Export-driven Stockpile Bears Fruits

From late 2010 to the first quarter of 2011, Vietnam’s export value sharply increased, even up to 40 percent. Between January and March, the export value grew 33.7 percent against the same period of 2010. This impressive growth is because of price hikes, particularly price increases of agricultural products. The price-rise factor made up more than 50 percent of export value in 2010.

 

Raw materials such as pit-coal, minerals and crude oil saw a sharp fall in export volume but higher value because of price factors in the market. However, prices of a number of industrial products also sharply increased, compensating part of the drop in fuels and minerals. Products which saw a surge in export value in 2010 are steel and iron. In 2009, these items obtained export value of less than US$500 million compared to over US$1 billion.

 

Last year, coffee prices were very low, at just VND22,000 per kilogramme. Currently, the price is up to 45-47,000/kg in the domestic market, while the world market is nearly US$2,000/tonne. Besides, prices of coffee, pepper and rubber have also risen by 70 percent, contributing to doubling export value of rubber in the first quarter compared to the same period of last year.

 

The export value, higher than the goal set by the National Assembly, is due to the global economy’s recovery and higher demand and exchange rate disparity. The changes in VND/USD exchange rate as well as other foreign currencies have partially supported Vietnamese exports when Vietnam had to adjust the exchange rate in line with the current market from VND19,000-19,500 to nearly VND21,000 per USD. However, from now to 2011, we should note the exchange rate’s good impacts on exports.

 

What impacts on agricultural products the most is the stockpiling policy, particularly coffee for enterprises and localities. We set a target to buy 200,000 tonnes of coffee, but in fact, collected just 70,000 tonnes, during the first three months. However, the reserve amount has contributed to raising coffee prices. Since Vietnam carried out this policy and due to the decline in the global market’s supply, coffee prices have continuously increased.

 

Despite this, recently, coffee prices have been adjusted, which is as a matter of fact because none can go up forever. However, this is the first time Vietnam has entered the world market to regulate price with the role of a big exporter. Vietnam’s participation in the price regulation process will help raise goods value, benefiting the whole manufacturing sector. This is an outstanding measure in the im-export regulating mechanism over the past time.

 

However, late 2010 when coffee prices sharply increased, Vietnamese businesses were short of funds and some could not get loans due to higher interest rates. Meanwhile, foreign firms with good financial capacity bought a great amount. The coffee amount collected by foreign companies is much higher than that held by local ones. To date, when coffee prices reached record highs, foreign companies benefitted the most, not farmers or local firms.

 

We are concerned that some of Vietnam’s economic changes can directly impact exports, such as inflation and interest rates. Currently, lending interest rates are high, even up to 20 percent. With the goal to curb inflation, monetary-tightening and fiscal policies will be carried out, therefore, interest rates will be kept high in the first and second quarter of this year and can slightly decrease in the third and fourth quarter.

 

Particularly, the leading interest rate is higher than the regional average level, which reduces Vietnamese exports’ competitiveness.

 

High interest rates cause difficulties for capital mobilisation and investment of companies and affect exports’ competitiveness.

 

I have heard enterprises and associations complain about difficulties to offer their products to foreign partners, saying that higher prices prevent them from signing more contracts. Therefore, some of their customers have moved to regional markets with lower prices and more reasonable interest rates.

 

In 2010, power shortages greatly influenced enterprises in general and exporters in particular. So far this year, we have basically ensured power for production and people’s demand. However, the dry season will be a big challenge owing to high power demand. In this situation, the Ministry of Industry and Trade have made efforts to join hands with the Electricity of Vietnam Group (EVN) and power producers as well as agencies and localities in power distribution for both production and daily activities.

 

In the coming time, the Ministry of Industry and Trade will apply a number of measures to boost production, business and export activities, including seeking the prime minister’s approval for a decision on policies supporting industry development. Besides, it will continue cooperating with ministries, agencies and localities to implement measures to accelerate exports and control the trade deficit. Vietnam has carried out contents of free-trade agreements inked with foreign countries, boosting its exports to countries which also join the agreements. Especially, the ministry will study and open a project to build a centre for receiving and delivering import-export goods. The centre will follow the model of management agencies, such as customs, quarantine and appraisal, as well as organisations to supply import-export services to form a one-door mechanism for exporters.