Production growth slows down; industrial enterprises are concerned

VCN - The growth rate of industrial production in the first 11 months of 2022 tends to slow down due to declining orders, high input costs and a shortage of raw materials. This raises many concerns for the industrial business community as it approaches 2023.
Industrial production activities are affected by many external factors. Photo: H.Dịu
Industrial production activities are affected by many external factors. Photo: H.Dịu

Many difficulties

A few days ago, the Japan Trade Promotion Organization (Jetro) announced the results of a survey on the business situation of Japanese enterprises in Vietnam in 2022. With 309 enterprises in the processing and manufacturing industry and a total of 603 enterprises participating in the survey, nearly 60% of them were forecasted to be profitable (up 5.2 points over the previous year), 20.8% at a loss (down 7.8 points).

However, Japanese enterprises in Vietnam expect significantly higher business prospects in 2023 than Japanese enterprises in the region. In particular, in Vietnam, the number of businesses that answered that they will "expand" their business activities in the next 1-2 years is 60% (an increase of 4.7 points compared to the previous year).

However, nearly 7% of businesses are still worried about the decline with the top reasons being the cost of buying raw materials, logistics, rising labor costs, the impact of exchange rate fluctuations, etc. This is also a difficulty for Vietnamese businesses in many industries and fields, including industry, processing and manufacturing. Data released by the General Statistics Office show that, in the first 11 months of 2022, the index of industrial production (IIP) is estimated to increase by 8.6% over the same period last year. Although there is still growth, the agency said that the growth rate tends to slow down for the same reasons as the Japanese side mentioned above.

The recent export industry report of VNDirect Securities Company has forecast that the prices of input materials such as yarn, fabric, plywood, etc. will decrease by 3-7% in 2023 due to weak demand, but with many challenges from the market, textile and forest product enterprises will have to reduce their selling prices by 7-10% to attract customers. As a result, the profit margins of companies in this industry will decrease by 0.8-1 percentage points year-on-year in 2023.

Efforts to cope with challenges

The business’s challenges in 2023 can be forecasted with difficulties in production and business. However, Vietnamese enterprises do not falter because of that, many industrial enterprises still try their best to maintain or even continue to expand investment to wait for new opportunities.

Recently, Truong Hai Group Joint Stock Company (THACO) has announced the establishment of Truong Hai Industrial Group Company - THACO Industries with a total investment of more than USD 550 million in Quang Nam province.

This company implements the strategy of developing, manufacturing and trading mechanical products and supporting industries on a large scale, synchronously investing, diversifying products and services; provides industrial solutions along the value chain.

A THACO representative said that the newly established company is determined to play a pivotal role, pioneering in linking and cooperating with businesses to build production chains and participate in global value chains. Recently, THACO has also exported a lot of mechanical products and spare parts to regional and international markets, especially high-end markets such as the US, Japan, Korea, Australia, and Europe.

According to Mr. Le Tien Truong, Chairman of the Board of Directors of the Vietnam National Textile and Garment Group (Vinatex), the current difficult period of the global economy is short-term in nature, therefore, the important solution is to determine what the assets that need long-term protection are.

According to Mr. Truong, for the textile and garment industry, the first is how to serve long-term well-known partners in the supply chain. Second, a highly qualified workforce must be maintained to ensure that when the market recovers, there is an immediate force to meet the market's requirements. Therefore, the key solution is to keep these two strategic assets. At the same time, focusing on improving labor productivity, administrative efficiency, and reducing costs in parallel with focusing on innovation in automation technology, reducing the labor force as well as the number of employees.

Regarding solutions to remove difficulties for industrial enterprises, Ms. Phi Thi Huong Nga, Deputy Director of the Industry-Construction Statistics Department, General Statistics Office, Ministry of Planning and Investment, said that the Government and the Ministries, sectors and localities need to ensure production and business conditions for enterprises by stabilizing the macro-economy and making great balances, especially the supply of raw materials, fuel and materials for production and business of the enterprise; remove difficulties in cash flow and reduce costs for businesses; strengthen the connection between labor supply and demand.

But businesses must also actively seize and take advantage of production and business opportunities, seek new orders, and have plans to adapt to future fluctuations. Besides, digital transformation and the application of science and technology are promoted to improve the productivity, quality, efficiency and competitiveness of enterprises.

By Hương Dịu/Bui Diep

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