Over the past four months, Vietnamese authorities have been quite busy working out solutions for the nation to attract more foreign investment and amplify trade ties with foreign markets. This takes place when Vietnam has been entering a new normalcy, with local production beginning to recover and businesses in critical need of beefing up their exports abroad.
Figures from the General Statistics Office (GSO) show that the index for industrial production is estimated to increase 3.5 percent month-on-month in August, and 2.2% year-on-year in the first eight months of this year. In which, the processing and manufacturing sector, which creates 80% of growth in the industrial sector, climbed 3.7% year-on-year; the electricity production and distribution sector ascended 2% year-on-year; and the treatment of waste water and trash went up 2.9% year-on-year.
Furthermore, the economy has also given signals of recovery when the number of newly-established enterprises in August totalled 13,400, registering VND288.8 trillion (US$12.55 billion) and employing 96,300 workers, up 1.5% year-on-year in the number of enterprises, 20.7% year-on-year in registered capital, and 5.4% in the number of workers, as compared to the previous month.
In the first eight months, the whole country saw 88,700 enterprises newly established and registered with over VND1.22 quadrillion (over US$53 billion) and employing nearly 695,000 workers. This was down 2% year-on-year in the number of new enterprises, but up 6.5% in registered capital.
Boosting economic diplomacy
In order to push up local production and exports, as well as attract more investment, a few weeks ago, Prime Minister Nguyen Xuan Phuc held a phone call with Japanese counterpart Abe Shinzo.
This was the second talk between the two leaders in the last three months, with one of the focuses laid on amplifying both nations’ trade and investment ties which are backed by some bilateral deals including the Vietnam-Japan Economic Partnership Agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership to which Vietnam and Japan are members, and the EU-Vietnam Free Trade Agreement, through which Japanese firms wish to boost export-oriented investments in Vietnam and then export products to the EU market.
The Vietnam-Japan’ two-way trade hit US$40 billion last year and US$25.3 billion in the first eight months of this year, including US$12.5 billion earned by Vietnam from exporting to Japan, down 6.1% year-on-year.
The two prime ministers agreed that both nations can resume commercial flights in the near future, helping to create a swell in trade and investment ties. PM Shinzo said some big Japanese businesses are receiving support from the Japanese government to expand their supply chains and half of them have selected Vietnam to expand investment. PM Phuc said he will soon have a meeting with Japanese investors.
Late last week, PM Phuc requested the Ministry of Transport to make a plan to reopen the commercial air route between Vietnam and Japan and the Republic of Korea.
In June, Deputy Prime Minister and Minister of Foreign Affairs Pham Binh Minh also held a phone call with the Republic of Korea’s Minister of Foreign Affairs Kang Kyung Wha, announcing that Vietnam is considering the resumption of commercial flights with a selection of nations including South Korea. This is aimed to increase trade and investment ties. In the first eight months of this year, two-way trade stood at US$41.3 billion, with Vietnam earning US$12.6 billion from exports, down 1.5% on-year, and spending US$28.7 billion, down 8.3% on-year.
It is expected that in the time to come, Vietnamese leaders will continue holding phone calls with leaders of many nations so as to expand trade and investment cooperation with them. Vietnamese leaders have also done that with Canada, China, Russia, the US, France, the EU, and Kuwait.
Vietnam’s Ministry of Industry and Trade (MoIT) forecasted that the ongoing health crisis will make it very challenging for Vietnam to hit its initial export-import targets.
Last November, the National Assembly set a target of a 7-8 percent rise in export turnover for 2020, with a trade deficit of under 2 percent of total export turnover. In 2019, total export turnover hit US$253.5 billion.
This means that in this year, the total export turnover will be US$281.9-284.5 billion, and the total import turnover will be US$287.5-290.2 billion, with a trade deficit of US$5.63-5.69 billion.
In total, the export-import value for this year will be US$569.4-574.7 billion, far higher than the US$517 billion recorded last year.
Enterprises seeking ways out
Over the past four months, Park Seo Joon, a representative from Blue Ocean Co., Ltd., in Hanoi, has been working very hard to help his company, a joint venture between the Republic of Korea and Vietnam which specialises in home appliances, out of the woes caused by the COVID-19 pandemic. The company exports products to some ASEAN nations, the US, and South Korea.
“Many of our export markets remain closed, so we must seek ways to boost exports to South Korea and Japan, even China,” Joon said. “We have been spending lots of money on marketing activities, including online marketing.”
Hong Sun, vice chairman of the Korea Chamber of Business in Vietnam (KorCham), said that about 20-30% of more than 9,000 Korean businesses in Vietnam must now seek new markets, both in Vietnam and overseas.
“Expanding new markets is a normal activity of any enterprises. However, the situation can be seen in many more enterprises of all size and of all sectors,” he said. “It is because they have been unable to consume products. To keep themselves stay afloat, they must spend more looking for new markets.”
According to the GSO, in the first eight months of this year, Vietnam’s garment and textile sector earned an export turnover of US$19.2 billion, down 11.6% year-on-year.
It is expected that in the second half of the year, the sector will suffer a decline of 14-18% in export turnover, with total export turnover for the entire year forecast to be US$32.75 billion, down 16% year-on-year.
Meanwhile, export turnover of mobile phones and their spare parts hit US$31.5 billion, accounting for 18.1% of the economy’s total export turnover, down 5.5% year-on-year. That of footwear also decreased 8.6% year-on-year to US$10.9 billion.
Notably, year-on-year reductions can also be seen in the export revenue of almost all key agricultural items, such as fruit and vegetables (US$2.3 billion, down 11.3%), cashews (US$2 billion, down 5.4%), coffee (US$2 billion, down 1.3%), rubber (US$1.2 billion, down 12.7%), and tea (US$134 million, down 6,2%).
According to the Ministry of Planning and Investment’s Department of Enterprise Development, hundreds of thousands of businesses in Vietnam are suffering from woes caused by COVID-19 are advised to find new markets to export their products.
“Seeking new markets will be an effective way to ensure production and outputs,” said a department representative.
In an example, Phuc Sinh Corporation in Ho Chi Minh City has been exporting its farm produce to Europe, the US, North America and the Middle East for years. In recent months, the corporation, which holds 15% of Vietnam’s pepper market share, and 8% of the world’s pepper market share, has suffered from a reduction of 70% in revenue from a domestic consumption subsidiary.
“The sales have dramatically slashed. We have been deploying online sales, but they are moving very slowly,” Phuc Sinh’s chairman and general director Pham Minh Thong told VIR. “Hundreds of thousands of enterprises in Vietnam are finding it hard to boost exports, and are seeking new export markets,” Thong added. “However, it is not easy to open new markets as it would take time and big money.”
According to Sun of KorCham, many South Korean firms also find it difficult to expand to new markets due to various hurdles.
“One of the obstructions is that new partners must be reliable, while nothing shows that they are so. Thus, it would take lots of time before new contracts can be signed, and much money would need to be spent on studying and surveying markets.”
