Industrial production still faces many challenges

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Textile and apparel is a typical industry which is under pressure of inventory and difficulties in output. Photo: Thanh Nguyen

High inventory

According to the General Statistics Office (Ministry of Planning and Investment), industrial production in the second quarter of 2020 was heavily influenced by the Covid-19 pandemic, so the added value was only 0.74% compared to the same period last year. In the first six months, the value added of industry increased by 2.71%; in which, the processing and manufacturing industry increased by 4.96% and was the lowest increase of the first half in the years 2011-2020.

Among secondary industries, some industries saw a sharp decrease or low increase in the first six months of the year, such as: production of motor vehicles decreased by 16.4%; crude oil and natural gas exploitation decreased by 11.3%; beverage production decreased by 8.8%; costume production decreased by 4.7%.

Referring to industrial production, in the first half of the year, the consumption index of the whole manufacturing industry increased by 4.3% compared to the same period last year (the same period in 2019 increased by 9.6%), but the average inventory rate of the whole processing and manufacturing industry in the first sixmonths was quite high at78.9% (the same period last year was 74.9%). In particular, some industries with high inventory rates can be listed as: 118.7% of thetextile; 104.7% of the wood processing and producing products from wood, bamboo; 97.3% of the motor vehicles manufacture.

According to Mr. Le Tien Truong, General Director of Vietnam Textile and Garment Group (Vinatex), thetextile industry can't export, so products fill up the warehouses. As the Covid-19 pandemicgradually became better controlled in many countries, the demand for masks decreased, while the demand for ordinary clothing did not actually go up.

For another sector with tens of billions of dollars in export turnover of footwear, it is not better. According to the Vietnam Leather and Footwear Association, due to the impact of the Covid-19 pandemic, in the first six months of this year, the export of footwear and bags decreased by 6.7% compared to the same period last year.

Many large enterprises in the industry are facing difficulties in both input and output.

"Before the disruption of the global supply chain, businesses must manage enough ways to stabilize production and retain workers. Typically, many enterprises try to find sources of goods in small markets andchange to produce products outside of the main goods,”the representative of the association said.

Much pressure

Recognizing the reasons why industrial production results achieved in the first half of the year were not as expected, Mr. Pham DinhThuy, Director of the Department of Industrial Statistics (General Statistics Office) stated: The Covid-19 pandemichas affected imported raw materials for industrial production, especially processing and manufacturing industries. In addition, the Government's Decree No. 100/2019/ND-CP stipulating sanctions against administrative violations in the field of road and rail transport, effective January 1, 2020, changed people's drinking habits, thereby affecting the beverage industry.

According to Mr. Vu DucGiang, Chairman of Vietnam Textile and Apparel Association, in the second half of the year, there wasstill pressure on Vietnam’stextile industry in particular and other industries in general.

"The highest textile and apparel export can only reach US$34 billion, while the target is set at US$40-42 billion. The export decrease in the first and second quarter is not much, but in the third quarter is high. This is due to the difficulties to explore the purchasing power of importing countries and the shortage of supply,”Mr. Giangsaid.

The Vietnam Leather - Shoes - Bags Association also forecast that from October, the market will be active again. The biggest driving force for the sector's growth is the impending European Union-Vietnam Free Trade Agreement (EVFTA). It is expected that the whole year's export value of the whole industry will decrease by about US$5.5 billion compared to the export turnover of US$22 billion in 2019.

One of the industries that are assessed to face many difficulties in the future is the processing, exporting wood and wood products. According to the Vietnam Association of Wood and Forest Products, the Ministry of Economy and Finance of South Korea has officially announced the imposition of anti-dumping duty on plywood products originating from Vietnam. In addition to six companies with their own anti-dumping duties, the common rate for all plywood exporting companies is 10.54%. Recently, the US Department of Commerce (DOC) has officially initiated an investigation to apply tax evasion measures to plywood products of Vietnam.

In order to promote industrial production in the future, Ms. Nguyen ThiHuong, General Director of the General Statistics Office, proposed ministries, branches and localities to continue reforming processes and procedures for enterprises to access support policies; assisting the business community in finding markets for importing raw materials, spare parts and components.

Regarding this issue, the Ministry of Industry and Trade determines that in the future, it will accelerate the implementation of key industrial projects to contribute to the overall growth of the economy; encourage the domestic supporting industry, especially those producing input materials for a number of industries such as textile and footwear (which are highly dependent on imported raw materials); strengthen production, connect with enterprises producing complete products (especially FDI enterprises) to meet domestic demand.

The Ministry of Industry and Trade also determined that it would speed up the construction and submission to the Government for promulgation of a Decree amending and supplementing a number of articles of the Government's Decree No. 111/2015/ND-CP of November 3, 2015 on the development of supporting industries, building and issuing a circular guiding this Decree.