Vietnamese enterprises compete from position of weakness

SGGP
Not only being competed in the export market by foreign-invested enterprises, but many domestic enterprises also expressed concern about the increasingly fierce competition pressure right on home ground.
Vietnamese enterprises compete from position of weakness ảnh 1 Garment production for export. (Photo: SGGP)
Encountering difficulties in foreign markets

At Saigon 3 Garment Joint Stock Company, more than 1,000 workers were working hard to ensure on-time delivery for its orders. Many workers shared that, unlike last year when workers had to cut shifts due to the lack of orders, from the beginning of this year, the situation has changed as the company has received orders again and workers no longer have to cut shifts. Therefore, the salary and income of workers are also more stable. However, contrary to the excitement of many workers, Mr. Pham Xuan Hong, Chairman of the company, still expressed concern.

Mr. Hong said that at the end of last year, the company got an agreement to supply textiles and garments for the Japanese Uniqlo store network. This order has helped the company to maintain stable production. However, the export market is facing difficulties. Many chain stores in the world have announced bankruptcy and the company is being competed fiercely by some FDI enterprises, which take advantage of free trade agreements (FTAs) that Vietnam has signed.

Mr. Nguyen Duc Thuan, Chairman of the Vietnam Leather, Footwear, and Handbag Association, said that the current export turnover has increased sharply, mainly because of foreign-invested enterprises. For instance, in the first four months of this year, export turnover was estimated at US$103.9 billion, up 28.3 percent over the same period last year. However, the domestic economic sector got $25.76 billion, up 12.8 percent, accounting for 24.8 percent of total export turnover, while the foreign-invested sector got $78.14 billion, up 34.4 percent, accounting for 75.2 percent.

According to Mr. Thuan, from three years ago, when the export turnover ratio remained at 65 percent for the foreign-invested sector and 35 percent for the domestic economic sector, the association has repeatedly proposed to authorities to consider regulating, channeling and selectively attracting investment.

Accordingly, reducing investment attraction in manufacturing industries that domestic enterprises have taken initiative and prioritizing investment attraction in industries that domestic enterprises need to complete the supply chain. At the same time, priority should be given to attracting investment into the high-tech industry.

Because, according to many economic experts, if the export turnover ratio rises to 75 percent for the foreign-invested sector and 25 percent for the domestic economic sector, exports will depend on FDI enterprises.

However, up to now, along with strong foreign capital inflow into Vietnam, the balance of export turnover has had a large difference with the FDI sector taking the upper hand. The inevitable consequence is that export turnover is highly dependent on foreign enterprises.

Worryingly, the sharp increase in export turnover to the level of trade surplus in some markets has pushed domestic enterprises to face the risk of being imposed safeguard duties.

Mr. Dinh Cong Khuong, CEO of Khuong Mai Steel Company, said that the company has to look for market share in many new and niche markets. Because the main export markets, such as the US, Canada, Australia, Europe, no longer have had an opportunity for Vietnamese enterprises after the governments of these countries imposed safeguard duties of up to 400 percent.

And even in home ground

A representative of Binh Tay Food Joint Stock Company shared that in the domestic market, the company's products are mainly supplied to the Vietnamese distribution networks. However, in recent years, foreign distribution networks have massively landed in the Vietnamese market, rapidly reducing the number as well as the size of domestic distribution ones, indirectly putting pressure on domestic manufacturing enterprises.

In fact, foreign enterprises have diverse investment forms, from large-scale shopping centers to several small outlet networks densely interwoven in residential areas. The denser the foreign distribution networks are, the weaker the consumption of domestic products is. It is not that the foreign distribution networks do not allow Vietnamese goods to enter. However, with such a high discount level, domestic enterprises hardly join the supply chain of foreign distributors.

In that context, many experts said that it is essential to support domestic enterprises to strongly develop the distribution networks of Vietnamese goods. Regarding this issue, Mr. Nguyen Anh Duc, CEO of Saigon Co.op, said that to increase the competitiveness of Vietnamese goods, Saigon Co.op has diversified retail models, helping Vietnamese goods to develop following appropriate customer segments. On the other hand, it has accelerated the development of its network, bringing Vietnamese goods to deeply reach localities and rural areas across the country. Up to now, the unit has invested and put into operation 1,086 points of sale.

Many other domestic enterprises also said that in the context that foreign enterprises massively enter Vietnam, domestic enterprises need quick support in terms of investment capital to expand production, improve product quality, and increase competitiveness. More importantly, the authorities need to strictly implement the Party and State's policy of selective investment attraction, be consistent and fair in the application of investment incentive policies between domestic and foreign enterprises, avoiding the situation of prioritizing investment attraction from foreign enterprises and ignoring domestic ones. Authorities need to timely detect and strictly handle officials and civil servants in ministries, agencies, and localities, who cause difficulties and harassment to enterprises, especially domestic enterprises, and step by step remove barriers and create favorable conditions for domestic enterprises to develop.

By Ai Van – Translated by Bao Nghi

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