The growth of the garment and textile industry was very low, at 0.2 per cent, in the first seven months of 2006. The export of garments and textiles faced difficulties in the major markets of the United States and the EU.
Garments and textiles is a key export of Vietnam with an annual growth of at least 10 per cent from 2001 to 2004. In 2005, the garment and textile export generated US$5.2 billion. However, the situation in the first seven months of this year showed the hardest-ever difficulty of the garment and textile industry, which is resulted from both the limited quota mechanism and low competitiveness.
According to Mr. Le Van Dao, General Secretary of the Vietnam Textile and Apparel Association (Vitas), the garment and textile export volume is reaching the saturation point. Although export earnings from textile and garment ranked second after oil and gas, the turnover is unlikely to rise in the coming time. The reasons are strict quota systems imposed by the US and the EU on several products of Vietnam as well as the eradication of State protection for this industry.
Difficulty from quota
Mr. Le Quoc An, Chairman of the Vietnam Garment and Textile Group (Vinatex), said, the Vietnamese garments and textiles are competing with products of China, India, Indonesia, South Korea and other strong rivals since Vietnam has not obtained the ticket to the WTO. The core reason comes from perplexity of State management bodies in allocating export quota to the US where accounts above half of Vietnam’s garment and textile export revenues. Generally, the average growth of the market share of Vietnam’s garments and textiles in the US is not high, mainly under 5 per cent. Especially, when more Cats are added to quota list, the export quota may run out before December31, 2006.
To reduce pressure on this industry, the Ministry of Trade and Ministry of Industry applied the automatic export visa mechanism for 17 out of 25 cat. However, according to An, if this mechanism ends after August 31, enterprises are only able to sell in-stock orders not win new contracts because no importers are risky enough to sign contracts with partners with uncertain export quotas.
To boost the implementation of the remaining quota in the remaining months, Trade Minister Truong Dinh Tuyen said he will instruct the application of automatic visa granting for all categories with an implementation rate of under 40 per cent.
Equitisation and listing on the stock market
From July 2006, the garment and textile industry in general and Vinatex in particular will mobilise capital from the stock market. To carry out the Vietnam Garment and Textile Development Plan in the 2006-2010 phase, Vinatex plans to execute 24 focal projects with a combined investment capital of VND16,115 billion (US$1 billion), including VND1,213.45 bilion (US$75.81 million) from chartered capital of equitised enterprises.
In its business strategy, Vinatex focuses on mobilising capital on the stock market. To take full advantage of this source of capital, Vinatex will equitise its subsidiaries. Particularly, 13 SOEs under Vinatex will go public in 2006- 2007, including six in 2006. By 2008, Vinatex itself will also be equitised. Equitised firms will be listed on the stock exchange.
Mr. An said: We have plans to send several Vinatex member companies like Duc Giang Garment, Nha Be Garment and Garment 10 to the stock market. To date, although no exact definition about the efficiency of this source of capital has been made, I believe it must be huge and depends on methods and sizes of development projects.
Vietnam now has more than 1,000 garment and textile factories employing over 50,000 workers, or 22 per cent of total industrial worker volume.
P.V
Vietnamese
