Nghe An and the problem of 'attracting' industrial projects to support the textile and garment industry

DEPENDENT ON IMPORTS

Up to now, in the province there are about 65 garment factories and establishments operating throughout the districts, cities and towns in the province. With the current development scale of textile and garment, it is a favorable condition for the industry.supporting industryThis industry is developing. Although the number of garment factories is large, the number of satellite enterprises with the mission of supporting is too small. Currently, there is only 1 yarn factory of Hoang Thi Loan Textile Joint Stock Company with an output of 20,000 tons of yarn/year; 1 embroidery facility (Lac Son Industrial Park, Do Luong District) with a workforce of 150-200 people embroidering accessories for garment factories of Havina Kim Lien Company and Prex Vinh Company Limited and about 18 other hand-woven facilities.

Many garment factories have been invested in throughout districts and towns in Nghe An. In the photo: Production at Venture Garment Factory in Thanh Tien Commune (Thanh Chuong). Photo: Thu Huyen

Among dozens of garment factories, there is only 1 yarn factory. Vinh Yarn Factory's production line was invested in the 90s of the last century, but now the parent company has invested in some new equipment in the early and late stages to balance the line, improve and enhance productivity, yarn quality,...

According to the assessment, currentlytextile and dyeing industryvery weak; many garment factories have sprung up in urban and rural areas but they mainly do low-value garment processing. The fabric production segment including weaving, dyeing, and finishing is underdeveloped, creating a "bottleneck" that makes it difficult for the textile industry to break through. Through research, some businesses believe that developing the textile industry's support industry requires very high environmental treatment costs, especially the fabric dyeing stage, so the products are expensive.

Most of the materials for the textile industry such as needles, threads, etc. must be imported from abroad. Photo: Thu Huyen

To increase competitiveness, increase product value, and sustainably develop the textile industry, businesses are aware of the importance of the textile and dyeing industry, but textile and dyeing production is still in a "lowland". The reason is that investing in textile and dyeing requires businesses to comply with environmental regulations, which requires very high production costs, so up to now the province has not had any dyeing factories.

Difficulties in raw materials have caused the textile industry to be stuck in a vicious cycle of importing cotton to spin yarn, then selling yarn and then importing fabric. Mr. Tran Duc Long - an officer of Prex Vinh Company Limited said that the garment industry is having to import 60-70% of raw materials, most of which are imported from the Chinese market. Our textile industry is strong in yarn and sewing but weak in dyeing; exporting yarn to China and then importing fabric. This problem has caused the textile industry of the whole country in general, and Nghe An in particular, to have to import a large amount of fabric materials.

Cotton fiber - the main raw material for yarn production - is also being imported from abroad. Photo: Thu Huyen

In addition to yarn, dyeing, mechanical equipment including equipment details, mechanical spare parts replaced during operation and maintenance, mechanical products used to support the textile industry; yarn guiding details, extended iron bobbins, various types of fixtures, bobbins, fabric scissors, thread scissors... Currently, the demand for replacing these products is very large but they are still mainly imported; Plastic products supporting the textile industry (plastic tubes for the textile industry, synthetic fibers, hangers for the garment industry, various types of pins, plastic clips...); Chemical products supporting the textile industry mainly (dyes, auxiliaries, basic chemicals, biological products); Raw materials supporting the garment industry mainly such as sewing threads, embroidery of all kinds, labels, logos; zippers; buttons... also depend on foreign countries.

Mr. Hoang Minh Tuan - Head of Import-Export Management Department, Department of Industry and Trade said: In 2021, despite many difficulties due to the pandemic, textile and garment export turnover increased by 34.9%, textile fibers of all kinds increased by 75.7%. In 2022, the textile and garment industry's export turnover continues to set a fairly high growth target, but the biggest difficulty for this industry is still the problem of raw materials and supporting products for the garment industry. If this gap is not overcome, it will be very difficult to proactively source raw materials to take advantage of the CPTPP and EVFTA trade agreements. In addition, the requirement of the CPTPP Agreement is that the origin of the product must be clear from the yarn onwards.

ATTRACTING SUPPORT INDUSTRY PROJECTS FOR THE GARMENT INDUSTRY

In fact, the supporting industry in the province is weak and lower than the national average, accounting for a small proportion of the province's industrial production value. The number of supporting industry enterprises in each industry and field is still small; weak in terms of capital capacity, technology, production capacity; very limited market scope, only able to participate in a number of fields that do not require high technical and production skills. Most of these enterprises have not been able to participate in the supply chain of theFDI enterprisesare operating in Vietnam. We have not yet attracted many multinational corporations with strong capital and technology potential to invest in key industries to act as a locomotive to promote the formation of a system of supporting industrial enterprises to serve these enterprises.

Yarn production line at Hoang Loan Textile Joint Stock Company. Photo: Thu Huyen

According to the leader of the Department of Industry and Trade, the underdeveloped supporting industry leads to businesses depending heavily on imported components, which will increase input costs due to increased transportation, warehousing, insurance, etc., not to mention the risk of receiving goods on time, affecting production progress and reducing competitiveness. Therefore, developing supporting industries in the province is a key task to increase the domestic value of industrial products, increase added value and develop sustainable industry.

At a Science ConferenceNghe An industryBy 2030, Dr. Le Xuan Sang - Deputy Director of the Vietnam Economic Institute said that the reason why the supporting industry, including the textile and garment industry, has not yet developed is due to the geographical economic disadvantage of Nghe An, which makes income and the level of socio-economic development, including the issue of developing business forces and industries, still relatively low. The distance from the centers, growth poles of the whole country and economic and international trade corridors, etc. are factors that make Nghe An still face certain difficulties in attracting investment, especially difficulty in attracting corporations to set up production facilities, leading to FDI companies investing less in it.

The development of supporting industry is facing many barriers in technology and cost, market connection between suppliers and demanders, support policies, quality of human resources and planning as well as technical infrastructure; the supply capacity of the supporting industry in the province is still very limited. The ability to connect with domestic and foreign enterprises to supply raw materials, components and spare parts is weak.

Supporting industrial production in a closed chain is the goal in the planning of Nghe An textile industry. Photo: Thu Huyen

Textile and garment is an industry group that needs supporting industry to develop because currently in the province there are many garment investment projects, in which some enterprises invest in production lines with quite large scale,... Meanwhile, the textile and garment industry has to import most of its raw materials and accessories, so it is necessary to attract many supporting industry projects to reduce trade deficit.

Nghe An is striving for an average increase in the value of supporting industrial production of 9-10% per year, accounting for 10-12% of the total industrial production value by 2025. Gradually increase the proportion of export turnover of supporting industrial products in the total export turnover of goods of the province. In the period of 2018-2025, strive for an average increase in the number of enterprises of 3% per year, accounting for 10-12% of the total number of enterprises of the entire industry by 2025. There are 20-30 supporting industrial enterprises located in the province that can participate in supplying FDI enterprises and participate in the value chain of corporations.

To concentrate resources on the most potential areas, bringing the highest investment efficiency, there needs to be orientation, goals along with a system of mechanisms, policies and promotion solutions from the State management agency. The goal of Nghe An's industrial development in the coming years is to prioritize industries with competitive advantages, while focusing on shifting the structure to areas with high science and technology content, increasing the proportion of exported industrial goods, promoting the final product manufacturing industries...