Bright signals from major export markets

Commercial activities in Vietnam's key markets are forecast to warm up soon. In the photo: Ship docked at Gemalink port, Ba Ria - Vung Tau province.

New orders are coming back

Speaking at the Vietnam - US Trade Forum held on November 21, Mr. Greg Testerman, Chairman of AmCham Vietnam, assessed 2023 as a difficult year for exporters in Vietnam as well as many other countries. Currently, inventories in the US were still high. Meanwhile, according to annual tradition, the Christmas season was the most exciting season for retail, but this year the situation was forecast to be quite quiet. However, Mr. Greg Testerman also said that there were some signs that retailers and brands in the US would launch discount sales campaigns during the year-end shopping season to stimulate purchasing power. This would help resolve the large amount of inventory over the past year and new demands and new orders would return early next year.

Mr. Ed Gresser, former Assistant United States Trade Representative (USTR), Vice President and Director of Global Trade and Markets - Progressive Research Institute (PPI) also assessed that after the sudden increase in 2 last years due to pressure during the Covid-19 pandemic, purchasing power in the US decreased sharply in 2023. However, this situation would not last long and there would be a recovery in 2024.

In the EU market, Mr. Ta Hoang Linh, Director of the European - American Market Department, Ministry of Industry and Trade, said that in the third quarter of 2023, two-way trade turnover between Vietnam and the EU reached US$ 15.12 billion, down 1.5% over the same period in 2022. This decline slowed significantly compared to the 10% decline in the first quarter and the 9.7% decline in the second quarter of 2023. In addition, the EU economy was gradually recovering with inflation levels continuing to be adjusted, which would be a factor supporting consumption of goods in the region in the coming time, import would also gradually improve when inventories decreased and Year-end shopping demand increased. Therefore, Vietnam's goods export to the EU were forecast to recover from the fourth quarter of 2023. In particular, EVFTA was considered a great advantage for Vietnam when currently only 4 Asian countries had signed FTAs with the EU, only Vietnam and Singapore in ASEAN.

As for Vietnamese manufacturers, Mr. Vu Duc Giang, Chairman of the Vietnam Textile and Apparel Association (VITAS), said that since the beginning of the fourth quarter of 2023, the order situation in Vietnam's textile and garment industry had begun to improve. Ms. Phan Thi Thanh Xuan, Vice President, General Secretary of the Vietnam Leather, Footwear and Handbag Association (LEFASO) also shared that although it did not return to the level of 2022, the order situation had begun to show positive signs.

Transforming production to create competitive advantage

​Through discussions with large corporations, Mr. Ed Gresser said that labels in the fashion, apparel and footwear industries in the US all said that Vietnam was currently the second largest supplier with advantages in production costs; an increasingly skilled workforce; flexibility to produce many different types and designs of clothes... In terms of tariffs, Vietnam is also enjoying more incentives than China. Therefore, although purchasing activities declined in Vietnam in 2023 due to the impact of weak purchasing power, brands still affirmed to continue to attach with Vietnamese manufacturers.

Ms. Rama Chug, Vice President in charge of purchasing and apparel at Walmart, assessed that Vietnam was a very important supplier of Walmart. Currently, this world's leading retailer had a representative office in Ho Chi Minh City to search and purchase Vietnamese goods. According to Ms. Rama Chug, Vietnam had great potential to develop and expand market share in Walmart. Because after experiencing a supply chain crisis, Walmart had launched a strategy to ensure supply chain safety. Accordingly, this retailer was taking positive solutions to develop more suppliers and diversify supply sources to ensure stability for the supply chain.

Nike brand is also offering a similar strategy. Ms. Angela Ho, General Director of Nike Vietnam, said that Nike was trying to increase the resilience of the supply chain in Vietnam. Specifically, investing in innovation, automation and capacity development for staff in the company and suppliers.

Facing increasingly clear opportunities from the recovery of the market as well as the shift in the supply chain of brands, Vietnamese businesses must also overcome significant challenges from new requirements of brands related to environmental issues. If promptly converted, these challenges will turn into competitive advantages for Vietnamese businesses. Mr. Giovana Rojas, CEO of Target Vietnam, Thailand and Cambodia, said that mass production industries only focusing on productivity would be severely affected when the economy slowed down and purchasing power decreased. At the present time, under pressure from consumers, brands set up ESG requirements (environmental, social and governance) on manufacturers. Accordingly, production locations promptly meeting these requirements would have a superior competitive advantage.

Mr. Gabor Fluit, President of EuroCham Vietnam, also assessed that in order to effectively exploit trade and investment with the EU, compliance with EU regulations such as the Carbon Border Adjustment Mechanism (CBAM) and appraisal directive on corporate sustainability (CSDDD) was the key. Vietnam's adoption of a carbon pricing policy consistent with CBAM would make competition for Vietnam's export. Furthermore, compliance with CSDDD directives demonstrated Vietnam's commitment to sustainable, transparent business practices. Complying with these requirements would help Vietnam protect its existing trade relationships with the EU and open up opportunities for new relationships.

As one of the businesses that has pioneered the transformation to a green production model, meeting strict environmental requirements, Mr. Nguyen Quoc Khanh, Executive Director of Research and Development, Vietnam Dairy Products Joint Stock Company (Vinamilk) said that the initial investment cost for the conversion might be a barrier and a challenge, but in return, operating costs after the conversion would be lower, the brand image was more appreciated, and increased reliability for consumers helped businesses easily access more markets. Accordingly, the benefits earned when businesses converted to green and sustainable production according to market requirements would be greater than the investment costs of conversion.