Industrial production makes substantial recoveries but still a long way off

Reports of Binh Duong Statistics showed that H1 industrial production has gained rewarding results on the next steps of H1 recovery momentum to bolder return in H2 of the year.

The reports are in figures of increased industrial production index in the first 6 months of the year (by 5.63% comparing to H1 2023 of 2.65%). The figures are broken down to mining industry of 0.88% reduction from H1 2023 which was 2.22%, machinery at 5.42% increase from H1 2023 which was 2.80%, the sector of power supply, gas, heating steam, steam and air-conditioning at 14.73% increase from H1 2023 which was 4.55%, and the sector of water supply, waste and waste water management and processing at 11.55% increase from Q1 2023 which was 2.18%.

Many important industries in the processing and manufacturing sector saw significant growth in the first 6 months of 2024 compared to the same period last year. Specifically, the wood processing and production of wood, bamboo, and rattan products increased by 11.31%; the production of beds, cabinets, tables, and chairs increased by 15.66%; the textile industry increased by 14.15% compared to the same period; the production of garments increased by 4.16%; the production of leather and related products increased by 18.63%; the production of precast metal products (excluding machinery and equipment) increased by 10.16%; and the production of electrical equipment increased by 11.59%.

In addition, the export turnover in the first 6 months of 2024 also increased significantly, reaching 16.299 billion USD, increasing by 10.3% compared to the same period. Some key export products also achieved high growth rates, such as wood and wood products (the product with the largest share of export turnover, accounting for 18.5% of the province's total export turnover) reached 3.020 billion USD, increasing by 23.2%; textiles and garments (the second largest share of export turnover, accounting for 8.5%) reached 1.386 billion USD, increasing by 2.4%; iron and steel of all kinds (accounting for 6.9% of total) reached 1,122 million USD with an increase of 18.8%; footwear of all kinds (accounting for 5.4% of total) reached 879 million USD with an increase of 7.6% among others.

A working session at the venue of Binh Duong provincial Department of Industry and Trade is carried out to grasp up production and business situations through feedbacks of associations and sectors

According to businesses and associations, in the first 6 months of 2024, the production and export situation has shown positive signs as many businesses have received export orders (except for the ceramics and lacquerware - sculpture industry, which has seen a decrease in export orders). The labor force is stable and no longer scarce like in previous years, which is also an advantage for manufacturing businesses.

However, enterprises believe their industrial production is still in hardship in the first 6 months of the year regardless of the rewarding outcomes. It is specifically stated:

- International market unrest is still challenging as a technical barrier preventing nations from importing while the heating up geo-political conflicts have reduced purchase orders of enterprises by 10 to even 25% from 2023, greatly affecting production costs and revenues of enterprises.

- The requirements for lower carbon footprints at domestic and destination markets have increased under the pushing of Netzero, making products of higher carbon footprints to cost higher which reduce their competitiveness in the market.

- Anti-dumping Investigations conducted by the USA, Canada, etc.

- Accessing loan capital is facing drawbacks: the revenue and profit of businesses in 2023 decrease compared to 2022; the credit limit is reduced due to the decrease in real estate collateral value; almost all banks require collateral assets instead of unsecured loans for projects, production contracts, and exports. In addition, the interest rates for existing loans (in 2022, 2023) are still high, much higher than new loans.

On the basis of drawbacks and obstacles, the associations requested to promote production and exportation in H2 as follows:

- Although there have been export orders, the company still has a large inventory, so the cash flow is frozen, and the company does not have enough money to repay the loans when they are due. Businesses propose that the State Bank direct commercial banks to restructure and extend debts for businesses to have more time to repay loans and maintain capital flow, ensuring business production and overcoming difficult periods without increasing bad debts for banks.

- The State Bank is recommended to direct commercial banks to have an appropriate interest rate reduction policy in line with the current interest rate level for medium-term loans that have been borrowed before years 2022 and 2023.

- The State Bank and credit funds are called upon to guide and facilitate businesses in accessing preferential loans with low interest rates, so that businesses have capital to maintain production, invest in machinery and equipment, and innovate technology.

- Regarding Social Insurance: Due to the impact of the economic crisis in 2023, the income of workers has also decreased, so many workers have applied for leave to withdraw their social insurance funds at once, affecting the labor force of businesses and causing difficulties for the social insurance fund. The Textile and Garment Association proposes that the Social Insurance and Policy Bank of the province can coordinate with businesses to find a solution to support workers' loans based on the value of their social insurance book, in order to bind workers to their loan responsibilities. This aims to support workers and businesses in stabilizing production, as well as to prevent the Social Insurance Agency from having to pay a large number of workers' insurance withdrawals at once as it is currently happening.

- Regarding the environment and fire prevention and fighting: currently, regulations on the environment and fire prevention and fighting are very strict and stringent. Businesses need a lot of expenses to invest in accordance with the regulations to continue their operations. For businesses located outside the industrial clusters in the southern region, they are very concerned about the cost of investment to meet the requirements of the environment and fire prevention and fighting at their current production location. Therefore, the provincial People's Committee, departments, and sectors are recommended to have policies to extend or provide support for businesses located outside industrial clusters and zones in the southern region.

- Regarding environmental permits: for businesses that have been approved for environmental impact assessment but have not yet completed the environmental impact assessment report; however, during the operation, the business still carries out quarterly monitoring reports that meet the requirements.

With the new regulations on environmental permits to be completed before January 2025, businesses are urgently carrying out the work, and there are many businesses that do not have a completed environmental impact assessment report after being approved for environmental impact assessment, which will be fined over 300 million VND per business. With the current difficult situation, the Textile and Garment Association recommends that the authorities consider exempting or reducing fines for incomplete environmental impact assessment reports during the previous period, in order for businesses to focus on investing in the costs of completing environmental permits as regulated.

- On taxes: Recommendation is made for considering solutions for the refund procedures of businesses such as VAT, import taxes for on-site import-export activities, in order to reduce capital accumulation for businesses.

- In terms of e-commerce and digital transformation: The cost of digital transformation for businesses is high and it is difficult to invest in digital transformation; recommendations include having policies to support businesses in their digital transformation.

- Regarding trade promotion and publicity: It is recommended for supporting businesses to enhance trade promotion to traditional markets such as Europe, the United States, and expand into new markets such as India and the Middle East. Organize domestic trade fairs to address inventory issues and target the domestic consumer market; provide support for publicity such as technology transfer, application of advanced machinery, and scientific and technological advancements in production.

Reported by Dai Duong – P.QLCN – Translated by Vi Bao