VZCZCXRO2001
PP RUEHCHI RUEHDT RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHNH RUEHPB
DE RUEHHI #0564/01 1690911
ZNR UUUUU ZZH
P 180911Z JUN 09
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC PRIORITY 9775
INFO RUEHHM/AMCONSUL HO CHI MINH 5940
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 000564 
 
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:  VIETNAM'S EXPORTERS BEATING THE SUMMER CRUNCH 
 
REF: A) Hanoi 205 ("Summer Is Sink-Or-Swim Time for Vietnam"); 
B) Hanoi 339 ("Vietnam's 1st Quarter Numbers"); 
C) 08 Hanoi 871 ("Vietnam Not Rushing Trade Deals") 
 
HANOI 00000564  001.2 OF 002 
 
 
¶1. (SBU) Summary:  Vietnam's most important export sectors are 
bouncing back after a tough, but much shorter than expected, period. 
 None are expecting big drops in export numbers compared to 2008, 
and some are holding on for the possibility that 2009 may even 
surpass the last year's record-setting levels.  Many exporters are 
producing more goods, though at diminishing returns as their prices 
have had to come down to be competitive.  Many of the industries are 
now turning their attention to other issues, like new U.S. import 
regulations on catfish and wood products, free trade deals, and 
improving their ability to counter dumping allegations.  End 
summary. 
 
WHAT A DIFFERENCE THREE MONTHS MAKE 
--------------------------------- 
 
¶2. (U) Just last March, Vietnam's leading export sectors were 
dreading the coming summer.  The second half of 2008 had already 
seen a slowdown and, with the global economic crisis in full swing, 
massive layoffs and plant closures were not out of the question. 
Three months later, many are hiring additional workers and output in 
some sectors is even outpacing the booming first half of 2008. 
VITAS, the largest association of garment manufacturers says some of 
its members are even refusing orders because they cannot keep up. 
The wood association, whose situation last March looked the most 
precarious of Vietnam's exporters, says many of its members have 
enough orders to keep them busy for the rest of the year. 
 
¶3. (U) Although the reasons vary by sector, demand for Vietnamese 
exports in the United States and Europe remains strong.  In 
addition, Vietnam's competitiveness in Japan is growing as a result 
of trade deals that have eliminated tariffs.  A key factor in the 
exporters' ability to weather the tough times has been their ability 
to cut profit margins to match and beat those of their competitors. 
Total exports for the first five months of the year were down by 
6.8% from 2008, but these numbers were affected by substantial 
changes in exports of precious metals and gold (up 3,310%) (Ref B) 
and oil (down 44%).  Not counting oil or precious metals, exports 
were down 10.94% in the first five months of the year.  Many 
agricultural exports have increased, even though many commodity 
prices have come down from last year's peaks (Septel). 
 
GARMENT/TEXTILE SECTOR DOING MUCH BETTER 
------------------------------ 
 
¶4. (U) Garments, Vietnam's top export after oil with $9.11 billion 
in 2008 revenues, were down by 1.8% over the first five months of 
2009, even though export volumes were above the previous year's. 
But every month is coming in a little better than the one before -- 
May alone brought in more revenues than the first four months of the 
year combined.  VITAS expects that exports will increase from .5 to 
2% during the year's peak May to August season from the year before. 
 Vietnamese garments are doing particularly well in the United 
States (up 6.6% in value and 20.6% in volume over the first quarter 
of 2009), where even dominant market leader China has seen 
reductions this year. "There are big orders coming in now and we 
expect an increase," VITAS's number two told us.  "Some factories 
have refused more orders already. 
 
FISHERIES LOOKING TO MATCH RECORD 2008 NUMBERS 
-------------------------------------------- 
 
¶5. (U) The fisheries sector, Vietnam's fourth largest export with 
$4.56 billion in 2008 revenues, is also looking forward to a 
brighter second half of 2009.  The first four months of the year 
have been tough, with export revenues down by almost 10%.  From 
January to April 2008, all of Vietnam's fisheries exports were down: 
pangasius (-1.2%), shrimp (-7.3%), tuna (-25%), dried seafood 
(-14%), and other fish (-6.3%).  Despite this, the industry saw 
better numbers in April and May.  The industry's main trade 
association, VASEP, said that they expect final 2009 numbers to be, 
at worst, down by 4.5% and, more likely, equal to the record 2008 
numbers. 
 
BUT DEEPLY CONCERNED ABOUT U.S. MARKET ACCESS 
------------------------------- 
 
 
HANOI 00000564  002.2 OF 002 
 
 
¶6. (U) Ironically for the fisheries industry, the U.S. market 
provides some of the brightest and darkest spots for 2009.  Like the 
garment industry, U.S. demand for Vietnamese fisheries products has 
increased over the first part of 2009, by 38% -- the biggest 
increase among all of Vietnam's markets.  But VASEP is increasingly 
concerned about proposed regulations on pangasius fish that they 
believe will reverse U.S. market gains.  Their tone is becoming 
increasingly bitter.  "Our agricultural imports from the U.S. are 
going up and up, and we're ready to import U.S. beef," the Vice 
Chair of VASEP told us, "why should it be any different for our 
fish?  I hate it that the United States is going for the easiest way 
to block our exports." 
 
FOOTWEAR AND WOOD BULLISH ABOUT SECOND HALF OF 2009 
--------------------------------------- 
 
¶7. (U) The footwear industry, whose products are Vietnam's third 
most valuable export with $4.7 billion in 2008 revenues, is also 
predicting solid numbers in 2009.  Although exports were down by 10% 
in the first five months of the year, the industry is confident that 
the third and fourth quarters of the year, when exports tend to 
peak, will see significant improvements.  Final 2009 numbers should 
end up down by about 4%, but still well above 2007 levels, according 
to the Vice Chairwoman of LEFASO, Vietnam's leading footwear 
association.  She added that the industry is actively hiring new 
workers, since through 2008 the shortage of labor was such that many 
factories were unable to adequately staff their operations. 
 
¶8. (U) The wood sector, which looked bleak last March, is seeing a 
"more promising" end of the year, according to the Chairman of 
VIFORES, the industry association.  "Some of our exporters already 
have orders to keep them busy until the end of the year," he added. 
In order to compete, pricing is 10-15% below last year.  The 
industry expects their exports to be down by 15% in the first half 
of the year, but exports usually peak in the latter half, and 
VIFORES expects 2009 to repeat the strong numbers of 2008 ($2.8 
billion).  The Chairman told us that the industry is now turning its 
attention on how to comply with new U.S. requirements on wood origin 
declarations. 
 
ELECTRONICS AT EASE WITH CURRENT SITUATION 
----------------------------------- 
 
¶9. (U) The electronics industry is also improving from the beginning 
of the year, although it is still down 8% from the first five months 
of 2008.  "We had ten years of continuous growth, so this is not so 
bad," the Vice Chairman of VEIA, the electronics industry 
association, told us.  Although they have no clear forecast for the 
rest of the year ("because we have never been in this position 
before"), he added that the industry will need to hire new workers 
in the second half. 
 
COMMENT: PASSING THE COMPETITIVENESS TEST 
--------------------------------------- 
 
¶10. (U) The speed at which Vietnamese exporters are seeming to 
recover is surprising, and underscores their ability to compete in 
the toughest of situations.  Although exporters are not resting on 
their laurels, many are now focusing on overcoming potential 
barriers down the road.  Almost all sectors are benefitting from 
last year's trade deals (Ref B), we were told, shoring up supporters 
of freer trade and market opening in the government and the private 
sector.  Despite their bright outlook, many exporters fear that the 
U.S. may turn more protectionist this year and renew textile 
monitoring, increase anti-dumping allegations and erect non-tariff 
barriers. 
 
PALMER