While participating in a woodworking and handicrafts trade fair, many Vietnamese enterprises obtained contracts with Sweden’s IKEA group.
IKEA purchased products in large quantities, but the prices were not high. Firms had to minimize expenses to fulfill the orders.
However, according to Hung, if Vietnamese enterprises still can sell products to IKEA, this means that they are still favoured by customers in the world.
Hawa is encouraging enterprises to research and develop new products to be introduced at the trade fair in October.
Le Phuc Thinh, Director of Saigon Palm, acknowledged that his company and many others have watched their numbers of orders drop sharply over the last few months.
“In previous years, production only slowed down in July and August, and then recovered in the next months. However, we have very few orders from foreign importers in the last three months,” Thinh confirmed.
Dang Quoc Hung, Deputy Chair of the HCM City Handicraft and Wood Industry Association (HAWA), reported that handicraft production and export in the first half of 2010 went very well, but the situation has deteriorated since July.
Hung explained that enterprises making products for export to Europe have encountered their weak purchasing power. Foreign importers now tend to force prices down, pushing Vietnamese exporters into difficult positions.
“Foreign partners set very low prices, while production costs have been increasing due to increases in material prices. Therefore, many companies are not accepting orders,” Hung revealed.
According to Saigon Tiep Thi, Thai, Chinese and Sri Lankan producers have offered very low export prices, making Vietnam unable to compete. Foreign partners also tend to require different designs in small quantities. Therefore, it takes firms a lot of time to fulfill export orders.
Currently, enterprises must buy materials at high prices because they cannot purchase them directly from farmers. They have to buy from intermediaries (only legal entities can provide invoices, while individuals and small merchants cannot), which explains why production costs are up.
The biggest headache is the labour shortage. Firms can only recruit workers if they agree to pay 60,000-70,000 dong in wage to workers in HCM City, and 50,000 dong to workers in other provinces. However, companies still cannot retain workers, because they do not have regular orders that can ensure enough jobs.
Handicrafts producers also complain that they do not want to make products in accordance with their own designs because they lack display areas. In fact, in the last few years, handicraft enterprises can only display products at a place in the centre of HCM City. These last only two or three months, not long enough to attract foreign businesses. Therefore, producers want good display locations, which can help them introduce products to foreigners and the domestic market.