Most manufacturing firms expects market to recover in 12 months

As many as 69% of manufacturing firms expect the market to recover in 12 months or more, according to a newly-released survey by VietnamWorks, a leading job website in Vietnam.

VietnamWorks conducted the survey in June, featuring over 500 employers and 1,000 employees in the manufacturing industry. It focused on sub-sectors in the high-tech industry, textiles-footwear, pharmaceuticals-biotechnology, agriculture-forestry, industrial products, consumer goods-food, construction materials, automotive, and others.

In particular, 39% of surveyed firms said the market would take over 12 months to recover, while 30% expected that in 12 months. Only 8% said the recovery will take place in three months, while 23% said six months. Overall, the survey showed that companies did not expect a speedy recovery.

Regarding government support, VietnamWorks mentioned solutions to simplify administrative procedures; reduce land rent, taxes and fees; cut loan interest rates; and others. Of which, reduced taxes and fees accounted for the biggest portion of between 42% and 70% of surveyed firm across all sectors, with agriculture-forestry at 29% and pharmaceuticals-biotechnology at 43%. For those two sectors, ‘reduced loan interest rates’ is the optimal solution with 34% and 50% of firms, respectively.

For businesses, during the hardship, 62% opted to utilize this time to improve productivity to prepare for post-crisis activities. The ratios varied between 52% and 71% for different sectors. Meanwhile, 38% plan to continue minimal business operations, ranging from 29% to 48% across all sectors.

Besides, the survey showed that many firms suffered from decreased revenues. Among those firms, between 34% and 65% saw revenues go down by 10-40%. Only between 9% and 31% of firms noted growing or unchanged revenues, except for the agriculture-forestry sector with 50%.

About workforce reduction, most companies laid off less than 10% of employees, ranging from 59% and 79% across sectors.

For employees, 58% reported salary cuts of 30-50%, while 34% reported reductions of less than 10%. Additionally, 6% and 2% noted salary cuts of 10-30% and over 50%, respectively. To adapt to these challenges, 60% said they had cut down on living costs, 37% said they had taken an extra job, and 3% had chose to work more overtime.

The Vietnamese manufacturing sector improved in July against June but its Manufacturing Purchasing Managers' Index (PMI) is still under 50, which separates expansion from contraction, S&P Global said on August 1. Vietnam’s July PMI was 48.7, up from 46.2 in June and 45.3 in May.

Vietnam’s index of industrial production (IIP) increased by 3.9% in July over the previous month and by 3.7% year-on-year, the General Statistics Office announced. However, in the first seven months of the year, the index decreased 0.7% year-on-year due to prolonged economic headwinds and weak demand worldwide, the GSO report said.

Vietnam is no longer the “cheap manufacturing base” it used to be, but no trend of “moving to cheaper countries” away from the country has been seen to date, according to a report titled “Investment in Vietnam is entering the Age of Co-Creation” prepared by the Japan Bank for International Cooperation (JBIC).