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Last updated: Monday, October 15, 2018

 

Garment, Textile Industry to Grow Strongly Amidst World Trade Tensions

Posted: Monday, August 06, 2018


Vietnam’s garment and textile industry made the strongest six-month growth in five years, according to the Ministry of Industry and Trade. Garment and textile exports were estimated at US$13.415 billion in the first half of 2018, an increase of 13.8 per cent compared to 2016. In addition to traditional markets such as the United States, the European Union, Japan and South Korea, Vietnamese firms also sought and developed new ones such as Africa, the Middle East, Russia and Cambodia.

Although there is no official information on whether trade spat between the United States and China will affect their textile and garment industries, it is highly likely that the US will raise relatively high import tariffs on garments and textiles from China. In this regard, Mr Vu Duc Giang, Chairman of the Vietnam Textile and Apparel Association (Vitas), said that the association asked businesses not to be too anxious about this issue and to stay prepared to take alternatives to inaccessible markets. He also noted that the Sino-US trade tensions may open up the opportunity for Vietnamese businesses to expand shipments and increase export market shares in the US.

Vitas forecast that textile and garment exports will reach US$18.5 billion in the second half to bring the full-year value to US$35 billion, US$1 billion higher than the plan. Local garment and textile firms have received orders enough for this year’s operations.

Vietnam’s textile and garment industry is seeing enormous opportunities and prospects for market expansion from free trade agreements (FTAs) such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) with a zero duty roadmap and many preferential provisions according to the yarn forward rule of origin. Besides, there is prospect of signing the Vietnam-EU Free Trade Agreement (EVFTA) this year, which will help the Vietnamese garment and textile industry widen its access to this market.

The CPTPP Agreement, signed on March 8, 2018 and scheduled to come into force in 2019, is expected to boost exports to the market of US$40 billion of six CPTPP members which import apparels and textiles will apply tariff incentives on imports from other CPTPP members. In 2017, Vietnam earned US$950 million from garment and textile exports to this market. The estimated value of global yarn and fabric production is US$778.2 billion in 2018, up 4.3 per cent over 2017. The retail value of apparels is forecast at US$1.470 billion in 2018, up 5.7 per cent from the previous year.

Mr Tran Thanh Hai, Deputy Director of the Import and Export Department under the Ministry of Industry and Trade, said, export duties on some products will fall to 0 per cent from 2018-2022 according to FTA commitments, thus helping increase general export value and garment export value in particular. In order to take full advantage of FTAs to expand exports, Vietnamese companies must study and look into commitments of each FTA to fully meet required standards.

However, the garment and textile industry is forecast to face certain difficulties in 2018, for example rising input costs pushed by higher minimum wages, social insurance and water prices; strong impacts of the Fourth Industrial Revolution on the garment and textile sector expected to invest in modern equipment and reduce the workforce; and volatile input prices caused by higher cotton prices in Pakistan, Bangladesh and Vietnam, etc.

In the coming time, the Ministry of Industry and Trade will continue to provide support solutions for domestic enterprises, especially small and medium ones, to quickly move to modern processing methods to meet export quality requirements. Besides, they are recommended to focus on designing and distribution systems to further develop the domestic market. And, they also need to concentrate on human resources training to catch up with digital requirements in some production stages.

According to Dr Tran Du Lich, in addition to human resource training solutions, it is necessary to mobilise stocks and bonds in the market to reduce intermediary costs, especially encouraging linkages with small and medium enterprises, especially when the Law on SME Support is enforced, to create value chains for businesses.

Mr Vu Duc Giang suggested that businesses build supply chains for production, reduce dependences on foreign inputs, and adhere to rules of origin of specific trade agreements.

Huong Giang








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