New challenges call for new measures to boost exports to US

Monday, 2017-03-06 09:59:37
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NDO - The US remains the largest market for Vietnamese goods, recording US$6 billion in the first two months of 2017, but due to the bleak outlook of the Trans-Pacific Partnership (TPP), Vietnam is facing many challenges in boosting exports to the world’s largest economy.

Vietnam’s difficulties have been further aggravated by a build-up of trade barriers along with the rise of protectionism.

New challenges

Nguyen Hong Anh, chief human resources officer at the Binh Duong Garment Company, said the likelihood that the TPP will not be ratified is bound to affect the production and export of many sectors, including garment companies. It can be seen in the garment industry’s weaker-than-expected export figures at the end of 2016 when it faced a range of difficulties.

Chairman of the Hung Yen Garment Company Nguyen Xuan Duong said that Vietnam and many exporters to the US will be hurt by the demise of the TPP and rising protectionism as the US is one of the major markets of Vietnam and many developing countries. It is not to be ruled out that the US may increase tariffs on some garment products from Vietnam and China. Such a move will make foreign goods in the US more expensive and result in US consumers buying less.

Dr Mai Huu Tin, chairman of the Binh Duong Enterprises Association, said that the US’ withdrawal from the TPP will certainly affect Vietnamese businesses and the foreign investment inflow to the country. At this time, all enterprises are aware of this impact and should have made necessary adjustments.

Conscious of challenges ahead, many enterprises have outlined and implemented coping measures since the start of the year. According to Dr Mai Huu Tin, enterprises should look to diversify their markets and change their product structure to meet the needs of different markets. Sharing the same view, General Director Nguyen Lam Vien of Vinamit, a dried fruit exporter, said enterprises should avoid relying on a single market and instead look for diversification, including the domestic market. Currently Vinamit is looking to sell its products to wealthy markets with high purchasing power such as Arabian countries in the Middle East while also bolstering sales on the domestic market. The company’s shares of foreign and domestic sales are now roughly equal. The US remains a major playing field because access to this market will bring in high profits, as such Vinamit is planning to penetrate this market, first by selling end-products, then by packaging their products in the US and finally establishing a plant there in the future.

Changing product structure

With a range of looming difficulties, each enterprise must review its operations and take action to adapt to the new situation appropriately. According to General Director Nguyen Quang Vu of Nam Binh Footwear Company, enterprises must determine their core strength, stick to it and foster it. They must revisit their human resources, technologies and particularly their products to see if they fit their core strength. He said for a long time, Vietnamese enterprises have been accustomed to manufacturing on outsource contracts and asserted that Vietnam has a huge advantage in cheap labour. But after what has been happening on the international stage, such an advantage is no longer effective and even becomes an obstacle to growth.

Specifically, skilled workers prefer to work for foreign-invested enterprises than domestic ones even when salaries and benefits are similar. Meanwhile low-skilled workers are constantly changing jobs and have low productivity. Therefore, enterprises should properly address this issue while focusing on improving their products by measures such as re-organising plants and production processes, or collaborating with enterprises in the same industry and those in the global supply chains to bolster their business, emphasised Vu.

To cope with new challenges, Garment 10 Company has identified the TPP’s demise as an opportunity to enhance its workers’ skills, competitiveness and foster innovation. General Director Nguyen Thi Thanh Hien said in addition to the company’s own efforts to stimulate investment, carry out reforms, enhance human resources and streamline corporate governance, she expects the government to continue with support policies in terms of finance and infrastructure so that the company can increase its competitiveness in the face of regional and global competitors.

Another urgent measure is enhancing productivity. Only when productivity is enhanced can enterprises cut product prices, maintain a customer base and compete with other enterprises. This goal can only be achieved by raising the quality of human resources and investing in modern equipment. But this is no easy task as domestic enterprises are currently facing many hurdles. Deputy General Director Bui Duc Cuong of the Ca Mau-based seafood exporter Camimex cited sharp falls in borrowing quotas for its shrimp processing business as an example. As a result, its factories are operating at one third of full capacity and thousands of workers have been left unemployed. In 2016, the company’s export revenues were only US$34 million although it previously earned up to US$100 million. The market for shrimp exports remains quite large and what needs to be addressed is the diversification of products and support from the government so that banks will increase lending quotas and ease long-term loan requirements.

In conclusion, for Vietnamese enterprises to succeed, Vietnam’s business environment must be capable of competing with countries that share similar product structures. When the costs and time for administrative procedures are reduced and the quality of infrastructure and human resources is increased, enterprises will be able to determine their own path to success.