Two industry groups join ten billion export club

(SGI) - Two new industry groups in Vietnam joined the over USD 10 billion export club in 2021, increasing the list to eight. 
Illustrative photo.
Illustrative photo.

This prestigious club hopes to continue on its success throughout 2022, with new expectations, achievements, and more growth. However, along with the highest ambitions and goals there are still plenty of challenges to face, especially in these turbulent times.

Imprint of 2021

In 2021, imports and exports proved to be bright spots for the economy by reaching a record of nearly USD 670 bn, up 23% over the previous year. In this the export turnover of goods reached more than USD 336 bn, up by 19%. There are currently 35 export items of over USD 1 bn. Eight export items are over USD 10 bn, which include phones and components; computer electronics and its components and other machinery, equipment, tools, and spare parts; textiles; leather shoes; wood and wood products; iron and steel; means of transport and many spare parts. Iron and steel, means of transport and spare parts are two newbie items in the over USD 10 bn export club, in which the breakthrough for the iron and steel industry has surprised many with export growth of more than 100%.

According to the Vietnam Steel Association, in 2021, steel exports brought in more than USD 12.7 bn from 14 million tons of steel, an increase of 124.3 % compared to 2020. The steel industry also marked a strong shift in 2021 in export structure by gradually reducing the proportion of exports to ASEAN and China, by boosting exports to other difficult markets such as the USA and EU. The steel industry made an impressive growth in exports in 2021 because many countries have been promoting infrastructure construction, which has created export opportunities for several countries, including Vietnam. Vietnamese enterprises have since made good use of this opportunity.

Other members of the Export Club have also made many spectacular breakthroughs in 2021. The leather, footwear, and handbags industry worked day and night to deliver goods in the fourth quarter, achieving an export turnover of USD 20.78 bn, up 4.6% compared to 2020, of which footwear alone reached USD 17.9 bn. Due to the impact of the Covid-19 pandemic, the textile and garment industry continuously adjusted down its export target in the third quarter of 2021, but in the last three months of the year, businesses went upstream to reach a target of USD 39 bn, up 12% compared to 2020 and 0.3% compared to 2019. Wood and wood products also closed the year 2021 impressively by reaching an export target of USD 14.8 bn, up by 19.7%.

Expectations for 2022

In 2022, Vietnam's exports of leather, footwear and bags aims to grow by 10% to 15%, equivalent to USD 23 bn and upto USD 25 bn. According to Lefaso, up to this point, businesses have orders until the end of the first quarter, and some businesses even have orders until the end of August. More importantly, global buyers have increasingly shown trust in their Vietnamese partners mainly because of reasonable labor prices, and good product quality that meets their strict requirements.

A clear example is that of Nike from USA. In 2021, upto 51% of its shoe products were made in Vietnam, compared to 21% in China. Another famous shoe brand, Adidas, has 40% of its production output from Vietnam. Currently, Vietnam ranks second in the world in footwear exports, reaching 1.23 billion pairs in 2020, and continued to maintain second position in 2021 with more than 10% of the world's total footwear exports.

The textile and garment industry now offers three scenarios in 2022, of which the most positive scenario is that if the pandemic is brought well under control in the first quarter, export turnover could reach USD 42 bn or even USD 43.5 bn. Currently, most textile enterprises have orders until the end of the first quarter, while many enterprises have orders until the end of May. Buyers are also very satisfied with the quality and commitment of Vietnamese enterprises.

The other six members of the over USD 10 billion Export Club also have significant goals for this year. For instance, the wood and wood products industry wants to continue to maintain the growth momentum of 20% and reach the milestone of USD 17.5 or USD 18 bn. The steel industry is forecast to continue to benefit from the wave of public investment in the world. In the first quarter, steel demand will continue to be at a high level as major economies promote disbursement of public investment, especially in USA. The USD 1,200 bn infrastructure investment bill in the US will increase steel demand by about 5 million tons per year in the period 2022 to 2025. This will be a huge opportunity for Vietnamese steel enterprises.

Major challenges

The biggest challenge facing enterprises is in logistics, which currently is beyond their control. At a recent seminar in mid-January to resolve difficulties for import-export enterprises in Ho Chi Minh City, most businesses said that high logistics costs and lengthy shipping time has eroded profits. As a result, most businesses are avoiding taking new orders. Sharing his views at the seminar, Mr. Huynh Van Cuong, Vice President of the Ho Chi Minh City Logistics Association, said that the cost of sea transportation has increased three to ten times in the last two years, while the pressure on import-export enterprises has also increased. He added that previously, goods from Cai Mep-Thi Vai port to the US took eighteen to thirty days, but now they take upto three months.

Currently, the logistics companies in Vietnam only provide basic services due to insufficient resources and lack of experience. Hence 65% of imports and 73% of export goods are carried out by FDI enterprises. According to Mr. Cuong, Vietnam needs to form a network of large logistics enterprises and have a special mechanism for these enterprises to promote their role in leading the market, reducing logistics costs, helping Vietnam's logistics industry develop, improve the competitiveness of Vietnamese products and goods, while meeting the increasing logistics needs of not only the domestic market but also attracting the attention of FDI enterprises.

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