New frontiers sought by diversifying firms

14:00 | 26/02/2020
Negative impacts of the coronavirus epidemic undermining Vietnam’s import-export targets this year have forced enterprises to plan to seek new markets.
new frontiers sought by diversifying firms
New frontiers sought by diversifying firms. Illustration photo: Le Toan

Over the past three weeks, Hoang An Trade Co., Ltd. has been unable to export any of its containers of cotton buds and shavers to China, a market creating 40 per cent of the company’s total export turnover, due to a halt in trade activities at the Dong Dang border gate in the northern province of Lang Son, caused by the COVID-19 outbreak.

“We are planning to work with some new partners from South Korea and Japan to boost exports and offset the losses from exports to China,” said the company’s vice director Nguyen Kim Ngan. “Currently, South Korea and Japan occupy 30 per cent of our export turnover, and the remaining markets are in Southeast Asia.”

According to the Ministry of Planning and Investment (MPI), hundreds of thousands of firms like Hoang An Trade are being advised to find fresh markets to export their products, instead of focusing too heavily on China.

Phuc Sinh Corporation in Ho Chi Minh City has been exporting its farm produce to Europe, North America, and the Middle East for several years. Over the past two months the corporation, which holds 15 per cent of Vietnam’s pepper market share and 8 per cent globally, has suffered from a 70 per cent fall 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.

He said that currently the corporation is not heavily affected in overseas markets by COVID-19. “However, if the epidemic continues until April, we will be badly hurt in these markets due to the snowball effect, and we may have to strengthen and expand new markets,” Thong added.

As per the General Statistics Office (GSO), in 2019 China accounted for 15.75 per cent of Vietnam’s total export value, and 29.7 per cent of Vietnam’s total import turnover. Also last year, Vietnam’s largest export markets include the US ($60.7 billion), Europe ($41.7 billion), China ($41.5 billion), the ASEAN ($25.3 billion), Japan ($20.3 billion), and South Korea ($19.8 billion).

However, according to Thong of Phuc Sinh, it is not always straightforward for any firm to establish new co-operation with an overseas partner. “The process will take months and lots of money for travelling, accommodation, and procedures,” he said.

The GSO stated that enterprise difficulties mean Vietnam will likely find it hard to secure its target of import-export turnover this year. The National Assembly last November set a target of a 7-8 per cent rise in export turnover for 2020, with a trade deficit of under 2 per cent of total export turnover. Last year, total export turnover hit $253.5 billion.

This means that in 2020, total export turnover is expected to be around $282 billion and total import turnover around $289 billion, with a trade deficit of $5.65 billion. In total, the export-import revenue for the year could be $572 billion, far higher than last year’s $517 billion. “The targets may not be easy to reach. The difficulties can be seen now in almost all sectors of the economy,” said GSO head Nguyen Bich Lam.

The Ministry of Planning and Investment has revealed two scenarios for Vietnam’s first-quarter export-import turnover (see box).

Under a GSO survey on the impacts of COVID-19 on the economy, the agro-forestry-fishery sector will be among the sectors most vulnerable to the epidemic, with its exports heavily affected.

If the outbreak is fully contained within the first quarter of the year, Vietnam’s first-quarter exports of these products to China will see a reduction of $250-300 million. If the epidemic is eradicated in the second quarter of the year, Vietnam’s six-month exports of the said products to China will suffer from a decline of $600-800 million.

“Many Chinese importers have notified Vietnam’s aquatic exporters to halt exports until official information about normalisation in cross-border trade activities from China is released,” said a representative from the Vietnam Association of Seafood Exporters and Producers. “Some big shipping firms have refused to transport goods to China. Even some EU and US partners have halted all of their plans to visit Vietnamese firms to forge co-operation.”

In addition, the textile and garment sector will also be affected by COVID-19. China last year earmarked $4.2 billion for importing garment and textile products from Vietnam, equivalent to nearly 11 per cent of Vietnam’s total global export turnover of these products. Moreover, up to 60 per cent of Vietnam’s demand for materials for garments and textiles, electronics, and automobiles are from mainland China.

According to the MPI’s Department for Local Economy and Territory, China currently holds 22.6 per cent of Vietnam’s total export-import-based revenue.

“It is forecast that there will be a reduction of 30 per cent in export-import revenue from China in the time to come,” said the department’s general director Tran Duy Dong.

Meanwhile, firms such as Hoang An are now still awaiting a brighter outlook for their exports after COVID-19 is eradicated.

“If we are not successful in expanding exports to more partners in South Korea, Japan, or elsewhere in Southeast Asia, and if the epidemic is not stopped, we will face further difficulties, and even have to shut down production,” said Ngan of Hoang An.

Scenarios for export-import turnover in the first six months of 2020

- Scenario 1:

If COVID-19 ends at the end of the first quarter of the year, the economy’s first-quarter export turnover will be $46.5 billion, down 21 per cent on-year, with exports of processed agro-forestry products down 29 per cent on-year, fishery products down 38 per cent, textiles and garments 22 per cent, footwear 17 per cent, computers and electronics 8 per cent, and mobile phones and spare parts 27 per cent. First-quarter exports to China will hit $5.6 billion, down 25 per cent on-year.

Meanwhile, Vietnam’s three-month import turnover will be $50 billion, down 13 per cent on-year, with production materials hitting $45 billion, down 12 per cent on-year. First-quarter imports from China touched $14.2 billion, down 12 per cent on-year.

- Scenario 2:

If COVID-19 is phased out at the end of the second quarter of 2020, Vietnam’s second-quarter export turnover would be $51 billion, down 20 per cent on-year, with exports of processed agro-forestry products down 32 per cent on-year, fishery products down 27 per cent, textiles and garments 23 per cent, footwear 26 per cent, computers and electronics 16 per cent, and mobile phones and spare parts 15 per cent. Second-quarter exports to China would be $5.6 billion, down 56 per cent on-year.

Meanwhile, Vietnam’s second-quarter import turnover will be $53 billion, down 15.6 per cent on-year, with production materials hitting $47.7 billion, down 12 per cent on-year. Second-quarter imports from China touched $15 billion, down 23 per cent on-year.

Source: Ministry of Planning and Investment

By Nguyen Dat

Based on MasterCMS Ultimate Edition Ver 2.9 2020