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Opportunities for Vietnam’s trade when the U.S removes stay-at-home orders

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The United States is Vietnam’s key export market. When U.S. consumers had to stay at home due to Covid-19 and slash spending, Vietnam’s exporters struggled. 

Yet as soon as those stay-at-home orders are removed, Vietnamese products have started to depart for the U.S.

Opportunities for Vietnam’s trade when the U.S removes stay-at-home orders

When Covid-19 reached the U.S. with hundreds of thousands of infected cases and tens of thousands of deaths, U.S. President Donald Trump invoked the Defense Production Act to prevent its spread. In mid-April 2020, most states imposed stay-at-home orders.

Retail shops selling non-essential products had to halt operations. According to GlobalData Retail, about 40% of retail outlets, equivalent to 200,000 shops, had to shut down. Most of them sold apparel items.

Leading apparel retail firms in the U.S. had to put almost one million staff on furlough, including Gap Inc. (80,000 staff at retail outlets under Banana Republic, Old Navy and Gap); Macy (most of its 130,000 staff); JC Penney (90,000) and Kohl’s (85,000). The U.S. Department of Labor says that during the period of over two weeks from the end of March to the start of April, about 10 million people applied for unemployment benefits as they went on no-pay leave.

Consumers slashed spending

The gloomy economic outlook has dragged down demand in the U.S. Consumers are adversely affected by the pandemic, which restricts movement, engenders worries about health and makes them less likely to shop. Their income plunges as various sectors tumble (retail, aviation, tourism, oil, manufacturing, commerce, service and stock). They also struggle to settle bills (housing, cars, insurance and so on). Concerns abound about a possible economic downturn that caused job and income losses. Consequently, purchasing power plummets. Spending in April dropped by 12.9%. Consumers have to tighten their expenditure, so export to the U.S. is unlikely to recover quickly. They will be unlikely to buy clothes, footwear, woodwork and electronic products, Vietnam’s main exports to this market.

Exporters to the U.S. in trouble

The U.S. economy depends on domestic consumption, which accounts for over two-thirds of its GDP. According to Bloomberg Intelligence, retail revenue will fall by 30% and threaten the survival of many local retailers. Consequently, many U.S. retailers have cancelled orders placed with firms in Asia, including Vietnam.

Vietnam’s export to the U.S. in May 2020 was merely 115,000 TEU, down 4% year-on-year (120,000 TEU). From January to April, export rose by an average of 25-30% and revenue from export to the U.S. in May hovered around US$4.9 billion, down 7% year-on-year (US$5.26 billion).

Plunging orders have directly hampered Vietnam’s economy in particular and those of Asian countries in general as they rely on export. Exporters, factories, maritime transport, supply chains, as well as the millions of workers in the related sectors are all confronted with challenges.

Easing social distancing for economic recovery

In view of the economic impacts of protracted social distancing, most states removed stay-at-home orders in late May despite objection from the media and society. According to the U.S. Department of Commerce, at the end of August, personal income rose after sliding for two months. Spending increased by 6.2% in June and 1.9% in July. With the reopening of shops, retail sales in June rose by 5.6% year-on-year and 6.8% month-on-month. Retail sales in July climbed by 5.8% year-on-year but merely 0.8% month-on-month (Source: US Census Bureau’s Monthly Retail Trade Report).

It is noteworthy that in September, Home Depot announced its plan not to embark on Black Friday sales. Instead, there will be two months of sales from early November to December. To protect consumers during the pandemic and encourage spending during the festival season, online shopping, especially via smartphone applications, will be encouraged with enticing prices offered. This approach seems to resonate with many other retailers.

Increasing export to the U.S.

Export to the U.S. rose again from June to August, the peak season. According to PIERS, export from Asia to the U.S. rose from 1.4 million TEU in June to 1.69 million TEU in July and 1.86 million TEU in August. While the total export turnover in the first eight months dipped by 2% year-on-year, export in August increased by 16% year-on-year.

Vietnam’s export to the U.S. in the first eight months of 2020 was about US$46.7 billion, up 19% year-on-year (US$39.2 billion).

Vietnam’s export to the U.S. was only second to China’s in terms of container output, up from 127,000 TEU in June to 172,000 TEU in July and 194,000 TEU in August. The total export volume in the first eight months of 2020 was 1.2 million TEU, up 21% year-on-year (990,000 TEU). Leading export products (woodwork, footwear, apparel, electronics and fishery) have shown signs of recovery since July.

By virtue of the timely easing of social distancing and the reopening of the U.S. economy, export to this market improved in the peak season of June-September although the pandemic remains detrimental. Although the last quarter is not a peak season, longer periods of promotions and demand stimulus initiatives during the festival season have encouraged retailers to import more. This bodes well for export to the U.S. in the remaining months of 2020.

Rosy prospects for maritime transport

Before the U.S.-China trade war (2018), export in terms of TEU to the U.S. rose by an average of 15% per year starting from 2015. Due to the trade war, export to the U.S. soared by 36% in 2019. Covid-19 disrupted global supply chains, offering Vietnam the chance to lure some chains in 2021. While challenges remain, there are causes for optimism regarding export to the U.S. in 2021.

Given the bright outlook for Vietnam’s export in general and that to the U.S. in particular, international container shipping firms believe Vietnam is a promising market. In recent years, more ships have entered Cai Mep-Thi Vai port complex (Ba Ria-Vung Tau) and Lach Huyen international port (TC-HICT, Haiphong), offering more opportunities for Vietnam’s container shipping firms.

First, transport routes linking Cai Mep-Thi Vai-HCMC-Quy Nhon-Danang-Haiphong will boast greater potential.

Second, apart from direct services, there are opportunities for feeder services linked with transshipment ports in Singapore and Tanjung Pelepas (Malaysia) to the south and Yantian (China), Hong Kong, Kaohsiung (Taiwan) and Pusan (Korea) to the north. Domestic shipping firms can independently tap into these routes or join forces with their international counterparts.

Local and transshipment routes can also be harnessed simultaneously, enabling flexible collaboration between domestic and foreign shipping firms. This will be a cause of celebration for Vietnam’s maritime transport.

SGT

Source: https://vietnamnet.vn/en/business/opportunities-for-vietnam-s-trade-when-the-u-s-removes-stay-at-home-orders-683694.html

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HCMC approves 1st bus rapid transit route

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HCMC approves 1st bus rapid transit route

A bus is stuck in traffic in Ho Chi Minh City. Photo by VnExpress/Huu Khoa.


HCMC has given the green light for its first bus rapid transit line at a cost of VND3.27 trillion ($142 million) and to be completed by 2023.

Green bus route 1 will run 26 kilometers through Districts 1, 2, 5, 6, 7, Binh Tan, and Binh Chanh in a dedicated lane at an average speed of 60 kilometers per hour.

It will have a fleet of 42 buses with a capacity of 60-72 passengers, 28 stations and eight parking lots for personal vehicles.

The city will build footbridges at several places for people to access the stations. The buses will have a smart ticket system using electronic cards and smartphones.

Of its $142 million cost, 87 percent will be borrowed from the World Bank.

It is one of six routes planned to reduce routine congestion in a city that lacks efficient public transport to serve its 13 million residents.

Source: https://e.vnexpress.net/news/business/economy/hcmc-approves-1st-bus-rapid-transit-route-4200753.html

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China-ASEAN Expo opens, featuring digital economy, RCEP

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The 17th China-ASEAN Expo and China-ASEAN Business and Investment Summit kicked off on Friday, highlighting booming digital economy cooperation and the implementation of a recently signed major trade pact.

Chinese President Xi Jinping called for cultivating a closer community with a shared future for China and the Association of Southeast Asian Nations (ASEAN) when addressing via video the opening ceremony.

Chinese President Xi Jinping addresses the opening ceremony of the 17th China-ASEAN Expo and China-ASEAN Business and Investment Summit via video on Nov. 27, 2020. (Xinhua/Li Xueren)

This year’s expo aims to deepen cooperation in trade, the digital economy, science and technology, health, and other fields.

With an exhibition area of 104,000 square meters, the expo has 5,400 booths in Nanning, capital of south China’s Guangxi Zhuang Autonomous Region. More than 1,500 enterprises from home and abroad will participate virtually in the four-day event, according to the organizers.

The expo will also host 11 high-level forums and more than 160 economic and trade promotion activities.

China-ASEAN Expo opens, featuring digital economy, RCEP

Booming digital cooperation

This year is designated as the China-ASEAN Year of Digital Economy Cooperation. Strengthening digital economy cooperation was the common call of ASEAN leaders at the opening ceremony.

ASEAN’s digital economy is estimated to increase from 1.3 percent of the group’s GDP in 2015 to 8.5 percent in 2025, according to ASEAN Secretary-General Lim Jock Hoi, adding that China is leading the development of digital infrastructure and is an important partner of ASEAN in promoting the digital economy in the region.

This year’s expo also highlights the Regional Comprehensive Economic Partnership (RCEP), the world’s biggest trade pact, which was signed earlier this month by 15 Asia-Pacific countries including ASEAN’s 10 member states and China. It was a massive move for regional economic integration, multilateralism and free trade.

China-ASEAN Expo opens, featuring digital economy, RCEP

The signing ceremony of the Regional Comprehensive Economic Partnership (RCEP) agreement is held via video conference in Hanoi, Vietnam, Nov. 15, 2020. (VNA via Xinhua)

The expo features an exhibition area, and enterprises from RCEP countries including Japan, the Republic of Korea, Australia and New Zealand have participated in the event, according to Wang Lei, secretary-general of the expo’s secretariat.

High-level dialogue conducted during the expo will promote greater participation from RCEP members, said Wang, adding that the expo will help integrate the market advantages and resources of the 10 ASEAN members with the capital and technical advantages of other RCEP members.

“I believe that the RCEP will also provide a solid foundation for an open, inclusive, and rules-based global trade environment,” said Myanmar President U Win Myint at the expo’s opening ceremony.

Xu Ningning, executive president of the China-ASEAN Business Council, said that opening up the markets of the 15 countries to each other will bring about new changes and closer regional cooperation. 

(Source: Xinhua)

Source: https://vietnamnet.vn/en/business/china-asean-expo-opens-featuring-digital-economy-rcep-694444.html

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VNR petitions for reduction of infrastructure charge

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Passengers board a train. VNR has proposed an infrastructure use fee reduction – PHOTO: LE ANH

HANOI – Vietnam Railway Corporation (VNR) has proposed reducing the infrastructure charge from 8% of its railway transport revenue to 2% due to the difficulties caused by Covid-19.

The proposal has been sent to the Ministries of Transport and Finance and the Commission for the Management of State Capital at Enterprises.

This year, VNR may generate nearly VND3.2 trillion in revenue and its losses were estimated at VND643 billion. It has minimized its operation cost and furloughed its staff.

VNR and transport firms have encountered cash flow difficulties to maintain their operations. They are finding it hard to overcome their budget deficit, VNR Chairman Vu Anh Minh said.

VNR needs VND320 billion in 2020 and VND350 billion in 2021 to make good its losses.

VNR’s railway transport revenue was estimated at VND2.7 trillion this year. With this revenue, it will have to pay VND213 billion as the infrastructure use fee.

If the proposal to reduce the infrastructure use fee is approved, the fee will be cut by VND160 billion. The reduced amount in 2021 will be an estimated VND179.5 billion.

Thus, the firm can make good half of its budget deficit.

Source: https://english.thesaigontimes.vn/79630/vnr-petitions-for-reduction-of-infrastructure-charge-.html

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