Economic recovery plans, export market expansion mark 2022 in Vietnam

Vietnam’s exports and retail sales are projected to rise this year and e-commerce revenue has also increased. Textile, garment and footwear firms anticipate tough situations in early 2023. Initiatives for post-pandemic economic recovery, efforts to expand export markets, and support for private firms in sustainable business development marked the year there, writes Dipesh Satapathy.

Let us take a look at the major developments of the year.

Vietnam’s exports and retail sales are projected to rise this year and e-commerce revenue has also increased. Textile, garment and footwear firms anticipate tough situations in early 2023. Initiatives for post-pandemic economic recovery, efforts to expand export markets, and support for private firms in sustainable business development marked the year there,

Statistics

Vietnam’s exports are projected to rise by 10.5 per cent to $371.5 billion in 2022 compared to 2021, according to the country’s ministry of industry and trade. The industrial production index is projected to soar by 9 per cent year-on-year (YoY). The country’s total trade value is expected to reach $732 billion in 2022, the ministry said in December.

Total retail sales value is also expected to soar by 21 per cent YoY in 2022, far beyond the target of 8 per cent. E-commerce continued to grow into a key distribution channel this year, as the size of Vietnam’s e-retail market is estimated at $16.4 billion, accounting for 7.5 per cent of total consumer goods revenue.

The country’s e-commerce revenue this year saw a rise of about 15 per cent compared to last year, the Vietnam E-commerce Association (VECOM) said.

Policy

The government in February issued a resolution on the overall socio-economic recovery programme worth VND 350 trillion ($15 billion) that was approved by the national assembly. The goal was to accelerate production and business, achieve a gross domestic product (GDP) growth of 6.5-7 per cent a year over the next five years, and reduce the unemployment rate in urban areas to less than 4 per cent.

In April, Deputy Prime Minister Le Minh Khai signed a resolution outlining the action plan to restructure the economy up to 2025. The resolution aimed at providing an appropriate and efficient structure for each sector and industry, linking them to the economy. The country aims at raising labour productivity by an average of over 6.5 per cent annually.

The resolution outlined plans to develop new technology-based national products, make breakthroughs in national competitiveness with the improvement of some key industries, efficiently change the growth model, and increase the resilience of the economy. By 2025, it wants to narrow the gap of national competitiveness with countries in ASEAN-4 (Indonesia, Malaysia, Philippines, and Thailand), while reducing the budget deficit to 3.7 per cent of the GDP.

Foreign Trade

Preferential import and export tariffs for goods and commodities exported between Vietnam and Peru became applicable from March 10, as committed under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Vietnam issued a decree on that date amending and supplementing some regulations of a 2019 decree.

A project was approved in November to expand export markets and enable enterprises to participate in foreign distribution networks by 2030 by encouraging the use of e-commerce channels along with traditional ones. The target is to build a stable and sustainable production and export distribution model covering free trade agreement partners.

Market information support will be offered to around 20,000 enterprises and training and consultancy to 15,000 enterprises to help them raise competitiveness and gradually participate in the global value chains. Five thousand enterprises will also be supported to build capacity of joining cross-border e-commerce.

Ten thousand trade connections and exchanges will be organised to connect Vietnamese firms with foreign distribution networks, while more than 10,000 products will be offered directly into foreign distribution networks with support.

Industrial

Vietnam’s southern province of Binh Duong started construction of two giant industrial zones this year to attract foreign investors. Construction of the Vietnam-Singapore Industrial Park III (VSIP III) in Bac Tan Uyen district began in March. In the second quarter, work began on the Cay Truong Industrial Park in Bau Bang district. Binh Duong also plans to expand Nam Tan Uyen and Rach Bap industrial parks along with a number of others to meet the increasing demand from domestic and foreign investors.

Sustainability

In February, a programme to support private enterprises in sustainable business development between 2022 and 2025 was approved. The aim is to boost firms’ sustainable development with harmony between economic interest, corporate social responsibility and environmental protection. This will contribute to completing 17 UN Sustainable Development Goals in 2030.

It also aims to mobilise social resources for the growth of the ecosystem supporting the firms in sustainable business so that they can make positive contributions to job generation, improvement of living conditions for low-income people and disadvantaged groups, environmental protection and climate change response in the country.

Vietnam’s ministry of planning and investment and the US Embassy in the country announced in November an initiative to spur private sector-driven sustainable and inclusive growth across the country and promote environmental, social and governance (ESG) standards. The US Agency for International Development is the partner agency. The project targets small and growing businesses that account for more than nine-tenths of the country’s private sector, employ more than half of the workforce and contribute roughly 40 per cent of the GDP. The initiative will deliver ESG technical assistance packages to 300 businesses by 2025, of which 10 will receive additional assistance to pilot, implement or scale their innovative ESG business concepts.

The nation’s textile and garment industry is investing in sustainable and eco-friendly technologies to be on the same page as several global companies. This has become a necessity for suppliers as the European Union (EU), a big market for Vietnamese businesses in this sector, has proposed new environmental requirements for imported textiles till 2050.

Danish-owned Specter’s new green apparel factory in the An Giang province started operation in September, specialising in outdoor sportswear for export and will be partly powered by renewable energy. The facility, which has received a Gold LEED certificate, uses solar energy and contemporary architecture to cut its annual carbon dioxide emissions by around 1,600 tonnes. This is Specter’s third facility in Vietnam.

Logistics

Despite regulatory barriers, more foreign investment is pouring into Vietnam’s logistics market to seize development opportunities after the pandemic. With Vietnam’s role in the global supply chain rising, the logistics sector, still dominated by smaller domestic players with traditional warehouses, will continue to develop at a faster pace, experts say.

Asian warehouse operator GLP in March announced setting up GLP Vietnam Development Partners with an investment of $1.1 billion. WHA Corporation PCL (Thailand) announced a plan for a new revenue stream by investing $1.51 billion over the next five years. Part of this was used to expand in an industrial park in Vietnam Nghe.

The Hanoi Logistics Association was established in November to promote logistics activities in Hanoi city. The association aims at improving the connection of multimodal transport, several types of logistics activities, and planning and construction of logistics centres at the national and regional levels.

The Ho Chi Minh City People’s Committee in December decided to develop the city’s seaport infrastructure system and will plan and invest in its transport infrastructure, inland port system and logistics centres.

Textile & Garments                      

The country earned $34.645 billion from textile and garment exports in the first eleven months of 2022, an increase of 18.9 per cent YoY, preliminary government data show. The exports growth was 7 per cent month-on-month in November.

The United States accounted for a major share—46.18 per cent—totalling $16.092 billion in such exports during the period. Japan and South Korea were the other major destinations with exports worth $3.693 billion and $3.051 billion respectively.

Yarn exports, however, decreased by 13.6 per cent YoY to $4.388 billion during the period. Of this, China imported around 46.44 per cent or $2.038 billion worth of yarn, followed by India, which imported yarn worth $112.205 million.

In volume terms, Vietnam exported 14,40,484 tonnes of yarn during the 11-month period—18.6 per cent lower than the exports during the corresponding period of last year.

Vietnam left behind South Korea to turn the world’s sixth largest fibre and yarn exporter after exporting $2.37 billion worth of such items in the first five months of 2022.

The country’s textile, garment and footwear firms are facing several difficulties, including reduced export orders, and that may continue till 2023 first half. Key export industries, including furniture, are projected to see a huge fall in orders. So, many businesses have reduced staff and the scale of production in the last few months of this year. Enterprises in most sectors said import-export activities in the second half of the fourth quarter this year and the beginning of 2023 will face tough situations compared to the third quarter of 2022.

Fibre2Fashion News Desk (WE)