At least 20 per cent of businesses in Vietnam's textile and garment industry, the country's second largest foreign exchange earner after crude oil, will go bankrupt after Vietnam joins the WTO, said Le Quoc An, Chairman of the Vietnam Textile and Apparel Association (Vitas).
Weaker and smaller enterprises may face bankruptcy in times of competition, said An, adding that stronger enterprises may survive, however, with opportunities to acquire bankrupted enterprises that fall on the wayside.
An said the biggest disadvantages for domestic garment makers are weak support industries and a lack of local materials. Apparel makers must import most of their fabric, paying more than rivals in China or India who can source materials locally.
Domestic garment producers import up to more than 85 per cent of materials and accessories; specially, nearly 100 per cent of synthetic fibres; nearly 100 per cent of dye, machines and equipments; 70 per cent of fabric and over 50 per cent of fibres.
The Viet Tien Garment Co. reported that it imported 70 per cent of its fabric, as well as accessories, machinery, technology and chemicals.
The company said it had acquired the factories of two failed competitors this year, adding to its 36 manufacturing facilities nationwide.
"Our intention is to buy cheap, get good management and skilled workers, and get more orders," said Viet Tien deputy director Le Viet Toa.
Some world economists, however, said the number of bankrupted enterprises will be much higher than the figure of 20 per cent.
Bloomberg recently quoted vice director of the Viet Tien Garment Co., Le Viet Toa, as saying that even half of some 2,000 textile and garment factories across Vietnam could file for bankruptcy in the next two years due to labor cost rises and fierce competition from Chinese goods.
The report, however, was then rejected by many textile and garment producers in Vietnam.
Although Vietnamese enterprises were facing a difficult period of stiffer competition, the year 2005 could be seen as the worst time for this industry as garment quotas with China were removed, said Diep Thanh Kiet, vice chairman of Ho Chi Minh City's Association of Textile and Garment Embroidery and Knitting.
The worst may be over, Kiet said, with a $700 million increase in export revenue this year over last. This was an encouraging sign for the survival and development of the garment industry, he added.
In the first eight months of this year, Vietnam's export revenues from textiles and garments reached nearly $4 billion, up 28 per cent on-year. The growth was attributed to the removal of quotas on Vietnamese garments exported to the EU, while the EU and US imposed additional quotas on China, Vietnam's leading rivals for garment orders.
The garment industry would keep developing, An said, but at a slower pace, as competition would be more fierce.
Garment enterprises, need to cooperate, to survive and maintain their export position, An said. Cooperation would help build strong garment groups with a larger production capacity and market share, a hedge against times of harsh competition.
Investment
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