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Expectations for industrial production in the rest of 2012
(07/24/2012)
In the first half of 2012 industrial production businesses had to cope with numerous difficulties and a high inventory level. In the rest of the year, industrial production is expected to revive as government support solutions become effective and consumer demand increases.
Difficulties
Statistics from the Ministry of Industry and Trade (MOIT) show that the Index of Industrial Production (IIP) in the first six months of 2012 grew 4.5 percent. Although this was lower than the IIP growth of the same period last year (9.7 percent), industrial production has improved month after month. Specifically, after a sharp decline in the first quarter, industrial production has shown signs of revival (IIP grew 4.1 percent in the first three months, 4.3 percent in the first four months, 4.2 percent in the first five months and 4.5 percent in the first six months). The MOIT said these results reflect initial positive effects of government-proposed measures to help businesses overcome difficulties such as offering a tax reduction (extending the deadline for payment of the corporate income tax and value added tax; exempting the business tax for family-sized seafood catching and salt production businesses), reducing the land rent and providing interest rate support for businesses operating in some specific fields.
Compared with the same period last year, the mining industry obtained the lowest growth rate in the first half of 2012, three percent. Processing and manufacturing industries grew four percent; production and distribution of electricity, gas and water grew at the highest rate, 14.2 percent.
The processing industry continued to meet numerous difficulties with a lower IIP growth in the first six months of this year compared with 12.7 percent in the same period last year. The IIP of many industries decreased, for example cement, steel, fiber production and textiles, footwear and crumpled paper. The inventory level of many kinds of industrial products was high compared the same period last year. For instance, by June 1, 2012, the inventory level of non-alcoholic beverage increased 23.8 percent, tobacco and pipe tobacco 41.1 percent, pulp, paper and board 15.6 percent.
Which solution?
Since the global financial crisis began in 2008, the industrial production situation had never been as difficult as it was in the first half of this year. However, experts believe the Vietnamese economy has gradually overcome challenges and is recovering, resuming its growth since the beginning of the second quarter of 2012. Actions such as reducing interest rates and taxes, providing advanced funding for projects with clear implementation plans, and measures to help businesses promote intensive investment to enhance production effectiveness, improve product competitiveness and expand their market are forecasted to have a stronger effect in the coming time.
Industrial production is predicted to receive strong support in the second half of 2012 because the energy sector appears capable to ensure sufficient supplies for people's lives and production needs from now to the year end. Do Van Hau, the general director of the Vietnam National Oil and Gas Group (PVN), said that total oil and gas production in 2012 is expected to reach 16 million tonnes and nine billion cu.m respectively, so sufficient supplies of gas for gas-run thermo-power plants in 2012 can be ensured. Not only electricity but other sectors will also be supplied with enough fuels to accelerate production from now to the year end.
Reducing the inventory level is one of the most important measures to boost production in the current period. Nguyen Xuan Chien, the deputy director of the Domestic Market Department of the MOIT, said this ministry is accelerating the implementation of Governmental Resolution 13/NQ-CP to help businesses increase sales. At the same time, the links between distributors and producers are being tightened. As usual, in the second half of 2012, Vietnamese people will have many activities to welcome some festivals and holidays such as Mid-Autumn Festival and National Day as well as to prepare for the Solar New Year and Lunar New Year of 2013. Government policies that stimulate consumption are hoped to increase the consumer demand in the second half of this year so that the inventory level can be gradually reduced.
The export situation is predicted to improve in the remaining months of this year. In the first half of 2012 the export value of the whole country was US$53.1 billion and so businesses must make stronger efforts to realize the US$109.3 billion target set for the year.
The MOIT wants businesses to expand production to ensure the balance between supply and demand for essential kinds of goods. In addition, they must seriously follow the Communist Party and the State's instructions for business restructuring and changing the growth model to achieve higher effectiveness./.

Source: VEN
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