from 2009. Thus, the trade deficit equalled about 17 percent of exports, satisfying the target of capping it at 20 percent approved by the National Assembly - the highest legislative body in Vietnam.

Deputy Minister of Industry and Trade Nguyen Thanh Bien said: "In 2011, the National Assembly and the Government assigned the trade and industry sector to keep export growth of 10 percent. This is not a high growth in comparison with what has been done in 2010, but it is a huge challenge because Vietnam is hardly able to expect the recovery of world economies and the rise of export prices as high as in 2010.”

 

To avoid huge loss in price drop, stockpiling is crucial, according to rice exporters. Thanks to a good warehousing system, many companies have actively stored rice for export to avoid being forced to sell at lower-than-expected prices by foreign importers. This is a valuable lesson not only for rice but also other agricultural products such as coffee and pepper.

 

Mr Bien analysed that Vietnam is an influential player on the global agricultural market, as the largest exporter of pepper and the second largest exporter of rice and coffee. Thus, it is able to influence global prices of these commodities and nip in the bud any attempt by foreign importers to drive down prices as before. Achieving this goal requires a broad consensus between the Ministry of Industry and Trade and business associations, localities and companies.

 

Another challenge is high exchange and interest rates - a concern for most businesses. Mr Bien said Vietnam will find it hard to keep the trade gap below 18 percent in 2011 because exchange and interest rates are high and more technical barriers are raised in foreign markets. The shortage of raw materials is forecast to be serious from now till June.

 

Remarkably, according to the Ministry of Industry and Trade, the growth of exports by foreign-invested companies was five times higher than domestic companies. The foreign-invested sector contributed over 20 percent of a surprise 25.5 percent export growth in 2010. This showed an imbalance of exports between domestic and foreign-led companies.

 

Exports in 2010 were considerably favourable because recovering economies in the world have higher demand for imports, leading to higher prices. However, higher prices of raw materials on world markets will impact domestic products in the future.

 

Recently, the Ministry of Industry and Trade together with companies, business associations and local authorities is actively seeking new export opportunities and removing obstacles facing enterprises to provide them the best chance to boost exports and access capital sources. Apart from traditional markets like the US, the EU, Japan and some Asian countries, Vietnam expanded exports to new markets like the Middle East and Africa.

 

The ministry also promoted trade by launching national trade promotion programmes and industry programmes.

 

Besides, the Ministry has signed agreements with its partners in the framework of ASEAN, including Vietnam - Japan partnership agreement, and negotiated free trade agreements with several partners like the US and the EU. The Ministry will inform companies in the country of advantages these agreements generate, particularly a zero tax approach.

Droughts and heavy rains forced coffee growers to delay harvesting. Vietnam’s coffee output in the 2010 - 2011 crop is forecast to drop 20 percent from last year due to repeated natural disasters.

 

In 2010, the coffee harvest was also delayed about one month because of continuous rain in early October - the season of harvesting coffee.

 

The Government should provide funds for purchasing coffee for temporary stockpiling in 2011 as it did in 2010. Many coffee companies are facing capital difficulties arising from excessively high interest rates and they can hardly stock the bean. They now have some 30 percent of necessary capital at hand for the work, while the remaining 70 percent is dependent on bank loans.

 

In spite of being the second largest coffee exporter in the world, Vietnam is driven by global coffee prices which are controlled by other associated coffee exporters. In 2010, the world’s coffee industry underwent highs and lows of coffee prices because of slow responses and inconsistent reactions to new market developments. This left coffee traders, exporters and farmers in a dilemma.

In general, Vietnamese textile and apparel companies have made a relatively good progress but they are currently facing soaring raw material prices which are now at all-time highs and show no sign of slowing down. At the same time, import and export procedures and costs are rising due to higher transport fares and electricity prices. Labour costs, which include wages, social insurance, health insurance and unemployment insurance, actually increased about 30 percent in 2010 and weakened the performance of garment and textile enterprises.

 

In 2011, companies need to focus on such measures as improving production management, increasing high-value commodities, boosting branding and popularity, and relocating and concentrating apparel manufacturers to agricultural areas where more low-wage labour is available.

Among aquatic products, giant tiger prawn (Penaeus monodon) always has high export value, generating a wide margin of profit for both businesses and farmers. The price of this shrimp increased rather much from late last year because many companies had signed large export contracts in early months. Thus, they did not have the stock to sell when the price soared. On the other hand, the shrimp price was largely affected by China’s movements. Many Chinese traders came to Ca Mau, Bac Lieu, Kien Giang, Soc Trang and other provinces to buy raw shrimps for their production facilities in China. Thus, Vietnamese processing plants were placed under high pressure from material shortages.

 

Recently, Japan has proposed verifying all Vietnamese exported shrimp on suspicion of antibiotic residues. When exporters asked for measures to deal with this matter, the Ministry of Agriculture and Rural Development issued many regulatory circulars on compulsory inspection of seafood quality before exporting it. VASEP protested this because processors already examined raw materials upon purchase from farmers. It is an uneconomical conduct because Japan also did the check. Companies had to spend more on unnecessary multiple checks. In 2011, the shrimp remains a staple seafood export; thus, Vietnam needs to take specific measures and strategies for different markets like the US, the EU and Japan to raise the export value of this product.