Vietnam takes steps to facilitate recovery of manufacturing sector

Wednesday, 2020-10-07 12:01:41
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Many Vietnamese garment companies are struggling due to reduced demand from the US and the EU.
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NDO - Vietnam’s manufacturing sector rebounded in September, raising hopes of an early recovery and rapid growth in the remainder of the year after months under the impact of the coronavirus pandemic.

Difficulties remain

According to the Ministry of Industry and Trade (MOIT), the Index of Industrial Production in September rose 2.3% against August and 3.8% year-on-year, signifying a gradual recovery, albeit slow as many key manufacturing industries are still struggling.

Garment, footwear, aviation and tourism were the sectors hit hardest by the coronavirus.

Global textile demand in 2020 has fallen sharply. Last year’s global garment imports were estimated at US$775 billion but the coronavirus is expected to reduce the turnover by 15-20%, or even up to 25%, in 2020.

Unlike in previous years when most Vietnamese enterprises had already secured orders for the final months of the year and even the early months of next year, for now they only receive orders for the next month or even week.

Vietnam’s key products such as jackets and premium shirts have seen virtually no orders for the final quarter. The market for footwear products is also expected to continue facing difficulties as it is heavily affected by the pandemic situation in the US and Europe.

The largest driver for the sector is the EU-Vietnam Free Trade Agreement (EVFTA), which took effect in August. To capitalise on the trade pact, local companies have taken various measures, including restructuring their organisation, getting factories and materials ready and increasing investment in machinery to improve product quality.

Manufacturing’s rare bright spot is the production of computers, electronic and optical products, which maintained growth at 8.6%. In August alone phone exports brought in US$5.3 billion, up 23.7% from the previous month, raising the total export revenue in the first eight months of 2020 to US$31.5 billion.

But experts have predicted that the electronics industry could still be affected in the next quarter as the ongoing pandemic reduces demand for electronic products in the US and the EU.

Key measures

In order to remove difficulties for businesses and bolster the economy in the final months of 2020, the Ministry of Industry and Trade has said it will continue to implement a wide range of measures to revive growth in industrial production.

Firstly, the ministry will focus on accelerating the progress of key industrial projects. Specifically, it will work with the Committee for the Management of State Capital at Enterprises to resolve the obstacles to major important power generation projects such as Long Phu 1, Song Hau 1 and Thai Binh 2.

The ministry will also work with local governments to develop production areas, industrial parks and economic zones in order to proactively secure the supply of materials at home. It will put forward appropriate incentive measures, especially for sectors hit hard by the coronavirus, and introduce policies to encourage the production of spare parts and intermediary products to replace imports.

For the textile industry, the MOIT has taken steps to encourage local manufacturers to switch from clothes to anti-droplet, antibacterial and common masks to meet the domestic demand for coronavirus prevention as well as for export, helping to maintain jobs for garment workers during the decline in orders for clothes.

At the same time, various measures are being implemented to promote the restructuring of industrial production, particularly supply chains for several key manufacturing sectors, in a more sustainable way with partners from Japan, India and the Republic of Korea in order to avoid heavy reliance on one or a few markets. The MOIT is cooperating closely with some multinational companies such as Samsung and Toyota to look for domestic enterprises capable of producing items to replace imports.

The Vietnam Trade Promotion Agency has said it will step up the implementation of online trade promotion activities to boost exports to markets likely to recover soon from the coronavirus, and to gradually expand to other markets depending on their virus situation. More research will also be conducted to gather information about new consumption trends in order to introduce appropriate measures.