Identifier
Created
Classification
Origin
09HANOI564
2009-06-18 09:11:00
UNCLASSIFIED
Embassy Hanoi
Cable title:  

VIETNAM'S EXPORTERS BEATING THE SUMMER CRUNCH

Tags:  ETRD EAGR EFIS ELAB ECON KTDB KTEX PGOV VM 
pdf how-to read a cable
VZCZCXRO2001
PP RUEHCHI RUEHDT RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHNH RUEHPB
DE RUEHHI #0564/01 1690911
ZNR UUUUU ZZH
P 180911Z JUN 09
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC PRIORITY 9775
INFO RUEHHM/AMCONSUL HO CHI MINH 5940
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC
UNCLAS SECTION 01 OF 02 HANOI 000564 

SIPDIS

STATE FOR EAP/MLS MBROWN
SINGAPORE FOR TREASURY
TREASURY FOR SCHUN
USTR FOR DBISBEE
USDA/FAS/OCRA/DLUCHOK

E.O. 12958: N/A
TAGS: ETRD EAGR EFIS ELAB ECON KTDB KTEX PGOV VM
SUBJECT: VIETNAM'S EXPORTERS BEATING THE SUMMER CRUNCH

REF: A) Hanoi 205 ("Summer Is Sink-Or-Swim Time for Vietnam");
B) Hanoi 339 ("Vietnam's 1st Quarter Numbers");
C) 08 Hanoi 871 ("Vietnam Not Rushing Trade Deals")

HANOI 00000564 001.2 OF 002


UNCLAS SECTION 01 OF 02 HANOI 000564

SIPDIS

STATE FOR EAP/MLS MBROWN
SINGAPORE FOR TREASURY
TREASURY FOR SCHUN
USTR FOR DBISBEE
USDA/FAS/OCRA/DLUCHOK

E.O. 12958: N/A
TAGS: ETRD EAGR EFIS ELAB ECON KTDB KTEX PGOV VM
SUBJECT: VIETNAM'S EXPORTERS BEATING THE SUMMER CRUNCH

REF: A) Hanoi 205 ("Summer Is Sink-Or-Swim Time for Vietnam");
B) Hanoi 339 ("Vietnam's 1st Quarter Numbers");
C) 08 Hanoi 871 ("Vietnam Not Rushing Trade Deals")

HANOI 00000564 001.2 OF 002



1. (SBU) Summary: Vietnam's most important export sectors are
bouncing back after a tough, but much shorter than expected, period.
None are expecting big drops in export numbers compared to 2008,
and some are holding on for the possibility that 2009 may even
surpass the last year's record-setting levels. Many exporters are
producing more goods, though at diminishing returns as their prices
have had to come down to be competitive. Many of the industries are
now turning their attention to other issues, like new U.S. import
regulations on catfish and wood products, free trade deals, and
improving their ability to counter dumping allegations. End
summary.

WHAT A DIFFERENCE THREE MONTHS MAKE
--------------


2. (U) Just last March, Vietnam's leading export sectors were
dreading the coming summer. The second half of 2008 had already
seen a slowdown and, with the global economic crisis in full swing,
massive layoffs and plant closures were not out of the question.
Three months later, many are hiring additional workers and output in
some sectors is even outpacing the booming first half of 2008.
VITAS, the largest association of garment manufacturers says some of
its members are even refusing orders because they cannot keep up.
The wood association, whose situation last March looked the most
precarious of Vietnam's exporters, says many of its members have
enough orders to keep them busy for the rest of the year.


3. (U) Although the reasons vary by sector, demand for Vietnamese
exports in the United States and Europe remains strong. In
addition, Vietnam's competitiveness in Japan is growing as a result
of trade deals that have eliminated tariffs. A key factor in the
exporters' ability to weather the tough times has been their ability

to cut profit margins to match and beat those of their competitors.
Total exports for the first five months of the year were down by
6.8% from 2008, but these numbers were affected by substantial
changes in exports of precious metals and gold (up 3,310%) (Ref B)
and oil (down 44%). Not counting oil or precious metals, exports
were down 10.94% in the first five months of the year. Many
agricultural exports have increased, even though many commodity
prices have come down from last year's peaks (Septel).

GARMENT/TEXTILE SECTOR DOING MUCH BETTER
--------------


4. (U) Garments, Vietnam's top export after oil with $9.11 billion
in 2008 revenues, were down by 1.8% over the first five months of
2009, even though export volumes were above the previous year's.
But every month is coming in a little better than the one before --
May alone brought in more revenues than the first four months of the
year combined. VITAS expects that exports will increase from .5 to
2% during the year's peak May to August season from the year before.
Vietnamese garments are doing particularly well in the United
States (up 6.6% in value and 20.6% in volume over the first quarter
of 2009),where even dominant market leader China has seen
reductions this year. "There are big orders coming in now and we
expect an increase," VITAS's number two told us. "Some factories
have refused more orders already.

FISHERIES LOOKING TO MATCH RECORD 2008 NUMBERS
--------------


5. (U) The fisheries sector, Vietnam's fourth largest export with
$4.56 billion in 2008 revenues, is also looking forward to a
brighter second half of 2009. The first four months of the year
have been tough, with export revenues down by almost 10%. From
January to April 2008, all of Vietnam's fisheries exports were down:
pangasius (-1.2%),shrimp (-7.3%),tuna (-25%),dried seafood
(-14%),and other fish (-6.3%). Despite this, the industry saw
better numbers in April and May. The industry's main trade
association, VASEP, said that they expect final 2009 numbers to be,
at worst, down by 4.5% and, more likely, equal to the record 2008
numbers.

BUT DEEPLY CONCERNED ABOUT U.S. MARKET ACCESS
--------------


HANOI 00000564 002.2 OF 002



6. (U) Ironically for the fisheries industry, the U.S. market
provides some of the brightest and darkest spots for 2009. Like the
garment industry, U.S. demand for Vietnamese fisheries products has
increased over the first part of 2009, by 38% -- the biggest
increase among all of Vietnam's markets. But VASEP is increasingly
concerned about proposed regulations on pangasius fish that they
believe will reverse U.S. market gains. Their tone is becoming
increasingly bitter. "Our agricultural imports from the U.S. are
going up and up, and we're ready to import U.S. beef," the Vice
Chair of VASEP told us, "why should it be any different for our
fish? I hate it that the United States is going for the easiest way
to block our exports."

FOOTWEAR AND WOOD BULLISH ABOUT SECOND HALF OF 2009
--------------


7. (U) The footwear industry, whose products are Vietnam's third
most valuable export with $4.7 billion in 2008 revenues, is also
predicting solid numbers in 2009. Although exports were down by 10%
in the first five months of the year, the industry is confident that
the third and fourth quarters of the year, when exports tend to
peak, will see significant improvements. Final 2009 numbers should
end up down by about 4%, but still well above 2007 levels, according
to the Vice Chairwoman of LEFASO, Vietnam's leading footwear
association. She added that the industry is actively hiring new
workers, since through 2008 the shortage of labor was such that many
factories were unable to adequately staff their operations.


8. (U) The wood sector, which looked bleak last March, is seeing a
"more promising" end of the year, according to the Chairman of
VIFORES, the industry association. "Some of our exporters already
have orders to keep them busy until the end of the year," he added.
In order to compete, pricing is 10-15% below last year. The
industry expects their exports to be down by 15% in the first half
of the year, but exports usually peak in the latter half, and
VIFORES expects 2009 to repeat the strong numbers of 2008 ($2.8
billion). The Chairman told us that the industry is now turning its
attention on how to comply with new U.S. requirements on wood origin
declarations.

ELECTRONICS AT EASE WITH CURRENT SITUATION
--------------


9. (U) The electronics industry is also improving from the beginning
of the year, although it is still down 8% from the first five months
of 2008. "We had ten years of continuous growth, so this is not so
bad," the Vice Chairman of VEIA, the electronics industry
association, told us. Although they have no clear forecast for the
rest of the year ("because we have never been in this position
before"),he added that the industry will need to hire new workers
in the second half.

COMMENT: PASSING THE COMPETITIVENESS TEST
--------------


10. (U) The speed at which Vietnamese exporters are seeming to
recover is surprising, and underscores their ability to compete in
the toughest of situations. Although exporters are not resting on
their laurels, many are now focusing on overcoming potential
barriers down the road. Almost all sectors are benefitting from
last year's trade deals (Ref B),we were told, shoring up supporters
of freer trade and market opening in the government and the private
sector. Despite their bright outlook, many exporters fear that the
U.S. may turn more protectionist this year and renew textile
monitoring, increase anti-dumping allegations and erect non-tariff
barriers.

PALMER