VZCZCXRO3617
PP RUEHCHI RUEHDT RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHNH RUEHPB
DE RUEHHI #0205/01 0680633
ZNR UUUUU ZZH
P 090633Z MAR 09
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC PRIORITY 9258
INFO RUEHHM/AMCONSUL HO CHI MINH 5654
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC

UNCLAS SECTION 01 OF 02 HANOI 000205 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS MBROWN 
SINGAPORE FOR TREASURY 
TREASURY FOR SCHUN 
USTR FOR DBISBEE 
USDA/FAS/OCRA/DLUCHOK 
 
E.O. 12958: N/A 
TAGS: ETRD EAGR EFIS ELAB ECON KTDB KTEX PGOV VM
SUBJECT:  SUMMER IS SINK-OR-SWIM TIME FOR VIETNAM'S LEADING 
EXPORTERS 
 
REF: 08 Hanoi 1162 (Vietnam in Trade Deal With Japan) 
 
HANOI 00000205  001.2 OF 002 
 
 
This cable is Sensitive but Unclassified.  For official use only, 
not for dissemination outside USG channels or posting on the 
internet. 
 
¶1. (SBU) Summary:  Orders for most of Vietnam's leading exports are 
down across the board, by about 25% or higher, according to industry 
representatives.  At this point, exporters are not panicking because 
they still have orders to keep them active for this quarter.  Some 
are even hoping to expand market share or streamline operations 
during the global economic crisis.  However, if economic conditions 
in Vietnam's major markets do not improve, exporters will be forced 
to make hard decisions about significantly scaling back operations. 
The crunch time begins in May or June for garment and footwear 
exporters, and summer for electronics and furniture manufacturers. 
Seafood exporters expect that the leaner times will allow them to 
take market share from higher-end competitors.  All major exporters 
hope that Vietnam will continue to pursue trade liberalization deals 
abroad.  End summary. 
 
ORDERS DOWN ACROSS THE BOARD 
---------------------------- 
 
¶2. (U) Econoff met in February with representatives of Vietnam's 
leading export manufacturing industries.  They report significant 
drops in overseas demand.  Orders for the garment and seafood 
industries, the country's second and fourth largest export earners 
in 2008, were down in December and dropped even lower in January 
(down over 30%) on a year-over-year (yoy) basis. (Crude oil remains 
Vietnam's largest export earner.) 
Footwear exports, which rank third, were down by 24% yoy in January 
and will face higher tariffs this year in the EU, their largest 
market.  Electronics will also drop by 30% and furniture exports by 
70% in early 2009, according to industry estimates.  Together, the 
textile and garments, seafood, footwear, electronics and furniture 
industries accounted for 38% of Vietnam's exports in 2008. 
 
CRUNCHTIME COMES SOON 
--------------------- 
 
¶3. (U) Despite suffering steep drops in exports, none of these 
sector representatives said their members planned significant 
cost-saving measures at this time.  Electronics and furniture 
exporters received their orders for 2009 at around the same time the 
global economic crisis began to unfold in 2008, while garment and 
footwear firms report enough orders to keep them afloat through the 
first quarter of 2009.  Seafood exporters, after seeing shipments 
drop at the turn of the year, reported recently that they are 
already back to near 2008 levels.  The time of reckoning for all 
these industries will come at the end of the first quarter or 
shortly thereafter. 
 
¶4. (U) Christmas-time orders for garments start rolling in after 
March, and by May the garment industry will know the full impact of 
the economic crisis, according to Vitas, Vietnam's leading apparel 
manufacturers' association.  The U.S. is by far Vietnam's largest 
garments market, taking in 54% of their exports, followed by the EU 
(18%) and Japan (12%).  Of the three, Japan is the only one where 
Vitas members could see any growth, as a result of their 
recently-concluded FTA (Reftel). Russia and the Middle East are 
other markets where they will pursue opportunities to make up for 
lost markets. 
 
¶5. (U) The footwear industry is on a similar timeline.  Export 
numbers were strong in 2008, including increases yoy in November and 
December, but they began to drop in January, coinciding with the 
EU's "graduation" of Vietnam's footwear industry from GSP 
preferences that same month, which raise some tariffs by as much as 
660%.  The change is hitting producers of leather footwear 
particularly hard. 
 
¶6. (U) Electronics exporters traditionally receive their yearly 
orders in June and July.  Over half of their production goes to 
Japan and, although they can benefit from the new Japan-Vietnam 
trade deal, the situation for 2009 is "worrisome," according to the 
Vice Chairman of VEIA, the electronics industry association.  The 
furniture industry receives its most significant orders in September 
 
HANOI 00000205  002.2 OF 002 
 
 
and October, and early signs are not good.  U.S. exports of lumber 
for that industry, which had been one of the brightest spots of our 
bilateral trade (Septel), began dropping in November 2008 and went 
down by 60% and 47% yoy in December and January, respectively. 
 
¶7. (SBU) The seafood industry is in better shape.  The Vice Chairman 
of VASEP, the seafood association, told Econoff that the worst for 
them may be over.  Aside from luxury seafood like large shrimp, 
which will probably suffer from the global crisis, VASEP members are 
feeling bullish about 2009.  The Russian market, which was up by 83% 
in 2008, has just re-opened for Vietnamese exports, and they expect 
big growth elsewhere in Eastern Europe and Europe, as consumers 
switch from increasingly expensive marine fish to freshwater 
white-fleshed pangasius.  Growth in the U.S. (3%) in 2008 was among 
the lowest in all markets and the U.S. share of seafood exports was 
16.5%. "Economic downturns are good for low prices," the Vice 
Chairman said, echoing the industry's sentiments. 
 
COMMENT: BITING NAILS AND BULLETS IN LATTER 2009 
--------------------------------------------- --- 
 
¶8. (SBU) Comment:  All of Vietnam's most important manufacturing 
export sectors ushered in 2009 in a downward trend.  One factor that 
has served as a buffer thus far is the buying cycle of Vietnam's 
leading export industries.  Contracts for winter season deliveries 
of apparel, footwear and other consumer goods are placed months in 
advance, meaning that many Vietnamese producers had their winter 
order books full by mid-summer of last year, well before the global 
economic slowdown became obvious in the fall.  If the situation in 
the country's major foreign markets does not brighten by the early 
summer, these businesses will have to make hard decisions about 
significantly cutting operations and reducing staff.  For now, the 
best-run firms are focusing on increasing competitiveness and 
lobbying the Government to accelerate trade liberalization deals. 
These are welcome developments in an otherwise-bleak outlook.  End 
Comment. 
 
¶9. (U) This telegram was coordinated with ConGen Ho Chi Minh City. 
 
MICHALAK