Declining orders, stagnant production and increased inventories are all part of the challenging information released at the recent periodical online meeting of Ministry of Industry and Trade (MoIT). Without timely and necessary support, unprofitable enterprises will probably have to stop their production activities, even go bankrupt.
Orders declined
Despite an increase of the industrial production index of 5.2 percent in October 2011, enterprises have still suffered great loss because of high interest rates as well as gradually decreasing orders. Lower domestic purchasing power, long lasted floods in some provinces, and high input materials prices for production are among the difficulties that some processing and manufacturing industries are facing.
According to the report of MoIT, some enterprises in several industries are now having trouble getting new orders. Taking garment and leather shoes industry for example, at the beginning of the year, garment and leather shoes enterprises massively borrowed money, extended their investments and increased their workforce, but still failed to satisfy the demand for export, however, currently some major markets like the United States and the EU have begun to limit imports, causing difficulty for Vietnam’s enterprises.
The United States and the EU are facing difficulties of high public debt risk and there are no signs of improvement. Therefore, in the last months of 2011, textile export will be difficult because of variation in finances, monetary and expenditure cuts from these markets. The markets have revealed an extended stagnation in new product orders for the first quarter in 2012. The MoIT has forecast a 15- 20 percent reduction in orders. Along with the textile industry, export turnover of this sector has fallen 20 percent over the past two months. Since September, Vietnam has earned just over US$400 million from the sector exports.
Stagnant production, high inventories
Some heavy industries such as electricity, steel and paper, are also showing a decline. In October, electricity supply fell slightly by 0.3 percent compared to that of September. Over the ten months, electricity supply reached approximately 78.5 billion kWh, or 11 percent over the same period. This growth is quite low compared to previous years, ranging from 12 - 14 percent.
More ominously, on 1 October 2011, inventory rates of all industries of processing and manufacturing increased 21.1 percent against the same period last year. Some industries have inventory rate of more than 80 percent, like producers of electric cables and insulated wires, cement, and furniture. Beer and malt production increased 50.7 percent, footwear raised 49.9 percent, and motorcycle manufacturing grew 49.5 percent.
According to employment investigation of 4,273 industrial enterprises, in October 2011, employment reduced slightly compared to the same period in 2010, in which the employment rate in state owned enterprises and foreign direct investment enterprises fell 4.1 percent and 0.1 percent respectively.
Domestic steel market becomes curtailed due to stagnant construction. As of early October, steel inventories continued to increase about 400,000 tonnes.
In October 2011, export turnover of Vietnam's paper products fell 1.9 percent compared to September. Generally, over the ten months, it is estimated to reach US$34 million; 8.9 percent higher than the same period last year.
Huong Ly
Vietnamese
