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Firms look for alternative sources of raw materials as epidemic closes China market

19:09 | 17/02/2020

Vietnamese companies many of whom are facing a shortage of feedstock and raw materials as a result of the new coronavirus COVID 19 outbreak in China have started looking at alternative sources

firms look for alternative sources of raw materials as epidemic closes china market

Workers at a textile factory. Vietnamese enterprises have already started looking to alternative sources of raw materials to deal with a shortage of raw materials due to the epidemic in China. VNA/VNS Photo Thanh Vu

The epidemic has had a significant impact on public health, transportation, tourism, education, and, importantly, trade and commerce, experts said.

It has affected Vietnam’s trade not only with China but also other markets, and started hurting Vietnamese businesses.

According to the Department of Import and Export under the Ministry of Industry and Trade, the impacts include prolonging delivery times and customs clearance due to the quarantine requirements on both sides.

In addition, trade by road, rail and air with China has slumped.

With Chinese goods not available, Vietnam has been unable to source imports, which has affected its production and exports to third markets.

Many textile and footwear enterprises are therefore looking at raw material imports from other markets such as the Republic of Korea, India, Bangladesh, and Brazil.

Pham Xuan Hong, president of HCM City’s Textile Association, said this would only be a temporary solution since China could not be replaced as the main supplier by anyone else due to its much lower costs.

Truong Van Cam, vice chairman and general secretary of the Vietnam Textile and Apparel Association (Vitas), said the textile industry sources a significant proportion of feedstock from China.

The epidemic has caused Chinese businesses to shut down production, especially in Wuhan, where there are a number of large factories, he said.

Since many textile plants in China are likely to be closed until the end of February or even longer, supply to Vietnam would be hard hit, he said.

If the epidemic continues for the next one or two months, the global economy, including Vietnam, would be in trouble, he warned.

But this is also an opportunity for Vietnamese businesses to look for other sources to relinquish their dependence on China, he pointed out.

Other countries like Thailand, India and Indonesia are also looking for other markets to source raw materials from to reduce their dependence on China, he said.

Companies, especially small and medium-sized enterprises, need Government support in the form of preferential loans and access to new technologies to sustain their business, he added.

Vitas has asked members for reports on the impact of the outbreak on their operations and instructed them to follow developments.

It urged businesses to focus on the domestic market and from other markets to sustain themselves and ensure workers are not affected.

Do Thi Thuy Huong of the Vietnam Electronics Industries Association said most enterprises in her industry are expected to be hit hard in the next one or two months, and face the risk of delaying payments to workers and stopping production.

Tran Thanh Hai, deputy director of the Ministry of Industry and Trade’s import-export department, said the ministry has worked with the Ministry of Health to take measures against the epidemic, but they would not impact trade.

Recently a number of credit institutions offered to earmark funds to meet credit demand from customers affected by the outbreak.

Source: VNS