Southern firms swim against the tide

Ho Chi Minh City-based firms are desperately trying to maintain stable production amid inflation, plus volatile deposit and exchange rates.

Anh Khoa Production & Trading deputy director Nguyen Khoa Van said the price of garment materials and accessories rose 80-90 per cent in 2010 with the Vietnam dong-US dollar exchange rate difference contributed around 10 per cent to the price hike.

The company, therefore, shifted into launching fashionable items instead of common ones to shirk competition from low-cost products.

“Scores of garment firms took the low-price regime as an effective tool to stay afloat of market competition in 2010, they then faced a mountain of difficulties amid soaring material prices,” Van said. He said the firm was set to achieve a 55 per cent jump in sales revenue in the first quarter of 2011 compared to the same period last year through spotlighting fashionable products.

Van, however, said it was still very difficult to access bank loans. “Banks often require collateral and not always willingly support businesses through offering factoring services or allowing us to mortgage end products for loans,” he said.

ThyssenKrupp Materials Vietnam’s Financial Department head Dang Thi Anh Tho said the exchange rate would heavily influence businesses’ activities. As 90 per cent of the company’s products are imported, the firm found it difficult to source US dollars to pay material suppliers.

“I think banks still do not have available dollars to lend in the first quarter. Therefore, from now on our company will shift into signing orders using other foreign currencies rather than US dollars,” Tho said.

Thep Viet Company Limited chairman Do Duy Thai said Vietnamese firms could not survive competition from similar items made in other regional countries given the high lending rates of 17-18 per cent.

“To mitigate difficulties, the company has injected capital into cutting-edge equipment to save fuel and lowering production costs,” Thai said.

He assumed that businesses’ efforts alone were insufficient to prevail and the government needed to advance efforts to help stabilise the macro-economy and pull back banks’ lending rates.

Thai said: “2011 would be another challenging year for Vietnamese companies if the price of essential input products such as electricity continues to hike amid current unfavourable lending and Vietnam dong-US dollar exchange rates”.