Sourcing in Vietnam’s blog

The Doosan Heavy Industries Vietnam Company on Nov. 13 shipped its first batch of desalination equipment worth 40 million USD to the United Arab Emirates (UAE).

The equipment, the first of its kind to be manufactured by a company in Vietnam , weighs 4,000 tonnes and measures 10.6m in height, 29.2m in width and is 100.4m long. It is capable of producing 450,000 litres of fresh water from seawater a day.

On addressing the event, Deputy Prime Minister Hoang Trung Hai said that Doosan Vina is one of the largest foreign-invested projects in Vietnamese heavy industry. The company’s export of desalination equipment to the UAE has taken Vietnamese heavy industry to a new level of development, he said.

The deputy PM urged Doosan Vina to maintain the rate of its growth and to focus on manufacturing desalination equipment, as well as improving the skills of its workers, which will contribute further to the development of the Dung Quat economic zone and Quang Ngai province as a whole.

On the occasion, Doosan Vina donated 200 million VND to the provinces Fatherland Front and an additional 100 million VND to Binh Son district to support local residents who were affected by typhoon Ketsana.

Vietnam will likely reach another government-to-government rice export contract as the Indian government has announced to buy two million tons of rice from Vietnam and Thailand.

Though foreign newspapers reported that India needed two million tons of rice, the Indian Agency of Foreign Affairs has asked the Vietnam Food Association (VFA) to export up to three million tons, VFA chairman Nguyen Tho Tri told the Daily on Monday. Local enterprises are capable of meeting the request due to the large rice stock in the country.

The export to India will not affect the nation’s food security although traders had signed contracts to sell six million tons this year, Tri said. The delivery may fall in January or February when local farmers harvest the bumper winter-spring crop.

Vietnam can supply only white rice that accounts for only 20%-30% of India’s rice demand and local exporters can implement the contract if export prices are reasonable, Tri says.

Domestic exporters earlier shipped a large amount of rice to India but then got into problems due to slow quality checking procedures at ports. Some enterprises incurred losses due to poor checking results and transport costs.

The apparel and textile industry in Vietnam has overtaken crude oil as that country’s No. 1 export.

During the first 10 months of this year, Vietnam shipped $7.5 billion in apparel and textiles to primarily the United States and Europe, according to the Vietnamese General Statistics Office.

The Vietnamese government is now predicting that the apparel export market will bring in $9.3 billion in revenues this year, up 3 percent over last year.

Vietnam’s apparel manufacturing sector has grown rapidly ever since the U.S. government early this year stopped monitoring Vietnamese apparel coming into the United States. The Bush administration feared that Vietnam would dump apparel goods on the U.S. market and started closely watching import prices in 2007 to determine whether anti-dumping duties should be imposed. The U.S. Department of Commerce held six-month reviews of five different apparel products—trousers, shirts, underwear, swimwear and sweaters—but found no signs of dumping.

After the monitoring ended, more U.S. apparel companies felt comfortable about sourcing in Vietnam. The Southeast Asian nation is now the No. 2 supplier of apparel to the United States, following China. During the one-year period ending Aug. 31, the United States imported $5.4 billion in apparel and textiles from Vietnam, up 3.7 percent over the same period last year. China shipped $32 billion in apparel to the United States for the 12 months ending Aug. 31.

Vietnam has been ranked the fifth largest rubber exporter in the world however; limitation in producing rubber products resulted in the reduction in adding value to these products.

Tran Thi Thuy Hoa, general secretary of Vietnam Rubber Association (VRA) stated that in 2005, the government issued Decision No 243?QD-TTg regulating about developing rubber trees, with the target of setting up the complexes of producing and processing rubber products.

However, until now, the consumption level of rubber product in Vietnam is still at low level, with limitation of producing car tyres, tyres and inner tubes of bicycles.

Tran Van Rach, vice director of Tay Ninh Rubber Joint Stock Co admitted his company has average production output of 13,000-14,000 tonnes per year in a long time, however, most of the products are preliminarily processed.

Vietnam’s rubber industry is in need of cooperation with foreign investors, especially in the field of processing, in order to raise the added value in the industry.

Hoa added that many Vietnamese rubber companies have called for investment capital. The foreign investors may invest in Vietnam’s rubber industry via purchasing shares of local rubber firms such as Tay Ninh Rubber JSC (coded TRC), Dong Phu Rubber JSC (DRC), and Hoa Binh Rubber JSC (HRC).

In the recent conference held in HCM City with theme of “How to improve the added value in rubber products”, many foreign investors still expressed their doubts about making direct investment in growing rubber trees in Vietnam.

In addition, some investors were worried about the bad effects from the fact that the US was imposing import tariff on China-originated rubber products on Vietnam’s rubber export industry, as most of Vietnamese rubber products have been exported to China so far.

As a result, although there’s a reduction in China’s export volume in general, it’s predicted that the country’s car-making will continue increasing, balancing the rubber demands in China’s domestic markets. Therefore, Vietnam’s rubber export to China has only dropped slightly.

Vietnam’s rubber industry has certain advantages such as abundant raw materials, and low-priced human resources. However, Vietnamese rubber firms have weak point in processing.

Therefore, if the domestic rubber producers can cooperate with the foreign investors to apply modern technologies in the processing period of rubber materials, producing new types of rubber products that may not only make contribution in the industry’s development process, but also reduce the country’s import volume.

Trade value between Vietnam and Brazil was forecast to reach US$1 billion next year, announced a seminar on business opportunities between the two countries held on Wednesday by the Export Assistance Centre of the Trade Promotion Department (TPD) under the Ministry of Industry and Trade.

Brazil, the world’s 10th largest economy with a population of 190 million, represents an export market with enormous potential for Vietnam.

Two way trade has surged significantly during 2005-08, representing an increase of 60 per cent a year. Bilateral trade value reached US$534.5 million in 2008, a year-on-year increase of 96 per cent, according to the Vietnam General Department of Customs.

In the first nine months of this year, Brazilian exports to Vietnam were worth $200 million, with imports the other way accounting for $100 million. Vietnam ships mostly footwear, computers, garments, leather shoes, coal, rubber and fruit to Brazil while importing textile and garment materials, iron and steel, machinery and equipment.

Speaking at the seminar, Le Xuan Duong, director of the Export Assistance Centre, said that Viet Nam’s export products had advantages due to reasonable prices and fairly good quality.

Vietnam currently has four potential staples such as fruits, leather shoes, seafood, and textiles and garments. However, to exploit export opportunities and reduce the trade deficit, Vietnam should further research Brazilian consumer tastes, as well as focus on more value-added products such as electronic components, and consumer goods, Duong said.

It is projected that by 2015 when Vietnam’s industry will be more advanced with higher productivity and industrial products, bilateral trade turnover could top billions of US dollars, on par with Thailand, South Korea and Singapore.

Since the geographical distance makes exchanging market information difficult, government trade bodies should play a bigger role in providing business information to companies to boost two-way trade, said Janet Castanha,
co-ordinator of Enterprises Association of Brazil’s Prana state.