VietNamNet Bridge – Though orders from foreign partners are coming thick and fast, Vietnamese enterprises say they can expect only modest profits due to a sharp increase in input material prices.

The Hong Kong and Shanghai Banking Corporation (HSBC) has reported that the Vietnam’s Purchasing Managers Index (PMI) rose to 52.1 points from 51 last month.

The bank reported the third consecutive increase in the number of orders from foreign partners in November, commenting that the country’s lower labor costs compared to China had helped Vietnam obtain more orders.

According to the General Statistics Office (GSO), export turnover in the first 11 months of the year reached $137 billion, an increase of 13.7 percent over the same period last year.

The export of key products has been satisfactory: garment exports brought $19.2 billion (up by 18.2 percent), footwear $9.2 billion (up by 23 percent), seafood $7.3 billion (up by 20 percent) and wooden furniture $5.6 billion.

Dang Quoc Hung, deputy chair of the Handicraft and Wood Industry Association of HCM City (Hawa), has confirmed that the orders have come steadily from the US and Europe, noting that foreign importers are placing orders with Vietnamese enterprises instead of Chinese due to high labor costs in China.

Garment and footwear companies have also reported a high volume of orders. Huynh Dang Tung, deputy director of Asia - Europe Shoes Company, revealed that he has enough orders to ensure jobs until March 2015.

An official of the Vietnam Leather and Footwear Association (Lefaso) noted that the $12 billion worth of footwear export turnover in 2014 is within reach.

Lower profits

Though getting big orders, Vietnamese enterprises say their happiness is “incomplete”.

Hung said the profits are modest because of significant increases in input material costs.

“An importer from Europe contacted us and negotiated a big deal, but I did not take the order,” he said. “The input material price is on the rise, while the export price remains unchanged. It is foreseeable that the more we do, the bigger loss we will incur.”

Believing that garment is the industry which would most benefits from free trade agreements (FTAs), Pham Xuan Hong, deputy chair of the Vietnam Textile and Garment Association, said the profits for garment companies have “shrunk”.

Truong Dinh Hoe, secretary general of the Vietnam Association of Seafood Exporters and Producers (VASEP), said after a “hot” development period with difficulties, seafood companies were reluctant to scale up production and export in large quantities, but were trying to “cut the coat to suit the cloth” in order to avoid risks.

Thanh Mai