Opportunities for the textile industry

From now until the end of the year, textile and garment exports will still face many difficulties. This requires businesses and the entire textile and garment industry to make efforts to increase competitiveness.

Low growth

According to the Vietnam Textile and Apparel Association (Vitas), in the first 7 months of this year, textile and garment exports increased by only 4.7% compared to the same period in 2015 and there were not many breakthroughs when growth in most major markets was below 5%. Accordingly, textile and garment exports in July only reached over 2.3 billion USD, contributing to the export value of this group of products in the first 7 months of the year reaching about 13.15 billion USD. In particular, textile and garment export turnover to key markets all increased low such as: Japan by nearly 5%, the United States and the EU by nearly 4%...

"With the growth rate not as high as expected, textile and garment has achieved the lowest growth rate in the past 6 years. The burden is falling on businesses in the last months of the year because to achieve the annual plan, textile and garment exports must reach about 3.4 billion USD/month, while the average in the first months of the year is only nearly 2 billion USD/month," said Mr. Vu Duc Giang, Chairman of Vitas.

The reason for this situation is that Vietnam's textile industry is facing fierce competition from other countries such as Cambodia, Myanmar, Bangladesh, etc. because production costs in these countries are lower than in Vietnam. Moreover, the slowdown in demand in many markets has indirectly caused world commodity prices to decrease. Since the beginning of the year, the unit price of textile and garment processing has continuously decreased. On the contrary, the number of orders transferred to other markets has increased rapidly. Meanwhile, unlike many competitors who are exempted from import tax in many key markets, such as the United States, Vietnamese textile and garment enterprises are still subject to import tax of up to 17%.

"Although it is a key export item, textile and garment enterprises currently mainly receive orders from intermediary customers abroad, so profits are low and there are many risks. In addition, due to the continuous increase in minimum wages and high bank loan interest rates (8-10%), 2-3 times higher than those of competing countries, the financial costs of enterprises have increased, contributing to the high price of Vietnamese goods. According to our calculations, domestic textile and garment products are 20-30% more expensive than our competitors," said Mr. Giang.

Seize opportunities from market opening

Currently, foreign-invested enterprises account for about 71% of Vietnam's exports and 59% of its imports, especially dominating key processed and manufactured goods. Looking at the reality, Ms. Ho Thi Kim Thoa, Deputy Minister of Industry and Trade, said that in the next 10 years, the textile and garment industry will still have advantages to develop as Vietnam has participated in many bilateral and multilateral free trade agreements and the Trans-Pacific Partnership Agreement (TPP)...

“The trend of the world textile industry is currently shifting rapidly to countries with advantages in human resources and low processing costs, so the textile industry needs to make adjustments to meet the new situation. The important thing now is that the industry needs to quickly build and adjust the development plan for the textile industry until 2020, with a vision to 2030, to suit the actual situation,” said Ms. Ho Thi Kim Thoa.

Hanosimex Nam Dan Textile Branch invested by Hanoi Textile and Garment Corporation in Nghe An. Photo courtesy

Meanwhile, to help textile and garment enterprises take advantage of opportunities and overcome challenges brought about by free trade agreements, Vitas has just proposed that the Government adjust the strategy and planning for the textile and garment industry development approved by the Prime Minister in Decision No. 36/2008/QD-TTg dated March 30, 2008 and Decision No. 3218/QD-BCT dated April 11, 2014 of the Ministry of Industry and Trade to suit the speed of deep and wide integration of Vietnam in a longer-term direction until 2025, with a vision to 2040 because many goals in the above decisions are now outdated.

According to economic experts, the economic agreements that come into effect will bring opportunities to increase exports for the textile and garment industry, but due to rising wage costs, the advantage of cheap, low-skilled labor in the textile and garment industry will decrease. If Vietnam wants to maintain its competitiveness, it must move up the value chain of textile and garment production. To develop sustainably, businesses need to learn and invest in technology to produce advanced fibers and fabrics because the use of high-tech equipment, although expensive, will change the quality of products, especially fabrics for export.

According to baotintuc