Market and product

A slowdown

Statistics from the Ministry of Industry and Trade show that compared with October 2010, industrial production of October 2011 increased only 5.3 percent. Specifically, the production value of the mining industry decreased by 6.2 percent; processing and manufacturing industries, up 10.3 percent (the average monthly growth rate in the first 10 months was 11.3 percent); power, gas and water production and distribution, up 6.9 percent. Compared with the same period last year, industrial production in the first 10 months of 2011 grew only seven percent.

In September 2011, industrial production increased 12 percent compared with the same month of 2010, but in October 2011, industrial production grew only 5.3 percent compared with October 2010. The output of some kinds of industrial products decreased, for example natural gas down 9.9 percent, liquefied petroleum gas (LPG) down 6.2 percent, petrol and oil down 4.9 percent.

Some industries have kept production at an indifferent level or even reduced the output to prevent an increase in the inventory, for example steel production down 1.3 percent (in early October 2011, nearly 400,000 tonnes of finished steel products and about 500,000 tonnes of steel billets lied in stock); machine-tool manufacture down 37.3 percent; air-conditioner manufacture down 23.8 percent; refrigerator and freezer manufacture down 15 percent; auto assembly down 3.4 percent; cotton fabric production down 1.1 percent; and detergent production down 7.9 percent.

The slowdown of industrial production in October 2011 was an unhappy signal, but in the opinion of many economists, Vietnam should not worry too much about this matter because the decline of industrial production resulted from various objective reasons including common difficulties facing all economies in the world. Moreover, in October, the floods in some provinces reduced the purchasing power for some kinds of products of the processing industry and adversely affected the pace of mining projects.

Predictions for the last two months

Despite the slowdown in October, Vietnam expects that industrial production will undergo positive changes in the last two months of 2011. At a regular meeting of the Government in October, government officials indicated that along with applying strict, effective monetary management policies in accordance with market signals, based on the results of efforts to curb inflation, the Government will take measures to gradually reduce the interest rates applied to credit loans and control the foreign exchange rate better. This will create favorable conditions for businesses which are short of capital to have access to loans in the coming period.

The Government has provided guidance for ministries, sectors and localities to help businesses overcome difficulties and promote production and investment. Tax authorities are considering amendments to tax policies so that they can help businesses overcome difficulties and develop. Meanwhile, the energy sector is boosting power generation to ensure a sufficient supply of electricity for production in the last two months of 2011. The coal output has increased on a stable basis while the growth of oil and gas production has been maintained. Since the beginning of this year, Vietnam has found five new deposits.

On their side, businesses must strive to overcome existing difficulties. Deputy Minister of Industry and Trade Nguyen Thanh Bien said, "Businesses must continue to boost technological innovation, improve management and use those kinds of materials and machinery, equipment which can be manufactured in Vietnam so as to reduce production costs and enhance the effectiveness of investment, thus contributing to reducing the country's trade deficit. In addition, businesses must concentrate on implementing energy conservation methods and boosting commodity production as well as the provision of services."