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| Production activities at Tan Quang Minh Trading and Production Company Limited (Bidrico). Photo: provided by the company |
Good business thanks to transformation
While major export markets such as the US and Europe have a large inventory of goods and a sharp decrease in purchasing power, wood exporters continue to face negative growth. However, businesses still make great efforts to survive.
Ms. Do Thi Kim Loan, General Director of Sao Nam Trading and Production Company Limited (Binh Duong), said that in the past, 100% of the company’s flooring products only focused on exporting to the US market. Still, from the end of the year to now, the demand of this market has dropped sharply, making the export volume, only about 35-40% of the factory’s production output. Sao Nam Company has sought to shift direction to find customers in other markets such as Australia, Canada to partially offset the decrease in volume from the main market.
“Currently, Australian wood board importers transfer materials to the company in the form of temporary import for re-export, we will perform the processing, packaging and export back to them. The proportion of participation in these products is only about 40-50%, but this is an adaptation to maintain the factory’s operations and create jobs for workers in difficult times,” said Ms. Do Thi Kim Loan.
Especially, thanks to the transition to green production, Trung Quy Textile and Garment Co., Ltd (Hai Son Industrial Park, Long An) has had more export orders and stands firm in difficult times. Recently, this company has exported two containers of fabric with organic fiber origin to an import partner from the US. Mr. Tran Van Quy, Chairman of the Board of Directors, General Director of Trung Quy Textile and Garment Co., Ltd. said that traditional products have yet to recover. Still, some partners have placed new orders for fabrics of organic origin, raw materials, and recycled material.
“Realizing that market demand bodes well for the new product line, the company has developed another 20 organically sourced fabrics ready to be produced as customer demand increases. Currently, there are about 10 major brands in Europe and the US that are researching Trung Quy’s environmentally friendly products,” added Mr. Tran Van Quy.
Nguyen Dang Hien, General Director of Tan Quang Minh Production and Trading Company Limited (Bidrico), said that in 2022, thanks to the greening of the production process, the export revenue of the enterprise will increase by more than 60% compared to 2022. From the beginning of 2023, in addition to maintaining market share in Korea, Japan and Southeast Asia, the company has increased export orders to the US and China thanks to its green transformation capacity.
Still need much help
In fact, many businesses still need help in mobilizing and accessing capital, increasing production and business costs, and export product markets are shrinking.
Mr. Nguyen Ngoc Hoa, Chairman of Ho Chi Minh City Business Association, said that in the first five months of 2023, the shortage of orders continues to be the biggest worry of businesses, especially in the fields of textiles, apparel and footwear, manufacturing, construction, materials, electricity – electronics. The shortage of orders has forced many businesses to reduce their production scale by more than 50%.
Stimulating domestic demand in the context of export difficulties is necessary to energize and bring new motivation to businesses. Dr. Tran Du Lich, a member of the National Financial and Monetary Policy Advisory Council, said that the total revenue of goods and services in the first quarter of 2023 increased well. Still, after April it began to slow down, and the market purchasing power was not good. Even tourism, visitors are still sparse, and domestic market stimulus is very limited. For the economy to recover soon, it must rely on the macro-economy; increase the purchasing power for the market by implementing the policy of stimulating domestic aggregate demand through two tools of the State and of enterprises.
Accordingly, it is necessary to continue researching to reduce VAT by industry, needing stronger solutions than reducing it to 5%-6%, boosting domestic market demand through consumer credit. However, enterprises themselves should have campaigns to accept discounts and stimulate the market because in this difficult export context without pulling up the domestic market, it will affect inventories, production activities, and business, Dr. Tran Du Lich said.
Ly Kim Chi, Chairman of the Food and Food Association of Ho Chi Minh City, said that lending interest rates should be brought below 10% per year to help businesses increase competitiveness, thereby increasing the ability to consume goods and products among businesses besides stimulating customer consumption demand. At that time, the domestic demand increase will offset the export turnover decrease. As with the food industry, the current rate of return is about 11%-12%/year (excluding depreciation and interest). If businesses have to borrow with interest rates above 10%/year, they will suffer losses.
Accordingly, commercial banks need to raise the ratio of loans to collateral because the current value of collateral after re-valuation has been reduced quite a lot. The State should have policies to encourage banks to value assets at market prices to serve as a basis for determining loan levels for businesses with good business performance because according to regulations, businesses can lend unsecured loans, Ms. Ly Kim Chi said.