Textiles and Garments at Threshold of New Year

The Vietnamese textile and garment industry experienced a year of ups and downs. The future of the industry in 2007 and how the industry will overcome post-quota barriers were themes of a recent conference entitled ‘Textile and garment – post-quota regulation mechanisms.’

 

“A new fresh life could be felt in the Vietnamese textile and garment industry, which employs two million of workers and has made a contribution to industrialisation of rural areas and poverty reduction,” said Le Quoc An, chairman of the Vietnam Textile and Garment Association, talking about the industry in 2006. Despite fierce competition, the industry saw a rapid development with export turnover increasing by 20 per cent, from US$4.8 billion in 2005 to 5.8 billion in 2006. In particular, most equitised enterprises gained a high growth rate and a high economic effectiveness.

 

The result of the voting for ‘2006 outstanding Vietnamese textile and garment enterprises,’ showed that business effectiveness of local textile and garment enterprises increased by 10 per cent against that of 2005. More than 50 per cent of enterprises joining the voting had their profit ratio exceeding 12 per cent. Six enterprises had sales reaching more than VND 1,000 billion and a growth rate of 20 per cent. The Viet Tien Garment Company had the highest export value of US$152 billion. It was followed by the Nha Be Garment Company with US$130 million. Hansoll Vina, with US$81 million, was the enterprise with highest exports to the US.

 

At the same time, many enterprises were successful in local market development, trademark building, environmental management, information technology application, and specific product creation. Encouraging achievements in 2006 show a good prospect for local textile and garment industry in the coming years.

 

Increasing the localisation proportion in exported products, for competitiveness improvement, is considered a development strategy of local textile and garment industry. The strategy has been guided and supported by the Government, ministries and agencies since 2001. In fact, the number of enterprises supplying cloth for exported garment making remains low. Imported cloth still accounts for around 70 per cent of cloth used by garment enterprises. Furthermore, there are few enterprises capable of making specific products. Most of local textile and garment enterprises make popular products, which are facing fierce competition in terms of prices from opponents from China, India and other countries in the region.

 

Sharing the same view, An said in 2007, the Vietnamese textile and garment industry would face challenges and barriers. At present, new competitive tools, such as brands, quality, environment-friendly management and labour relationships have yet to receive proper attention of local enterprises. More importantly, enterprises lack technology and management experts capable of working in a high competition environment. At the same time, macro-economic policies for improving national competitiveness, such as simplification of administrative, taxation and customs procedures, and communication infrastructure, have yet to meet the demand of enterprises.

 

At the conference, Trade Minister Truong Dinh Tuyen, said in the new period the Vietnamese textile and garment industry would face three new challenges, including overheated growth, a rapid development of the re-export of products made by other countries, and risks of anti-dumping investigation by the US. The minister said overheated growth may lead to enterprises cutting prices. Also, the removal of quotas may impose challenges for the industry in managing the re-export of products made by other countries.