Vietnam's exports are estimated to reach US$19.25 billion in the first quarter of this year, an increase of 33.7 percent compared to the same period last year, according to the Ministry of Industry and Trade. However, production and export still face a number of difficulties.
In the first quarter of this year, exports of agricultural products, such as coffee, rubber, rice, cassava and seafood increased significantly in both volume and value,. Crude oil and coal exports fell sharply due to Government restrictions on exports. Many processing industries achieved impressive growths, including chemicals, plastics, handbags, suitcases, garments and footwear. This is a good signal for high export growth this year, which will compensate for the decline in mineral and gold exports.
The biggest challenge facing seafood, cashew nut and timber product exports is the lack of input materials and high loan rates imposed under the Government's policy to tighten credit growth in order to contain inflation.
Nguyen Thai Hoc, Chairman of the Vietnam Cashew Nuts Association, said the cashew sector had to import around 50 percent of its input materials in 2010 and will import the same volume this year. The price of materials rose by 1.8 times and the sector will need around VND12,000 billion to import material in the second quarter of 2011.
Businesses need large amount of capital for production and exporting but find it difficult to access loans because of high interest rates. If they do not maintain production they will lose prestige and many workers will lose their jobs. But if they borrow money to import materials, they will lose about US$400 per tonne, Hoc said.
This situation has caused businesses protect themselves by cutting operations, instead of pouring more investment into the enterprise or expanding production, which will affect the sector's growth in 2012 and the following years.
Tran Quoc Manh, Vice Chairman of the Ho Chi Minh City Handicraft and Wood Industry Association (HAWA) said another issue of concern is that rising input costs and prices of finished products will directly affect the competitive edge of Vietnamese products.
While the Government gives top priority to containing inflation it won't loosen its credit policy or promote an interest rate stimulus package like it did two years ago.
Deputy Minister of Industry and Trade, Nguyen Thanh Bien said the Government and the State Bank of Vietnam are trying to make the ceiling loan rate a reasonable level. For example, the ceiling interest rate is now 14 percent but, in fact, businesses have to borrow capital at a higher rate.
To deal with these challenges, some associations have urged the State to consider exempting corporate income tax for six months or one year, and lowering valued-added tax (VAT) and abolishing export tax.
Hoang Manh Tuan, Deputy Head of the Tax Policy Department of the Ministry of Finance, analysed that according to the WTO commitments, abolishing export tax is a yellow warning level because our products will likely have an anti-dumping tax imposed on them. Exempting corporate income tax is a red warning level and must be submitted to the National Assembly.
Experts forecast that production and exports will face even greater difficulties in the second quarter of this year.
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