Reliance on imports poses risks

Vietnam's increasing reliance on imports of goods and materials from foreign countries, especially China, is a risky move, according to experts.
Vietnam's increasing reliance on imports of goods and materials from foreign countries, especially China, is a risky move, according to experts.

Vietnam imports large quantities of fertiliser, machinery, equipment, electronic parts and materials for leather, footwear, garment and textile production from China, along with petrol and oil from Singapore and home appliances from Thailand.

According to the General Department of Customs, Vietnam trade deficit with China increased during the first half of this year, as imports from China to Vietnam rose sharply.

The nation imported 1.84 million tonnes of fertiliser in the first half of the year, including 713,000 tonnes from China; 7.09 billion USD worth of machinery and equipment, including 2.4 billion USD from China; 2.75 USD billion worth of computer and electronic components and products, including 897 million USD from China; and 6 billion USD in material for leather, footwear, textile and garment industries, including 2 billion USD from China.

Pham Xuan Hong, general director of Sai Gon 3 Garment Company, said Vietnam had to import 70 percent of materials used for the local textile and garment production, including 20 percent from Thailand, Indonesia and India. Only 30 percent of materials used for production was sourced domestically.

"Domestic textile and garment producers can't get enough materials for production locally, so they have appointed foreign firms as materials providers especially Chinese firms," Hong said.

The textile and garment industry registered a growth rate of 30 percent in export value for the first months of this year, he said. But, export value had a real increase of 10 percent due to high import prices for cloth.

For instance, the whole sale price of a shirt had increased from 10 USD per unit to 12 USD due to high production costs. So if local producers make their products with only local materials, they would gain a higher export value, Hong said.

Truong Thi Thuy Lien, director of the Lien Phat Ltd Company, said that since early this year, prices of materials imported from China had increased by 40 percent against the end of last year.

The greatest risk from importing the material from China was a sudden increase in the price of the imports, she said.

Economic expert Le Dang Doanh said local producers had to import a large quantity of material from China because the country was nearby, so transport costs were low, and added incentive for domestic exporters.

However, if local producers rely too heavily on imports from other countries, the risks they face are high.

To deal with the risk, the Binh Tan Consumption Goods Company (Bita's) had sought new suppliers in Thailand, the Republic of Korea, Malaysia and Italy, in addition to its Chinese partners, said Do Long, Bita's general director.

Hong said the Sai Gon 3 Garment Company had ordered materials from ASEAN countries and even bought materials from joint ventures in Vietnam.

But, the amount of materials was still not enough to satisfy demand and producers were finding it difficult to reduce imports of materials from China, Lien said, adding that Vietnam was not a centre for producing materials used for leather, footwear, textile and garment industries. Local producers have had to depend on materials imported from China.

Huynh Van Minh, chairman of the HCM City Enterprises Association, said domestic producers could not diversify their sources of materials, machinery and equipment due to financial limitations.

Vietnam should develop a centre for making the material to meet domestic demand, creating favourable conditions for the local producers in improving their competitiveness on the world market, Minh said./.

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