Exports to face difficulties in second half of year

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Textiles and garments is one of the major export industries forecast to face many difficulties in the second half of the year. Photo: N.Thanh

Driving force from FTAs

Export growth declined in May 2022, but in general, the exports in the first five months of this year still rose 16.4% year-on-year to US$152.96 billion. The domestic business sector increased sharply (up 21.2%), higher than the FDI sector (up 14.8%).

"This shows the efforts of domestic enterprises in restoring production and business and supply chains amid the pandemic," Deputy Minister of Industry and Trade Do Thang Hai said.

The processing industry in the first five months continued to make an important contribution to the overall growth of export activities with an estimated turnover of US$131.39 billion, up 16 year-on-year, making up 85.9% of total export turnover.

Textile and garment is one of the industries that recorded positive export growth in the first months with abundant orders. Mr. Vu Duc Giang, Chairman of the Vietnam Textile and Apparel Association, said that a series of Free Trade Agreements (FTAs) and the latest Regional Comprehensive Economic Partnership (RCEP), effective from January 1, 2022, are the driving forces for enterprises to restructure as well as expand export markets. “To a certain extent, China's continued implementation of the "Zero Covid" policy also facilitates Vietnam's textile and garment to have more orders due to investment shift from China to Vietnam,” said Mr. Giang.

Besides textile and garment, wood and wood products also saw success in the first months of the year. Vietnam Timber & Forest Products Association (VIFORES) said the export of wood and wood products between January and May was estimated at US$7.15 billion, up 6.9% year-on-year. Thus, export of wood and wood products is likely to rise by 8% in the first half of 2022.

“In the context of unresolved geopolitical tensions, along with the unpredictable pandemic situation, wood enterprises have offered flexible and creative solutions to solve difficulties. In addition, the new generation FTAs ​​ supported Vietnam's wood processing industry to boost exports to many markets, increasing its competitiveness with products of other countries," said Mr. Do Xuan Lap, Chairman of VIFORES.

Challenges due to rising costs

According to the Ministry of Industry and Trade, the recovery of the world economy and the implementation of Vietnam's FTAs ​​with more preferential tariffs along with commitments to creating favorable conditions and minimizing barriers will be a great advantage for Vietnam's production and export. Besides, the wave of investment shift to restructure the supply chain of foreign corporations with a large production scale and wide customer network will be a new driving force for import-export activities.

However, the difficulties and challenges for exports in the second half of the year are not small when the protectionist trend is still ongoing. The outbreak of the Covid-19 pandemic in China and the "Zero-Covid" policy have affected the supply chain and also the export of goods across the border of Vietnam. In addition, high freight rates, rising prices of energy and raw materials and the Russia-Ukraine conflicts also have a great impact on our country's import-export activities.

Speaking to Customs News, Mr. Than Duc Viet, General Director of Garment 10 Corporation, said in the fourth quarter of 2021, enterprises believe that the textile and garment market in 2022 will recover, even better than before the Covid-19 outbreak. However, Garment 10 Corporation has to change its market assessment for the third quarter and the fourth quarter of 2022. The factory may fall into a vicious circle of rising input prices, leading to a delay in production and stagnation, the corporation will face difficulties, but if production in the context of rising prices, the corporation will suffer losses. "In general, the business performance of Garment 10 Corporation in the first half of the year is still good, but the performance in the second half of the year will face difficulties," said Mr. Viet.

Similarly, Mr. Nguyen Liem, Chairman of Binh Duong Furniture Association (BIFA), said although many businesses in the wood industry have orders until the end of the third quarter of 2022, wood is not like other products, this order number is approximate. Mr. Liem said “the expansion in inflation makes consumers save spending. Transportation costs are very high, which has had a significant impact on the profits of enterprises. There are wooden products exported to the US market, the product value is much lower than the shipping costs. Wood industry exports are in the group of good growth. However, this year’s growth rate will be lower than previous years and is forecast to reach 5%-7%, rather than the figure of 19% like in 2021," said Mr. Nguyen Liem.

According to some economic experts, FTAs have given big opportunities for businesses but businesses have not taken full advantage of the opportunities. In which, autonomy in logistics is considered one of the big barriers. Therefore, Vietnam needs to improve policies and laws on logistics services and build a fleet of super-long and super-heavy ships with modern logistics infrastructure to meet import-export needs, regardless of the fleet of foreign ships.

Increasing wood exports to Canada, opportunities to expand the North American market

“In addition, enterprises need to improve their business models, upgrade products and services, and rearrange input supply chains to take full advantage of tariff preferences from FTAs ​​and penetrate new markets," said Mr. Do Xuan Lap.