Many challenges of the industrial production industry need to face
Currently, Vietnamese enterprises are facing many difficulties in business and production activities. Especially in the context of the global economy being hit hard by fluctuations in interest rates, the Russia-Ukraine war and the Covid pandemic. And to clarify the above obstacles, in today’s article, let’s learn with RX Tradex about the challenges of the industrial manufacturing industry to face in 2023.
1. General overview of the difficulties of the industrial production industry in the first 6 months of 2023.
According to the Investment Newspaper, the growth rate of the industry-wide manufacturing index (IIP) slowed down from the fourth quarter of 2022 (up 3%) and began to decrease in the first months of 2023. Many experts said that this is a rare downward cycle in recent years. Notably, the decrease / increase in IIP took place in 2 main industrial production industries: Processing, manufacturing and mining. In addition, electricity production and distribution increased slightly by 0.8%, water supply and waste treatment increased by 6.4%, but these 2 sectors accounted for a small proportion in the economy. At the same time, some industrial products with a deep decrease in IIP (over 10%) are: crude oil, gas, textiles, clothing, leather footwear, cement, steel, phone components, automobile and motorcycle assembly… These are products that have inherent strengths in labor and technology in Vietnam. [1]
According to VnEconomy, the reason for the decrease in the industrial production index in the first months of 2023 is due to the slow recovery of the world economy with tightening monetary policies in many countries. Since then, consumer demand declined and major trading partners began to restrict imports and sign new industrial production orders. [2]
It can be said that in 2023, the general situation of the industrial production industry is facing many difficulties. Currently, in order to maintain operations, Vietnamese enterprises are required to come up with short-term solutions, minimize the biggest losses before fluctuations in the market and wait for the recovery from the global economy, which may not be until the end of 2023.
2. The challenges of the industrial production industry and enterprises need to face in 2023.
2.1. Purchasing power recovered slowly.
According to Industry and Trade Newspaper, Vietnamese enterprises are facing many difficulties with high inventory rates, new orders from August 2022 to the first quarter of 2023 are also extremely difficult. [3] Many businesses facing a shortage of orders had to halt production or reduce personnel to ensure sufficient capital for business operations.
According to Lao Dong Newspaper, the world economy recovered slowly with tightening monetary policies in many countries, reducing consumer demand of major trading partners, including Europe, the United States, China,… This is considered the main cause, affecting the decline of industrial production in the first 5 months of 2023. [3]
2.2. Limitations on production technology.
In addition to the great progress over the years, the industry in Vietnam is still facing many limitations, especially the application of technology in production activities. Currently, most Vietnamese enterprises are small and medium-sized, lack investment capital to build and expand production and business facilities. In addition, technological research and development activities in production also face many difficulties. Domestic enterprises mainly only participate in production stages that create low added value such as processing, assembling, processing,… Therefore, industrial products can hardly compete in the international arena.
2.3. Not keeping pace with the trend of digital transformation.
In the future, digital transformation is considered an inevitable trend for the global industrial production industry. However, at present, Vietnamese enterprises still have certain limitations in accessing technology, not catching up with this digital trend. In fact, a large number of small and medium enterprises do not have enough resources to carry out the transformation process or lack personnel to deploy and apply science and technology to production activities.
According to Ms. Nguyen Thi Thu Giang – Vice President of the Software and Information Technology Services Association (VINASA), challenges in digital transformation are related to a number of issues such as: Development orientation, selection of solutions and services suitable for business models, security,… [4] Since then, digital transformation in manufacturing requires coordination between management, executive boards and specialized departments to create the highest efficiency. In addition, in the process of digital transformation, company culture, production processes and training to improve the qualifications of personnel also need businesses to focus on investment.
2.4. Administrative procedures still have many problems.
Another limitation in the industrial production industry is administrative procedures, which is considered a barrier for Vietnamese enterprises, especially in the process of import and export of goods. Although this problem has been concerned by the state and is implementing many policies to overcome and solve. But in general, businesses still face difficulties in public administrative procedures, many intermediate levels and inadequacies in some business activities.
According to Nguyen Kim Hung, chairman of Kim Nam Group, there is currently no detailed set of governance standards for individual business households, small enterprises and SMEs. [5] In addition, the issues of capital mobilization and financial hire and purchase are also dilemmas, needing the government’s attention and creating favorable conditions for businesses to solve quickly.
2.5. Lack of human resources.
Viet Nam has entered an aging population since 2011 and it is forecast that by 2030, the proportion of elderly people in Vietnam will increase to 17%. [6] The aging of the population will cause human resources to shrink, directly affecting the whole economy, and long-term impacts on industrial production. This is a big challenge, which needs to be planned by businesses for long-term strategies in the future, when Vietnam begins to lack young workers, There is no longer a competitive advantage in population compared to other countries in the region.
At the same time, another human resource challenge for Vietnamese enterprises is the lack of high-quality labor. Many enterprises in industrial production currently lack a team of good managerial leaders, experts and skilled labor. These restrictions have hindered the sustainable development of the business for many years. In particular, the low labor level will make it difficult for manufacturing units in Vietnam to move to industries and stages with high added value, catch up with the international market and maximize profits for the company.
3. Summary
Above is an article on “Many challenges of the industrial production industry to face” in 2023. Hopefully, through the article, RX Tradex has provided a full perspective on the general situation, with many difficulties and challenges in the industrial production industry in Vietnam. And this year, in order to help businesses find new directions, RX Tradex Vietnam will organize the Vietnam Manufacturing Expo to help connect many trading partners and promote goods trading. In addition, RX Tradex also organizes other leading exhibitions such as NEPCON Vietnam, METALEX Vietnam and Waste and Recycling Vietnam.
Note:
[1]: Investment Newspaper
[2]: VnEconomy
[3]: Lao Lao newspaper
[4]: Digital transformation in businesses – an inevitable trend
[5]: Tuoi Tre newspaper
[6]: Website of the Ministry of Labor, War Invalids and Social Affairs
