Vietnam’s Garment Textile in 2009: Advancing Four Advantages

Vietnam now ships up to 65 per cent of its garments and textiles to the US market while other two majors, Europe and Japan, also play strategic roles. In 2008, all three markets fell into recession, which led to shrinking demand for imported items. In the fourth quarter of 2008, orders from the US decreased 20 per cent from a year earlier. Besides, commodities from China, India, Pakistan and Bangladesh have increased their presence on Vietnam’s key export markets and regional markets, even Vietnam. Fewer orders sent outsourcing prices down by 20 per cent - 30 per cent. In European markets, orders from major France, Spain and Germany have also dropped steeply. Only orders from small markets like Scandinavia and Switzerland are still good. The Japanese market also fell in the common trend but Vietnam is holding advantage to increase shipments to this market because Japan is applying zero tax on commodities from ASEAN nations. However, enterprises in Vietnam have to adapt to demanding requirements for commodities from this market. Before this hard situation, many garment and textile companies in Ho Chi Minh City have expanded their markets and sought new ones like Russia, the Middle East and Africa. Especially the Russian market is seen rather to be easy to please and Vietnamese commodities can penetrate the world-largest nation. Regarding employment, although many workers get unemployed due to the closure of foreign-led companies, many companies without sufficient workforce will have a chance.

 

After going through a hard year, Vietnamese garment and textile firms made a growth of over 18 per cent and the growth in exports to the US marketed stood at a double-digit. The total export earnings exceeded US$9.1 billion. Mr. Vu Duc Giang, General Director of Vietnam National Textile and Garment Group (Vinatex), said at a review meeting on January 1, 2008 that Vinatex made an industrial production value growth of 11 per cent, revnue increase of 10 per cent, export rise of 21 per cent, material production output rise of sản 6 per cent and garment output increase of 12 per cent.

 

Experts forecast that the garment and textile industry will face a tough year ahead because global demand for garments and textiles may fall 15 per cent. Vietnam may earn US$9.2 - 9.5 billion in 2009. The first and foremost difficulty against the Vietnamese industry is the shrinking demand for high-grade apparels and textiles dragged by continued financial crisis and economic slowdown. The pressure from China’s competition is also a factor because the US government eliminated quota policy imposed on Chinese items from January 1, 2009. Vietnam’s opening of its retail market for foreign firms, as committed in the WTO entry roadmap, will further pressure on Vietnamese firms on the home market.

 

Therefore, garment and textile companies need to build long-term development strategies based on four advantages; namely, quality, price, good labour relation and friendly working environment. The industry in general and Vinatex in particular will focus on enhancing productivity, consolidating personnel and exercising thrift practice. The US market is forecast to undergo shrinkage and Vietnamese enterprises need to expand other markets like the Middle East, Eastern Europe and Africa to lesson reliance on several traditional markets and clients. Especially, in the branding development, Vinatex will ensure the consistency, build a three-year branding development plan, focus on investing in two strategic programmes of manufacturing exported clothing and growing cottons. At the same time, the group adopted new measures to enhance productivity, streamline workforce and develop the domestic market.

 

Garment and textile companies are very interested about the demand stimulus package worth US$6 billion introduced by the government. However, this package lacks concrete solutions and this largely concerned garment and textile firms. If this package has only 20 per cent for small and medium enterprises (SMEs), garment and textile companies will hardly touch it because, according to the statutory definition, a SME is a business entity with an equity of less than VND10 billion. In fact, they have to spend a large sum of money to modernise machinery and equipment to enhance productivity. A very tiny garment and textile firm has chartered capital of VND10 billion. Meanwhile, very small ones do not have export markets like bigger ones. The government should take this into account. Like companies in other industries, garment and textile companies also need tax break and delay to escape difficulty. They prefer to have trade union free cut from the current 2 per cent to 1 per cent - the rate at foreign-invested garment and textile firms.