Production remains on uptrend despite pandemic

In defiance of the difficulties caused by the health crisis, business confidence and industrial production, especially in electronics, have continued their uptrend partly thanks to the effective containment of the pandemic so far.

The ongoing health crisis has failed to curb a rise in domestic production
The ongoing health crisis has failed to curb a rise in domestic production

State-run Vietnam Oil and Gas Group (PetroVietnam) has reported that in the first five months of this year, its total revenue is estimated at VND206.15 trillion (US$8.96 billion), up 8% as compared to that of the same period last year, with revenue from industrial activities increasing 22% year-on-year.

PetroVietnam’s total gross output is estimated to stand at VND142.36 trillion (US$6.19 billion), a year-on-year 17% rise. Of which, exploitation of crude oil and gas expanded 28%, production of refined oil products ascended 17%, production of chemical products climbed 15%, and production and distribution of electricity and gas rose 6%.

Meanwhile, State-owned Electricity of Vietnam (EVN) has also reported that in the first five months, its total industrial gross output reached more than VND147 trillion (US$6.39 billion), up 8.06% year-on-year. Electricity produced and purchased is estimated at over 99.9 billion kilowatt hours, up 7.11% year-on-year.

EVN’s commercialised electricity in the past five months is estimated at 90.14 billion kWh, a 8.06% year-on-year rise. Of which, electricity for agro-forestry-fishery activities accounts for 3.9%, electricity for industrial and construction activities holds 55.91%, and electricity for households occupies 31.5%. The rate for hotels is 4.5%.

EVN’s revenue from electricity sales in the first four months is estimated at VND166.67 trillion (US$7.24 billion), up 11.06% year-on-year.

According to the General Statistics Office (GSO), in the first five months of this year, the economy’s production and distribution of electricity increased 8.3% as compared to only 2.1%% in the same period last year.

In Vietnam, petrol and electricity are vital inputs for production activities, especially manufacturing and processing activities. A rise in these would mean an ascension in local production, especially industrial activities which consume a huge volume of electricity and petrol.

Industrial activities on the rise

The GSO also state that Vietnam’s production activities are strongly bouncing back in general. Specifically, the economy’s index for industrial production (IIP) climbed 9.9% as compared to only 1% in the same period last year.

Notably the manufacturing and processing sector, which creates 80% of the nation’s industrial growth, ascended 12.6% in comparison with merely 2.2% in the corresponding period of 2020.

The IIP in May expanded 11.6% over the same period last year, when the IIP declined 3.1%.

Also according to the GSO, in the first five months of 2021, the economy witnessed 55,800 newly established enterprises, registered at VND778.3 trillion (US$33.84 billion) and employing 412,400 new labourers, up 15.4% in terms of the number of enterprises and 39.5% in registered capital.

If another VND975.1 trillion (US$42.4 billion) registered by 19,100 operational enterprises is included, total capital added to the economy in the period was VND1.753 quadrillion (US$76.2 billion), up 27.5% on-year. Moreover, 22,600 businesses resumed operations, up 3.9% on-year.

Standard Chartered Bank has just forecasted that Vietnam’s GDP growth will accelerate to 6.7% in 2021 and 7.3% in 2022.

“Vietnam’s economic fundamentals remain robust. The country has been one of the world’s best-performing economies during the pandemic. That said, we are closely watching the domestic COVID-19 situation.” said Tim Leelahaphan, economist for Thailand and Vietnam at Standard Chartered, in the bank’s recent Global Research report entitled “Vietnam – Strong performance continues this year”.

Vietnam began vaccinations on March 8, with around one million of the total population of 96 million having been vaccinated, mainly frontline medical workers. Wider vaccination rollout is a precondition for a tourism rebound and a sustainable economic recovery, according to the UK-based bank.

Standard Chartered’s economists point out that trade data has maintained the positive momentum seen last year. Exports of telephones and parts (16% of total exports) and electronics, computers and parts (15%) gained strongly in May.

In the first five months of 2021, the nation’s total export-import turnover is estimated to have hit US$262.21 billion, including US$130.94 billion from exports – up 30.7% year-on-year, and US$131.31 billion from imports - up 36.4% year-on-year.

Electronics expanding

The Ministry of Planning and Investment’s Department of Industrial Economy (DIE) has said that over the past few months, electronics businesses have boosted their performance in Vietnam, with multinational corporations shifting their electronics production chains to markets less vulnerable to the health crisis, such as. This has created opportunities for Vietnamese electronics firms to participate in more global supply chains.

“It is expected that in 2021, high-tech production and electronics will see high growth, strongly inspired by developed nations’ support programmes for groups on taking factories out of China. This will help technological giants boost restructuring their supply chains out of China,” said a DIE report. “In only the first two months of this year, there was much positive information about the expansion of Foxconn, Intel, and LG.”

The DIE cited the recent news that Foxconn will invest US$700 million in Vietnam in 2021, with the group expecting to reap total revenue of US$10 billion. Previously, Foxconn invested US$1.5 billion in Vietnam late last year 2020. Foxconn is planning to recruit an additional 10,000 employees in 2021. One of the group’s big projects is the Fukang Technology Company in the northern province of Bac Giang, registered at US$270 million. This factory is expected to manufacture about eight million products each year, including the iPad and MacBook.

The Intel Corporation, meanwhile, earlier this year announced it had invested a further US$475 million in Intel Products Vietnam (IPV). This new investment is in addition to their US$1 billion investment in a state-of-the-art chip assembly and test manufacturing facility in the Saigon Hi-Tech Park (SHTP), first announced in 2006. This takes Intel’s total investment in its Vietnam facilities to US$1.5 billion.

“As of the end of 2020, Intel Products Vietnam has shipped more than two billion units to customers worldwide. We’re very proud of this milestone, which shows both how important IPV is to helping Intel meet the needs of its customers all around the world, and why we continue to invest in our facilities and team here in Vietnam,” said Kim Huat Ooi, vice president of Manufacturing and Operations and general manager of Intel Products Vietnam Co. Ltd.

Vietnam is now considered a global manufacturing hub for South Korea’s Samsung, which is focusing funding on manufacturing electronics products in the northern provinces of Bac Ninh, Thai Nguyen, and Ho Chi Minh City, with total capital of over US$17.5 billion, in addition to a US$230 million research and development centre under construction in Hanoi.