Construction Material Industry with Target of US$360Mln Export Value

Vietnam is now 33^rd among ceramic tile exporting countries, and 22^nd among countries exporting sanitary ceramic wares. In particular, Vietnam is in the top ten countries and the largest exporter in Asia in exporting some types of ceramic tiles. Vietnamese-made construction materials have been exported to over 100 countries and territories in the world. In 2005, export turnover of construction materials was put at US$113 million and the item was considered by the Ministry of Trade as a potential export item. Therefore, to gain its target of US$360 million, the industry will have to strive for an increase of 300 per cent. Is this a realistic target?

 

According to the evaluation of the Construction Material Management Department, the Ministry of Construction, the demand for construction materials will double in the next five years, and between four and seven fold in the next 15 years. The fact is that the 2005 export turnover of construction materials increased by 4.5 fold against that of 2001. Therefore, with proper investment policies and good management, it will not difficult to achieve the target after four years.

 

Export promotion for market expansion will help to fully tap the local production capability, thus helping strengthen the local market. Accordingly, the construction material industry will strive to export between 30 and 40 per cent of its output with ceramics, glasses and natural and artificial stones. According to the Construction Material Management Department, Vietnamese-made products can compete against products of China because Chinese products, although cheap, are sometimes of a quality not suited to the customers’ demands, let alone the fact that Chinese ceramic tiles face difficulties due to protection barriers. For example, to enter the Republic of Korea market, Chinese ceramic tiles will be imposed with an import tax rate of 28 per cent. In the meantime, the ASEAN Free Trade Area (AFTA) protection is an advantage for ceramic tile manufacturers in the region.

 

The biggest challenge for the Vietnamese construction material industry is that Vietnam is located in a region with many powerhouses in the industry, such as Japan, Thailand, Indonesia, Malaysia and China. Vietnam’s export turnover is just equal to 8.3 per cent of that of China, 28.8 per cent of Indonesia, 44.4 per cent of Thailand and 47.8 per cent of Malaysia. The above mentioned competition pressure requires the Vietnamese construction material industry to have suitable development orientations, in which the production capability of local manufacturers should be promoted to fit Vietnam’s international integration.

 

At first, local manufacturers should cut their production costs, thus reducing their prices. In fact, the existing production capability has exceeded the local demand, so local manufacturers do not dare to operate their modern equipment and production lines at their maximum capacity because it may result in an increase in prices. All countries face challenges from cheap products from China, and Vietnam is no exception. Investment in Vietnam’s construction materials establishments is often between 15 and 40 per cent higher than the average level in the world as local enterprises have to borrow capital at high interests. A balance of the consumption of the local and export markets may help reduce the prices of products.

 

There is no better way for effective competition than market access with high quality products. This requires Vietnam to invest in manufacturing specific products of high value. Ceramic tiles, sanitary wares and stones of all kinds, which are the main export items of Vietnam, have become familiar in the world market. Apart from focusing on manufacturing sophisticated products to meet the tough demands of customers, local enterprises should be active in providing services and goods compatible with WTO rules.

 

Vietnam is increasing its market share in the US, Japan, Russia, the Republic of Korea, the Middle East and Africa. In particular, some EU countries, such as Italy and Belgium, have imported a huge volume of Vietnamese stones. In fact, only a few local enterprises have joined construction material export. Therefore, export turnover mainly comes from joint venture companies or 100 per cent foreign-invested enterprises. In 2005, the enterprises contributed 70 per cent to ceramic export turnover and 90 per cent of sanitary ware value. Local enterprises have developed strategies to set up joint venture companies and co-operation with foreign partners, taking advantage of famous trademarks to expand markets.