Vietnam economy hit by falling demand for exports

Oct 22, 2008, 11:43 GMT

   Hanoi - Vietnam is isolated from losses linked to toxic US subprime mortgage loans but the global economic crisis they have unleashed is hitting its export markets, government officials said Wednesday.

   The Trade and Industry Ministry projected the country would earn 15.7 billion dollars from exports in the fourth quarter, or roughly 5 billion dollars for each remaining month of the year. That figure represents a drop from the recent monthly average of more than 6 billion dollars as demand for key exports drops.

   Producers and exporters are reporting that prices of exports such as rubber, coffee, pepper, rice and seafood are falling.

   Textile and apparel exports, Vietnam's second-biggest earner just after crude oil, were likely to miss the growth targets the government set for 2008.

   'Obviously, our textile and apparel exports are being badly affected by the world financial crisis,' said Le Quoc An, chairman of the Vietnam Textile and Apparel Association. 'We find it hard to export our products these days.'

   Vietnam planned on earning 9.5 billion dollars from the industry this year, up from 7.8 billion in 2007. It earned 7 billion dollars, or about 800 million dollars per month, in the first nine months of the year, but An said he doubted exporters could bring in the remaining 2.5 billion in the next three months.

   Other major Vietnamese exports are facing difficulties as well as Vietnam's main export markets tighten their belts because of slowing economic growth.

   'Our exports have dropped sharply in the first nine months this year as our major markets are in recession,' said Nguyen Ton Quyen, secretary general of the Vietnam Wood and Forestry Product Association. 'The fourth quarter will be a very tough time for us because we don't have many orders.'

   Quyen said importers from North America, Europe and Japan were not selling wood furniture from Vietnam because people have stopped making large purchases with the economic downturn.

   The importers of Vietnam's wood products are overstocked by 30 per cent, Quyen said, adding that orders have dropped by 20 per cent compared with the first nine months of last year.

   'Many wood companies are only working intermittently because we cannot sell our products,' Quyen added.

   Vietnam is the world's 10th-largest wood products exporter and the second largest in the 10-nation Association of South-East Asian Nations with export revenues of 2.35 billion dollars in 2007. The government set a target of 3 billion dollars for the sector for 2008, but Quyen estimated the total would come closer to 2.8 billion dollars.

   'The economic slowdown has caused a loss of 30 per cent in our export revenues in the past nine months compared with the same period last year,' said Nguyen Van Thu, vice chairman of Vietnam's Tea Association.

   Thu said Vietnam exported about 120,000 tons of tea in 2007, bringing in 130 million dollars. This year, he expected to export around 90,000 tons.

   Rice, the country's other key export, has been seeing similar falls. Local media reported that farmers were finding it hard to sell their rice while world prices plummet.

   Vietnam's rice exporters are facing a range of challenges, including high interest rates, lack of importers and the recent introduction of a rice export tax.

   The Vietnam Food Association reported it had exported 3.8 million tons of rice as of October 17 and it expects to export 700,000 tons for the last quarter, but rice exporters said they doubted they could sell that much in two and a half months. They said most rice exporters have found that their customers are not placing any large orders.

   'We planned to export around 200,000 tons of rice for the last quarter, but our importers lack money,' said Tran Xuan Ha, head of the export and import department of the Northern Food Corp, the second-biggest rice-exporting corporation in Vietnam. 'We are not sure we can earn that money.'