Textile and Garment Industry: Preparing for the bumpy road ahead

Textile and Garment Industry: Preparing for the bumpy road ahead

As challenges to Vietnam’s textile and garment industry are set to increase in 2005, The American Chamber of Commerce (AmCham) organised a seminar on how Vietnamese textile-garment enterprises and workers could survive in 2005. Over 300 Vietnamese and foreign enterprises participated in the seminar, held in Ho Chi Minh City on 30 July 2004, to work on solutions for the sector.

The export of textile and garments plays an important role in the Vietnamese export strategy. The export of these products to the United States makes up 70 per cent of the total value of Vietnamese textile-garment exports. In 2003, the textile-garment export value was US$2.5 billion and made up half of the export value to the United States. It also means that 1.4 million jobs depend on this market. Vietnam is now facing a big challenge. ATC has decided that after December 31, 2004, no more textile-garment quotas will be applied to WTO member countries. It is a crucial moment and Vietnamese enterprises will face fierce competition.

Ms. Brenda Jacobs, from Sidley, Austin, Brown & Wood LLP law firm said that through in-depth analysis of the Vietnamese situation, measures to cope with the challenge can be found. So far, clients come to Vietnam for different commodities. They do not come to Vietnam because of quota shortages in other countries. Many foreign investors in Vietnam include companies that American clients have had business relations with for many decades. Therefore, the lifting of quotas for other countries does not necessarily affect Vietnam. For example, quotas are keeping back China in almost all important categories, including trousers and shirts. Currently, China ranks 23^rd in Cat. 347/348 and 26^th in Cat. 338/339. Therefore, such trade will be expanded and not necessarily taken away from the Vietnamese share. Foreign clients wish to do business in Asia, including Vietnam, because of the skilled labour, the high quality products and services, the available materials, good storage and supply, long-standing partnerships and the observance of international criteria (human rights, labour and the social responsibilities of companies).

To meet the challenge, Ms. Brenda Jacobs believed that expenses in the management of quotas must be minimised. The distribution of quotas must be done properly and with transparency to assure the maintenance of clients. Quotas must be directed to true and effective clients otherwise they may be misused by brokers or simply not used. The supply line must also be improved. Furthermore, Vietnam needs to accelerate its admission to the WTO, which will be even more critical to the garment and textile industry in 2005. With WTO membership Vietnam would have the best protection against barriers from foreign markets. It is not an easy process, but a well-deserved one. Vietnam is regarded as a future “dragon”, with great potential in the export of textile and garment. The open policy on foreign investment and export orientation is the key to Vietnamese economic development.

Mr. Diep Thanh Kiet, President of the Textile-Garment Association in Ho Chi Minh City, said that 80 per cent of Vietnamese textile-garment enterprises are of small and medium size. The association has some 200 members including large enterprises and it has already taken measures to ensure their existence. The year 2005 will be the time to review what they have achieved. Their competition strategy has been carried out in four programmes: price reduction, efficient management and increased productivity; improved quality and environment and labour criteria; pro-active business (in workforce, finance, market, materials); and the client care delivery service. The enterprises have increased their production capacity as well as business linkages - vertically to ensure the input and outlet, and horizontally to coordinate with similar commodities and items. Each enterprise has its own special product to avoid overlapping with large enterprises. It is carrying out capacity building programme with MPDF and JETRO, a programme of shifting from contractual production to direct trade and a programme of transforming the production industry into trade and services. The association has coordinated with other organisations to establish three centres: the human resources development centre; the centre for the supply of materials for garment and footwear industries; the centre for trade promotion and service.  The association hopes that with its joint efforts, Vietnamese textile-garment enterprises can overcome challenges that 2005 will bring with it.

In preparation for 2005, the Trade Ministry has taken into account all the views of concerned businesses and has decided to apply the distribution of quotas depending on the merits of particular businesses.  Mr. Le Van Thang, Deputy Head of the Import-Export Department, under the Ministry of Trade, said that the ministry is working hard to inform enterprises of the quota by September 15, 2004, at the latest. In addition, the ministries of trade, finance and industry will continue to improve taxation policies, promote assistance and upgrade production lines to increase business competitiveness. Those concerted efforts will reduce production costs and will increase comparative advantages and product credibility in the market.