Export opportunities to europe

According to the Vietnam Timber and Forest Product Association (VIFOREST), the prices of imported wood have increased by 20-25 percent; The prices of auxiliary materials, such as glue, paint, and paper, have also inched up by 10-20 percent compared to last year. This has made the cost prices of products go up, causing difficulties for manufacturing enterprises.

Ms. Le Thi Xuyen, CEO of Thuan An Wood Processing Joint Stock Company in Binh Duong Province, said that every time the price increases, the company must continuously adjust the prices following the production costs. Most of the raw materials for the production of wooden products must be imported from abroad. Due to the Covid-19 pandemic, many countries, such as the US and Europe, had to carry out social distancing and temporarily suspend exploitation, production, and processing.

As a result, the source of raw materials has gradually been exhausted. However, the demand for wooden products has increased, while the logistics costs have also climbed. On the other hand, foreign orders usually require that the surface material of products must be pine and oak wood, and the inside is mainly acacia wood and rubberwood of Vietnam.

Last year, because domestic chicken prices fell, the company was unable to compete with imported chickens, so it had to reduce the chicken flock by more than 40 percent. Instead, it has raised pigs to cover the loss. If the situation remains pessimistic, the company will cut another 20 percent of the total flock to maintain operations. According to Tien Phong Pig Farming Cooperative in HCMC, in the past six months, the price of animal feed had increased five times, with a total increase of more than 20 percent because animal feed was mainly imported.

Similarly, in the first three months of this year, fertilizer prices increased heavily and a local shortage occurred. Fertilizer prices increased due to many reasons but were mainly affected by input costs. In comparison with the end of last year, the prices of export and domestic DAP fertilizers have soared drastically. Compared to DAP fertilizers, urea fertilizer went up more slowly, due to the active restraint of manufacturers.

It is recorded that at the beginning of March this year, at agents of Ca Mau fertilizer in the South, urea fertilizer is being offered by the factory for VND8,500 per kilogram, lower than that in the region and the world, but has increased by about 20 percent compared to the end of last year.

Opportunity to build Vietnamese brands

According to Ca Mau Fertilizer Company, to contribute to stabilizing the fertilizer market, in the summer-autumn crop this year, the company plans to supply 190,000-230,000 tons of fertilizer to the market, meeting the needs of farmers in Southern provinces.

Besides the efforts of the production department, the company has proactively rescheduled the delivery of export orders to other countries to prioritize the distribution of fertilizers in the domestic market. In addition, the company has researched to improve and launch new product lines to help plants to grow well, save costs, increase profits, and increase productivity.

According to Mr. Le Quoc Phong, Vice Chairman of the Vietnam Fertilizer Association, the prices of imported fertilizers increased because the raw material-producing countries had temporarily carried out social distancing due to the Covid-19 pandemic. Many agricultural countries have resumed production and increased the import of fertilizers. On the other hand, for having to comply with signed contracts, many domestic fertilizer companies must export fertilizers, causing a shortage of fertilizers for domestic consumption.

Therefore, the Ministry of Agriculture and Rural Development needs to participate in managing and forecasting the needed fertilizer output of the whole country. The Ministry of Industry and Trade should have a plan for importing and consuming fertilizers nationwide, aiming to regulate the market.

Mr. Nguyen Thanh Son, Chairman of the Vietnam Poultry Association, said that the lack of animal feed was because some foreign enterprises had collected, hoarded, and reserved raw materials for the production of animal feed, so the hike in prices of animal feed was unavoidable. From now until the end of the year, animal feed prices would continue to escalate.

Therefore, enterprises need to adjust the selling prices and production scale accordingly. In the context that the domestic livestock industry is developing, the State needs to make a plan to develop raw material growing areas for the production of animal feed. For instance, it is possible to develop models of growing corn or producing animal feed from by-products in seafood processing.

Cross-border railway hopes remain stuck on the tracks. Photo: freepik.com

The blockage of the Suez Canal last month, the shortest shipping route between Europe and Asia, has once again urged Vietnamese agencies to rethink the pros and cons in development of the railway network to gain bigger future benefits.

Vietnam Railways (VNR) has been awaiting development of the new Lao Cai-Hanoi-Haiphong railway route connecting to Lach Huyen International Gateway Seaport, which helps enhance connection in the East-West Corridor and between Vietnam and China.

VNR deputy director Phan Quoc Anh told VIR, “The project has remained on paper for months. We expect that the study will be fast-tracked so that we can tap into global growing trade. Many regional countries have developed their railway networks, while Vietnam’s remains in standstill.”

Anh and other VNR leaders feel anxious about the current situation, especially when import-export companies in Vietnam and other countries are seeking to diversify their means of transport. Railways are receiving renewed focus following the six-day blockage of the Suez Canal last month by a container ship.

The VNR leader noted, “We are ready to welcome more goods on the Asia-Europe railway route. VNR now accommodates 800,000 tonnes on international connecting trains annually, while our capacity is 2.5 million tonnes.”

However, whether the giant can tap into the advantage remains uncertain as it needs a policy evolution to enable VNR to call for private investment.

Vietnamese railways are still less attractive to importers and exporters, although railway transport times between Vietnam and the EU are quicker and more stable than transport by sea – for instance, the time from Vietnam to Germany is about 29-30 days. Railway transport costs are generally higher than sea transport, driven by unfavourable infrastructure which somewhat partly increases its logistics costs.

The country’s railway network was built over 100 years ago. Dang Dinh Thao, former head of the Institute for Economics and Development Studies, said that the country’s railways have always used diesel technology, while others use electrification or even high-speed electromagnetic trains.

Railways in China and European countries have designed tracks of around 1.43m in width, while that of Vietnam are only one metre. Consequently, importers and exporters have to suffer extra costs of loading and unloading for transit in China. And therefore, few choose railways.

Moreover, a lack of links to seaports, industrial and economic zones is also another problem, preventing the railway sector from attracting customers. The sector now only has one route connecting Hoang Dieu Berth of Haiphong city and the other to Cai Lan Port in the northern province of Quang Ninh.

VNR has been attempting in vain for years to deal with infrastructure weaknesses by calling for private investors to join its upgrading plan and developing warehouses and inland container depots (ICDs). However, legal barriers are as ever impeding the next steps.

As ruled, VNR cannot make any investments or call for funding in the network because of the state asset status. To solve the problem, the giant proposed in a draft master plan in line with Decree No.46/2018/ND-CP issued in 2018 governing the management and use of railway infrastructure assets, for the state to hand over station squares, warehouses, ICDs, and others to it to own, use, and develop with assets to be recorded as state capital contribution to the operator.

The draft, expected to be released in 2019, has yet to be completed. While waiting for this, VNR has been suffering as all investment plans and cooperation with domestic and international private partners have been suspended.

“We earlier signed an agreement with Saigon Newport Corporation to develop ICDs and warehouses at Song Than, Dieu Tri, Yen Vien, Dong Anh, and Dong Dang stations. Some Russian and Kazakhstani companies also sought opportunities in warehouse development in Dong Dang and Lao Cai. All are on paper,” Anh admitted.

Now VNR is facing further disappointment because of the slow pace of drafting the master plan. Vietnam and several countries have consistently planned to develop the Asia-Europe railway route connecting Vietnam, China, Kazakhstan, and Central Asia to Russia and the EU. Years have passed, but true connections have yet to be kicked off and the track size issue among other things have yet to be addressed.

Elsewhere, Laos is tapping into the opportunity of growing trade flows between Asia and Europe by developing the Kunming-Vientiane railway route to connect with the EU.

Currently, all imports and exports from Vietnam to European countries by rail have to transit in China via Lao Cai and Dong Dang railway stations. According to VNR statistics, Vietnam’s railway transport of goods from Vietnam to China and other countries reached nearly 900,000 tonnes in 2020, up about 10 per cent on-year.

In 2021, VNR plans to strengthen transport of cold containers by rail to China and third countries.