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Vietnam construction industry eyes foreign markets
Many domestic construction material producers have outlined their new business plans recently, giving priority to developing exports.
They see this as a way to increase profits because the domestic market outlook is still gloomy, analysts say.
They note that although domestic construction material market has in recent months showed slight recovery signs after the two years of sluggishness, significant improvements in purchasing power cannot be expected.
The added focus on exports also has an eye on long-term business success, given that Vietnam is part of the Trans-Pacific Partnership that is in force.
The cement industry is an example of the strategic shift being made. In the first 10 months of the year, domestic firms consumed 48.27 million tonnes of cement, up 12 percent year-on-year.
Of this, 10.5 million tonnes, or 10 percent were exported, registering a year-on-year increase of 62 percent.
This indicates that the going is still tough in the domestic market and there is potential for increasing exports, the analysts as well as industry insiders agree.
Tran Viet Thang, general director of the Vietnam Cement Industry Corporation, said in the first 10 months of the year the company exported 1.8 million tonnes of cement, equivalent to 601 percent of the yearly plan and 174 percent of the last year’s figure.
The Vietnam Glass and Ceramics Corporation has also made great efforts to export their products to 40 countries. As a result, the company earned 30 USD million from their overseas business in the first nine months.
However, according to the Construction Material Producers Association, the construction materials industry is still caught up several “inherent” difficulties.
These include low sales, huge inventories and stagnant production, meaning many companies are not running at full capacity.
In the cement industry, many enterprises are only operating at around 70 percent capacity, and several have even suspended production.
A similar situation can be seen in the construction glass sector, with many firms running at 50 percent of their production capacity and inventory rising to about 300,000 tonnes.
Many industry insiders are hoping the TPP can help ameliorate the situation by boosting exports.
“With the TPP agreement, the domestic construction material industry would be able to sell more products, while they can import better products at reasonable prices,” Chairman of the Vietnam Steel Association Pham Chi Cuong told Thoi Nay (Today) newspaper.
He said that most Vietnamese construction material products are of average quality, but even these are needed in some countries. These countries would have to drop their import tariffs under the TPP, creating an opportunity for Vietnamese firms.
According to Deputy Minister of Industry and Trade Tran Quoc Khanh, TPP member countries have participated in 19 official rounds of negotiations, the last one taking place in August this year. The negotiations are expected to wrap up by the end of this year.
Khanh affirmed that when the TPP is put into place, Vietnam’s export sector will benefit as other countries 100 percent of import taxes.
In addition, Vietnam will have the chance to participate in global production chains, which will pave the way for the country to further promote the restructuring of its economy, increase job opportunities and improve the business environment to attract more investment.
Tran Ngoc Chu, general director of the Ton Hoa Sen Company, said they now export to 30 countries around the world.
When the TPP agreement takes effect the company expects to have opportunities to penetrate into major overseas markets including Chile, New Zealand, the US, Australia and Mexico, Chu said.
Economist Tran Minh Hai of the Ho Chi Minh City National University stressed the need for the domestic construction material producers to come up with effective export strategies. He said the focus should on pricing, quality and sales promotion.