Industrial enterprises face many difficulties in the second half of the year

Industrial enterprises can benefit from the expansion of investment by FDI enterprises. Source: Internet.

Input price challenge, supply chain disruption

According to the General Statistics Office, in terms of industrial production, the added value of the whole industry in the first six months of 2022 was estimated to increase by 8.48% over the same period last year. In which, the processing and manufacturing industry increased by 9.66% (up by 7.72% in the first quarter; 11.45% in the second quarter), contributing 2.58 percentage points to the increase in the total added value of the whole economy. In addition, the industrial production index in the first six months of 2022 compared to the same period last year in some key industries increased sharply. Costume production increased by 23.3%; production of electrical equipment increased by 22.2%; production of drugs, pharmaceutical chemicals and herbal ingredients increased by 17.5%; production of leather and related products increased by 13.1%.

At the beginning of July, S&P Global announced that the Purchasing Managers' Index (PMI) of Vietnam's manufacturing industry reached 54 points in June, slightly down from 54.7 points in May, but still showing health and the manufacturing industry improved dramatically. Both output and new orders continued to increase significantly towards the end of the second quarter of 2022 as the market's relative stability in the absence of pandemic disruptions boosted demand. Meanwhile, the number of new export orders increased at the fastest rate in the past four months, despite some reports that shipping difficulties have limit  ed export opportunities.

However, many businesses have begun to worry about the difficulties and challenges that await in the remaining months of 2022.

Phan Thi Thanh Xuan, Vice President of the Vietnam Leather, Footwear and Handbag Association, said that the business is facing many difficulties due to the high inventory rate, which is expected to be about 40%, along with logistics costs, shortage of labor resources and production materials due to supply chain disruptions when China still pursues the "Zero Covid" policy. New orders from August 2022 to the first quarter of 2023 are also lacking, causing many businesses to stop production.

A representative of Vietnam National Textile and Garment Group (Vinatex) said that most of the units in the group have only signed orders until the end of August, with some units signing until October, with enough orders until the end of the year, but facing the problem of lack of raw materials, lack of labor and increased costs.

In the electronics industry, according to Do Thi Thuy Huong, member of the Executive Committee of the Vietnam Electronic Industries Association (VEIA), Vice President of the Vietnam Association of Supporting Industries (VASI), electronic industry enterprises lack components for production, and at the same time have a high inventory rate. Samsung Group set up a production base in Vietnam but in May 2022 also reported a 20% reduction in production. This makes domestic electronics enterprises generally affected.

Along with that, gasoline prices are still high, affecting the revenue of many businesses. Vietnam Cement Corporation (Vicem) said revenue in the first five months of 2022 reached VND15,700 billion, reaching 42% of the plan and increasing 12.4% compared to the same period in 2021. But due to the increase in input prices, even though the revenue was higher thanks to the adjustment to increase the selling price of cement from the beginning of the year, it was still not enough to offset the increase in input costs, so the profit in the first five months of the year decreased by 2.6% compared to the same period last year.

There are still many opportunities

From the above difficulties, businesses have made a series of recommendations on capital and financial support, and at the same time need to have preferential policies, to attract foreign investment selectively. According to Do Thi Thuy Huong, for supporting industry enterprises, the Government should have support programs to increase the domestic rate of industrial production, as well as arrange and support capital and technology.

In fact, Vietnam's industry always has a lot of development opportunities, especially thanks to the attraction of foreign direct investment (FDI) flows, creating a spillover effect on the activities of enterprises. domestic industry. For example, LG Display, a subsidiary of LG Group, is expected to raise about US$1 billion in investment capital from domestic and foreign banks to expand OLED display production lines and build factory infrastructure in Vietnam; Apple is moving iPad production outside China, towards Vietnam; many German electronics industry enterprises are also making huge investments in Vietnam; 76% of more than 1,200 European enterprises in Vietnam expect to increase FDI in Vietnam before the end of the third quarter.

Regarding supporting the industry, the Ministry of Industry and Trade said that the agency has directed units and enterprises to continue promoting industrial restructuring towards increasing the proportion of processing, manufacturing and reduce the proportion of processing and assembly for industrial products manufactured in Vietnam; review mechanisms and policies affecting industry of each industry and product; step by step remove difficulties for enterprises to increase competitiveness, build technical barriers for imported products to support domestic products, and increase the localization rate.