Exports face difficulties because of Covid-19

Textiles and apparel is a typical industry that is forecasted to continue to experience a decline in export turnover in the near future due to the impact of the Covid-19 epidemic. Photo: N. Thanh.

Very low growth in the first quarter

According to the General Statistics Office (Ministry of Planning and Investment), the Covid-19 epidemic spread strongly among Vietnam's leading trading partners, such as China, South Korea, Japan, the EU and the United States, greatly affecting the import and export turnover of many items.

Generally, for the first quarter, total import and export turnover of goods reached USD 115.34 billion, down 0.7% from the same period last year. Of which, exports reached USD 59.08 billion, up 0.5%; while imports reached USD 56.26 billion, down 1.9%. Trade surplus in the first quarter of this year reached USD 2.8 billion (the same period last year saw a trade surplus of USD 1.5 billion). In particular, the domestic economic sector had a trade deficit of USD 4.4 billion; while the FDI sector (including crude oil) saw a surplus of USD 7.2 billion.

In the first quarter, there were eight items with export turnover of over USD 1 billion, accounting for 70.6% of total export turnover. In particular, phones and components had the largest export turnover, reaching USD 12.4 billion, accounting for 20.9% of total export turnover, up 2% over the same period last year. The export proportion of some key products still belongs to the foreign direct investment sector, typically phones and components; machines, equipment, tools and spare parts.

Regarding the market, in the first quarter of 2020, the US was Vietnam's largest export market with a turnover of USD 15.5 billion, up 16.2% over the same period last year; followed by China with USD 8.4 billion, up 11.5%; EU reached USD 7.5 billion, down 14.9%; ASEAN reached USD 6 billion, down 5.2%; Japan reached USD 4.8 billion, up 3.5%; South Korea reached USD 4.5 billion, down 2.7%.

Assessing the context of export goods in the first three months of this year, Mr. Bui Trong Tu, Deputy Director of the Department of Trade and Services Statistics (General Statistics Office) said export growth the first quarter is at a very low level compared to the same period last year. Meanwhile, Pham Tat Thang, a trade expert, told Customs Newspaper that the report looked less gloomy when analyzing, although the growth rate of exports in the first quarter of this year was quite low, there was still growth. Vietnam still has a trade surplus. This shows that although exports were seriously affected by the Covid-19 epidemic, that pace is acceptable.

Serious decline in the second quarter

In recent days, the key export sectors of Vietnam such as textiles, footwear, wood and wood products have continuously received negative information from major import markets, typically the US and EU.

The difficulties and challenges caused by the Covid-19 epidemic created an unprecedented crisis in the past 20 years of Vietnam National Textile and Garment Group (Vinatex). A representative of Vinatex's leadership said that from the middle of March 2020, there were consecutive orders canceled, stopped and suspended, leading to the fact that most units will be underemployed in April and May 2020. Notably, the higher the brand is, the greater the rate is reductive and no signal of recovery time.

Vinatex predicts that the domestic market will also decline when the economy grows slowly. Meanwhile, China has resumed operations and low market demand will lead to a strong global decline, while prices are expected to fall over 20%. This situation leads to great pressure on textile and garment enterprises both financially and in terms of labor. If there is no policy adjustment, it is likely that many enterprises will lose their liquidity by the end of April 2020. Underemployed laborers are between 30% and 50% in April and May 2020.

“Estimated losses for the garment industry amount to over VND5 trillion if 30% of workers were underemployed in April 2020 and 50% of workers were underemployed in May 2020 (Vinatex alone estimated losses of VND403 billion).

Especially, if the situation continues, the industry will lose up to VND3 trillion each month,” said a Vinatex representative.

The wood and wood products sector with tens of billions of USD in export turnover has faced challenges. According to preliminary reports from local wood associations and wood processing enterprises, since mid-March, the industry has been seriously affected.

Specifically, the export market accounting for 50% of the market share is the US, over 80% of shoppers exported to this market announced to stop buying, cancel orders waiting for a new situation. For the EU market, 81% of businesses received notifications of cancellations and order relaxation. The markets of Japan, Korea and China also dropped by 60-80%. Moreover, 96% of businesses have bank loans and are under pressure in terms of interest and repayment time.

Mr. Do Xuan Lap, Chairman of Tien Dat Wood Industry Joint Stock Company, Chairman of Vietnam Association of Wood and Forest Products, said that customers are not coming to the factory to approve samples. Therefore, Vietnamese timber enterprises have not signed new orders for the 2020-2021 season. Therefore, many factories are at risk of closing and stopping operation in the near future.

Through some "outline" of export prospects in the coming months of the tens of billions of US dollars of exported goods, it helps to partially imagine the situation of Vietnam's second quarter export of goods without being positive, especially in the context of not knowing when the Covid-19 epidemic will end. Bui Trong Tu said: “Recently, the Covid-19 outbreak has been seen in the EU and the US. Most of the orders of businesses in the US and EU are on hold. If the second quarter of the epidemic continues, it will certainly affect Vietnam's exports and cannot be kept as it is now because these two markets are relatively large, especially for industries such as textiles, footwear and seafood.”

Hope because of EVFTA

In addition to the negative information, the progress of the Vietnam-EU Free Trade Agreement (EVFTA) is hope for Vietnam's exports of goods in the near future.

On March 30, the European Council (EC) decided to approve the EVFTA after the agreement was ratified by the European Parliament on 12 February. It is expected that the EVFTA can take effect from July 2020. At that time, the Covid-19 epidemic is forecast to be better controlled globally.

General Director of the General Statistics Office Nguyen Bich Lam said that when the EVFTA comes into effect, exports to the EU can achieve a good growth of over 20% this year and this number will continue to increase in the next year.

One of the export items with many advantages is seafood. When the EVFTA comes into effect, Vietnamese seafood will compete with similar products of other countries. “Regarding the export of agriculture, forestry and fishery products to the EU in general, in 2019 the total value of the revenue will be USD 2.6 billion, accounting for 6.4% of the total export turnover to this market. In 2020, exports of agriculture, forestry and fisheries will increase, accounting for about 10% of the total export turnover to the EU market," Mr. Lam said.

The same view that EVFTA will open up many export promotion opportunities for Vietnam, Mr. Bui Trong Tu said: “In the future, when the Covid-19 epidemic is reduced, Vietnam must make good use of the EVFTA, focusing on key items. However, the key problem lies in the enterprise. Enterprises must improve the situation by themselves, improve product quality, clarify the origin, meet technical barriers. Because when participating in a big game, we must grow up to win."