The market is volatile
One of the biggest challenges facing the manufacturing industry in 2024 is the volatility of major export markets.
According to data from the Directorate of Statistics, the total export turnover of the manufacturing industry in the first 9 months of 2024 increased by only 2.5% over the same period last year, reaching about 250 billion USD. This is the lowest growth rate in the past 5 years.
The main reason for this situation is the decline in global consumer demand, especially in major markets such as the US, EU and China. The impact of economic recession and high inflation in many countries has reduced purchasing power, and new orders from Vietnam have also decreased sharply. Meanwhile, competition with countries in the region such as Thailand, Indonesia and India is becoming increasingly fierce. These countries are promoting the development of the manufacturing and processing industry through preferential policies and investment attraction strategies, putting pressure on Vietnamese enterprises.
Besides, in the first 9 months of 2024, production costs of enterprises in the manufacturing and processing industry continued to increase, seriously affecting the profits and competitiveness of enterprises.
The main reason is the sharp increase in input material prices due to fluctuations in the global energy and raw material markets. For example, prices of steel, plastics, chemicals and other materials have all increased by an average of 10-15% compared to the same period last year.
Opportunities and challenges
Despite many difficulties, the total added value of the entire industrial sector in the first 9 months of 2024 is estimated to have increased by 8.34% over the same period last year. Of which, the processing and manufacturing industry increased by 9.76% (in the first quarter, it increased by 7.21%; in the second quarter, it increased by 10.39%; in the third quarter, it increased by 11.41%), contributing 2.44 percentage points to the total added value of the entire economy. Notably, the industrial production index increased in 60 localities and decreased in 3 localities nationwide, showing a positive recovery of the processing and manufacturing industry.
Digital transformation and the application of modern technology in production are considered the inevitable path to increase productivity, improve product quality and reduce production costs. However, in reality, enterprises in the Vietnamese manufacturing and processing industry are still facing many limitations in implementing this strategy.
According to a report by the Ministry of Industry and Trade, only about 30% of enterprises in the manufacturing and processing industry are currently applying 4.0 technology solutions to their production processes. The majority of the remaining enterprises are still using traditional technology or only applying technology at a low and unsynchronized level. The reasons come from the lack of investment capital, lack of high-quality human resources and lack of necessary technical support from research and development (R&D) units.
The inventory situation in the manufacturing industry is a matter of concern. The estimated inventory index of the entire industry as of September 30, 2024 increased by 5.2% compared to the same period last month and increased by 8.5% compared to the same period last year. The average inventory ratio of the entire manufacturing industry in the first 9 months of the year was 76.8%, lower than the 85.3% level in the same period in 2023, but still quite high. This shows that many businesses are having difficulty selling their products, leading to a large backlog of goods.
However, the consumption index of the entire manufacturing industry in September 2024 increased by 12.7% compared to the same period last year, showing a positive signal in the recovery of market demand. However, this growth is not enough to reduce the inventory ratio to a safe and stable level.
To overcome current challenges, businesses and state management agencies need to focus on a number of practical solutions such as promoting digital transformation, improving the quality of human resources, improving the investment environment and building financial support policies for businesses. In particular, it is necessary to focus on developing supporting industries, creating a solid foundation for the sustainable development of the manufacturing and processing industry in the coming time.
