Local enterprises lack materials due to China's 'Zero COVID' policy
Hanoi, June
28 (VNS/VNA) - While many exporters and producers had orders for 2022,
they are worried about a possible shortage of production materials because of
supply disruptions from China.
The worst
sufferers were the electronics, wood, textiles, and footwear industries.
According to the Ministry of Industry and Trade (MoIT), China was an important
market for the export and import activities of Vietnam as it provides the
majority of input materials for Vietnam's production, especially electronic
components, machinery parts, fabrics and chemicals.
MoIT said
from 50 to 55 percent of raw materials and accessories for the textile,
garment, and footwear industries originated from China.
The country
was currently implementing the "Zero COVID" strategy, which forced
many factories there temporarily stop production to fight the pandemic.
The import-export activities in the neighbouring country were affected a
lot by the shortage of containers at ports.
Phan Thi
Thanh Xuan, Vice Chairwoman and General Secretary of the Vietnam Leather, Footwear and Handbag
Association, said businesses in the industry had to slow down export deliveries
because their Chinese partners lacked empty containers for transporting raw
materials and accessories.
She added
the supply of raw materials from China also decreased because many factories
had to suspend operations.
Nguyen Duc Minh,
Director of Duc Minh Rubber Company and Chairman of the HCM City Rubber
Plastics Association, said: "The Vietnam's rubber industry depends on up
to 70 percent of raw materials, especially chemicals.
"However,
the supply from this market is being blocked due to the Chinese side's
implementation of Zero COVID. If the supply from this market continues to be
interrupted, enterprises are forced to import from the Japanese and Korean
markets at 15-20 percent higher prices. With this input material price,
enterprises are at risk of not being profitable, making their products
difficult to compete in the world market."
Phan Anh Tuan,
General Director of Tan Phu Plastic Company, said besides the Zero
COVID, the escalating fuel prices forced the plastic materials prices to
go up, influencing his firm's input source.
Tuan said
though operation costs were also put higher due to higher logistic prices,
the Tan Phu company still kept prices of all products stable to support
consumers.
Tuan said:
"We keep modernising the production process to improve products and cut
costs the most."
The company
also aimed to use safe and high-technology materials so that the consumers
could reuse them to protect the environment and avoid more consumption of
plastic.
Tuan said
they organised a campaign called "Live green, live Japanese style" to
encourage customers to exchange the old products for the new ones instead of
buying new products.
While the
plastic company seemed to find a way to fix its problem, the textile
and garment, an industry with a lot of imported materials, was still
struggling.
Local media
reported that Dap Cau Garment Corporation, specialising in garment processing
for major markets and imports up to 80 percent of raw materials from China, got
orders until September, but it also had to postpone the delivery of many orders
due to the lack of raw materials.
The
company's leader said: "For orders that do not have enough materials, we
have to renegotiate the delivery time. However, the delivery time cannot be too
slow because that makes businesses face many payment risks."
In this
case, MoIT asked local enterprises to adapt to an appropriate strategy.
"The
most important task of enterprises at this time is to restructure production
soon, find alternative sources of supply to offset the shortage of the
current raw materials and outdated equipment. Enterprises also need to promote
linkages, support and use made-in-Vietnam products in production and business
activities to reduce dependence on external resources," MoIT said.
The ministry
asked them to find new sources of supply outside of China besides negotiating
with partners to share risks and extend the delivery time, but Nguyen Duc Thang,
Director of the Dap Cau Garment Company, said: "It's not an overnight
issue because China is the world's factory, supplying many raw materials and
accessories at reasonable prices. In addition, most of the raw materials the Dap
Cau company imports are pre-assigned by partners."
Vu Duc Giang,
Chairman of the Vietnam Textile and Apparel Association, said that it was
necessary to effectively promote the role of foreign trade counsellors to
strengthen the search for markets to supply raw materials along with supporting
them to access to a reliable source with good prices.
He said:
"This not only increases competitiveness for local enterprises but also
minimises the risks of dependence on a supply market."
A
representative of MoIT's Department of Industry emphasised that in the long
term, there must be solutions to develop supporting industries and several
important primary material industries in order to minimise dependence on
imported raw materials, components and input accessories./.
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