Production activities at the Chutex International Co., Ltd., Song Than Industrial Zone (Di An town, Binh Duong province).
NDO – Although half the year has already passed, Vietnam’s garment and textile export revenues have only reached a mere US$14.2 billion, accounting for approximately 45% of the year’s plan at more than US$31 billion. As assessed by experts, Vietnam’s garment and textile industry is continuing to face numerous difficulties this year in the context of the world’s declining consumption demand and fiercer competition among exporting countries. Therefore, together with efforts made by businesses in implementing measures to boost exports, it is necessary for ministries and sectors to issue support policies for enterprises.
Confronting numerous challenges
According to the statistics provided by the Vietnam National Textile and Garment Group (Vinatex), Vietnam’s garment and textile export revenues hit US$14.2 billion in the first six months of 2017, representing an increase of 10.6% compared to the same period last year. The United States was the largest importer of Vietnamese products with a value of US$6 billion (up 9% year on year), followed by the European Union with US$2.3 billion (up 8%), Japan with US$1.5 billion (up 12%) and the Republic of Korea with US$1.2 billion (up 18%). Although the growth rate in traditional markets did not live up to expectations, positive signals have been recorded in a number of new markets with the growth rate of two digits or above. The rapid growth pace in the markets of Thailand (17%), Indonesia (11%) and Singapore (38%), has indicated that Vietnam’s efforts to proactively access, make use of and exploit new bilateral and multilateral trade agreements, have initially been of benefit. In addition, the garment and textile industry continued maintaining the growth rate of traditional items, such as T-shirts and trousers of different types at 13-17% on average, and vests at 15%. A number of new products saw positive growth, including swimsuits (29%), raincoats (41%) and towels (31%).
A range of new products and market access methods have gradually resulted in a higher and more stable growth rate with less dependence on traditional markets like in previous years. However, Vietnam’s garment and textile industry is still facing a lot of difficulties as orders have been shifted to some other countries in the region with higher competitiveness. Price reductions negotiated by foreign partners, as well as hiking production costs (power, water, warehouse and transportation) are putting businesses in danger of losses or even bankruptcy.
Concerning businesses’ production activities, Chairman of the Board of Directors of the Hung Yen Garment Company (Hugaco), Nguyen Xuan Duong, noted that the company has received more orders than previously, but all of which terminate as early as September. In the first six months of the year, Hugaco’s total revenues hit roughly US$126 million, down 5% compared to the same period of 2016. The decline was attributed to the fact that most of the commodity codes had their prices pushed down by 5-10% by foreign partners, while countries directly competing with Vietnam’s export garment and textile products, such as Bangladesh, India, Pakistan and Indonesia, applied the policy of devaluing their domestic currencies to boost exports.
Vice President of the Binh Duong provincial Garment Association, Phan Le Diem Trang, who is also Director of the International Garment Company, shared that in the context of declining global consumption demand, businesses will strive to increase productivity, reduce unnecessary expenditures and raise awareness of responsibility among workers, while expecting the State to stabilise prices and create favourable conditions for companies to survive and develop. According to Trang, despite facing little difficulty in seeking orders in the first half of the year, her company still reported a modest profit due to low selling prices
Enhancing investment in technology and expanding market shares
In the context of numerous difficulties faced by Vietnam’s garment and textile industry as global consumption demand is decreasing and competition is becoming fiercer on the market, in order to maintain operation, enterprises have no other choice than to accelerate production and business activities, to invest in modern equipment and technologies and deploy policies to attract, train and improve skills for labourers, aiming to ensure revenue growth.
Discussing market signals in the time ahead, Nguyen Hong Anh, Director of the Administration and Personnel Department at the Binh Duong Manufacturing - Import - Export Corporation (the management unit of the Binh Duong Garment Joint Stock Company), affirmed that the garment and textile sector will thrive in Q3 and Q4. In order to complete the year’s plan, the corporation is focusing on accelerating the production model towards being streamlined, investing in modern equipment and applying the production management model using advanced software of the garment industry. This year, the corporation targets to export US$60 million worth of commodities, US$3 million more than in 2016. So far, it has completed 55% of the plan, however, in order to increase competitiveness, the corporation still needs to take measures to reduce production costs and raise labor productivity.
Mentioning the development direction for the garment and textile industry in the years to come, Vice President of the Vietnam Textile and Apparel Association (VITAS) and Vinatex CEO, Le Tien Truong, noted that the solitary path for Vinatex in particular, and the garment and textile sector as a whole, is to increase market shares and to win-over customers from other countries. This has put Vinatex under pressure to update its technology. It is an urgent need to reform technology, and the 2017-2020 period is the time to focus on investing strongly in technology, Truong said. In addition, Vinatex will drastically strengthen corporate management and administration capabilities towards professionalism and modernity, striving to become a group of regional and international scale.
In an effort to reach the year target of over US$31 billion in garment and textile export revenues, domestic businesses should accelerate the expansion of new markets in Eastern European countries by making use of trade agreements that have already taken effect, while making effective investments through increasing productivity, reducing costs and enhancing existing capacity of the fiber-weave-dye-sew complete supply chain. Focus needs to be placed on implementing key measures, including optimally facilitating fiber exports (over 90% of outputs); diversifying fiber export markets to avoid excessive dependence on one market; and adding value to fiber by shifting into manufacturing fiber products of higher quality. Concerning fabric and cloth sector, it is necessary to enhance links between enterprises so that they can make use of one another’s products, thus indirectly increasing export revenues through the step of sewing when using domestic fabrics. Regarding the garment sector, there is a strong need to urgently settle the issue of labour fluctuation by taking two solutions, including applying automation technology to avoid excessive dependence on labourers, and making recommendations to the Government on salary policies to relieve burdens for businesses in paying insurance premiums.
In addition, garment and textile companies expect that the State’s macro policies make accurate calculations and balances in the exchange rates between the Vietnamese dong and other foreign currencies, in order to prevent domestic businesses from suffering losses in exports. The latency of the export market can last from six months to one year, and if Vietnam fails to deliver timely responses during this period of time, customers are likely to choose other supply sources, which will inevitably put domestic export enterprises in difficult situations in the long term. Also, the Government needs to apply financial support policies at acceptable interest rates, continue accelerating administrative reforms to adjust fees and charges in line with the reality, and upgrade infrastructure, aiming to create favourable conditions for businesses to develop.