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The paradox in the domestic market
Vietnamese businesses have focused on making products to sell abroad at low prices, while they have not paid much attention to selling products in the domestic market. This partially explains why Vietnam’s trade deficit reached $5 billion in the first eight months of the year.
Van, who works for a telecom company in Hanoi, said that she purchases ‘made in Vietnam’ clothes and leather shoes made by Vietnamese companies under outsourcing contracts signed with foreign partners. Van said that the products are all made in Vietnam, but they have very good designs with ‘western style’ and reasonable prices.
Thuy Lan, a colleague of Van, said that she only purchases imported dairy products for her son. “I feel more secure when using imported dairy products and I do not intend to use domestically-made products instead,” Lan said.
Most Vietnamese people prefer imports to domestically-made products, especially those who have medium and higher incomes. Vu Vinh Phu, Chairman of the Hanoi Supermarket Association, believes that more than a half of customers at supermarkets will choose a box of cookies from Denmark priced at 70,000 dong over a box of cookies of the same kind and made in Vietnam sold at 60,000.
Vietnam is a vast consumer market of $40-50 billion a year. Meanwhile, Vietnamese businesses have been ignoring the market. In many markets, like the toy markets, 90 percent of products on sale are foreign-made, while in the apparel market, the figure is 30-40 percent.
According to the General Statistics Office, the volume of goods in stock of the enterprises in processing industry was 1.5 times higher than that of the same period of last year. The inventory goods index in the first months of the year was between 134.6 percent and 170.7 percent in comparison with the same period of 2008, which shows that domestically-made goods have been selling very slowly.
Vietnam’s GDP still grew by 3.9 percent in the first half, despite the world’s economic recession, but only thanks to exports.
According to one of the two methods of calculating GDP Vietnam is applying, the growth rate is calculated by the final consumption (mostly household consumption) plus asset accumulation and import-export. It is clear that while asset accumulation and consumption decreased by 5.3 and 4.5 percent, respectively, in the first six months of the year, exports were the only factor that could help make GDP grow by 3.9 percent.
Nevertheless, it is noteworthy that Vietnam is exporting products at prices much lower than previously, since the prices of many products in the world market have been decreasing since the end of 2008 due to the economic recession. The export volume in the first six months of the year was 11 percent higher than during the same period of last year, while export turnover was down by 10.1 percent.
The situation is continuing and happening to nearly all key export products. Though crude oil exports in the first eight months of the year increased by 8 percent over the same period of last year, earnings decreased by 48.1 percent. As for rice and pepper exports, though the export volumes increased by 1.5 times, export turnover decreased by 1.4 and 0.6 percent, respectively. The same situation happened with coffee, rubber and cashew nut exports.
Vietnamese businesses have been working hard to make products for export and they have left the domestic market open to foreign-made products.
In fact, a quick survey conducted by local newspaper VnExpress showed that Vietnamese consumers are also interested in Vietnam-made goods. 40.2 percent of consumers said they consider sale prices and products’ quality before deciding whether to purchase goods. 23 percent said they purchase domestic products simply because they do not have money to purchase foreign-made products. Only 12.6 percent of readers said they do not care if products are made in Vietnam or foreign countries.
vietnamnet, vneconomy
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