In the January-July period of 2022, despite achieving a growth rate of 20.1% over the same period in 2021 (US$1,213.5 million), many of Da Nang’s key export industries are facing difficulties due to unpredictable market fluctuations.

Workers are seen at the SEADANANG company. Photo: KHANH HOA

Businesses get stuck in trouble

A recent report from the Da Nang Department of Industry and Trade shows that, in addition to the mining sector, which continued decreasing by 30.55%, there were 9/12 important sub-sectors of the processing and manufacturing industry that lose growth momentum such as wood processing and wood products production down 5.63%, textile 12.85%, production of beds, cabinets, tables and chairs 22.64%, the production of paper and related products 8.27%, manufacturing chemicals and chemical products 6.81%, electrical equipment production 9.51%, metal production 8.6% and apparel production 2.29%.

The decline of the above-mentioned industries triggered a significant impact on the overall growth of the group of processed industrial products, and industrial production as a whole. Through fact-finding at many enterprises, export growth is gradually slowing down and orders are not as abundant as before.

There are even businesses in the industry that have had their orders cancelled because of a sharp drop in demand. In addition to the consequences of the COVID-19 surge, inflation in European countries and the Russia - Ukraine conflict has adversely affected global purchasing power, causing orders to go down further.

Mr. Ha Ngoc Thong, the Director of A Chau Architecture and Trading Co., Ltd. said that the operation situation of the paper industry is still facing difficulties. At this time, although businesses can still maintain orders, ensure jobs and income for employees, it is forecasted that it is hard to achieve the growth rate as previously planned by the end of this year.

Similarly, seafood enterprises are also facing a situation under which exports have shown signs of "cooling down" since more than a month, although in the first 7 months of the year, the total export turnover of the whole industry is estimated at . US$145 million, up 18.9% over the same period in 2021.

Mr. Nguyen Van Chin, the Director of Bac Dau Co., Ltd. said that the supply of raw materials has been restored to about 50 - 70%, helping businesses operate at 100% capacity at factories. Such main markets as Japan, S.Korea and Singapore still remained stable. However, input material prices still increased by 10 - 15%, so the first 7 months of the year only broke even, with no growth.

It is forecasted that in the remaining months of this year, the problem of supply and price of raw materials for businesses has not been completely resolved, imposing great pressure on businesses to maintain operations and meet increasing requirements made by their partners.

According to Mr. Tran Van Linh, the Chairman of the Board of Directors of Thuan Phuoc Seafood Corporation, over the past 7 months, this business has grown by about 25%. Despite the spectacular growth in output, in fact, the economic efficiency achieved by enterprises was not high as expected due to high transportation costs.

Since July, the influence of inflation, the depreciation of the euro against the US dollar has greatly affected the export activities of seafood enterprises, in which the two main and largest markets- the U.S and Europe recorded a slowdown and a sharp decline in output.

In a similar trouble, many businesses in the garment industry are also facing difficulties during this tough time. Although the growth exceeded the plan in the 7-month period, according to Ms. Phan Thi Kieu Oanh, Deputy Director of the Da Nang Branch of Vinatex International JSC, in the remaining months of this year, the market of the textile industry is quite gloomy with the consumption rate is unlikely to be high.

It can be seen that export activities in the 7-month period still achieved positive results. However, according to the forecast made by the municipal Department of Industry and Trade, from now until the end of this year, export activities will face many difficulties, especially when Da Nang’s major import markets and those of Viet Nam at large like the U.S., EU are affected by inflation and recession.

People, especially those in EU countries are tightening their spending during the economically difficult time. So,  their demand for household and consumer goods will decrease, which may affect Viet Nam's export industries. This unfavourable fact requires businesses to proactively respond to these challenges.

The production view is pictured at the Da Nang Export Forestry Products JSC. Photo: M.Q

Proactive adaptation: an urgent need

Faced with the highly-concerning problem of a sharply declining export market the hike in input costs, businesses should not passively rely on foreign partners or wait for inflation to go down. Instead, they are highly recommended to proactively take many timely solutions in a great effort to reduce input costs, limit the increase in selling prices of products and cutting out the middlemen as many as possible.

In order to minimise the great impact of market fluctuations, especially in the U.S., the Da Nang Rubber JSC is placing a focus on solutions such as continuing to diversify export markets and proactively sourcing more raw materials, expanding production capacity and improving product quality to increase competitiveness in the market.

Mr. Le Hoang Khanh Nhut, General Director of Da Nang Rubber Joint Stock Company said: “In fact, although this company has been affected by fluctuations in the world market, it has made direct supplies to the Vietnamese customers, without going through an intermediary. Therefore, the influence is not too great.

In the first 7 months of this year, the company's revenue exceeded the plan by 25%, and is expected to continue to grow until the end of the year when orders for the rest of this year have been confirmed from its partners.

In the seafood sector, according to Mr. Nguyen Van Chin, from now until the end of the year, his enterprise will still maintain production activities to ensure that there are enough expenses to cover losses, depreciation and put its employees on stable payrolls. It is forecasted that by the end of the year, the Thuan Phuoc company’s situation is still positive with an estimated growth of 18 - 20% as compared to 2021.

As predicted by the Da Nang exporters, in the remaining months of 2022 are forecasted to be full of challenges. During the current tough time, making good use of the market and trade agreements will be an opportunity for exporters to make accelerations. It is also important for each enterprise to clearly identify its specific difficulties and challenges in order to take appropriate adaptive solutions and be proactive in the face of unwanted impacts.

In order to create momentum for exports in the rest of this year, especially to effectively tap the potential of such major foreign markets as the U.S., Europe and Japan, besides activities to remove the difficulties facing businesses, the Da Nang Department of Industry and Trade is focusing on implementing highly practical solutions as well as requesting function agencies to support businesses to access market information, boost export promotion, and take advantage of free trade agreements (FTAs) to find new consumption markets.

Reporting by KHANH HOA - Translating by A.THU