Export growth an open question

Export of textiles and garments has increased by 78 times over the past 20 years. However, is there still room for growth in the future?

Over the past two decades, changes in the global market for textiles and garments, as well as Vietnam’s deeper global integration, have paved the way for the local apparel sector to develop. Labour shortages in Asia-particularly Taiwan, Hong Kong, Korea and Singapore-have forced these economies to gradually scale down production and invest in workshops in other countries where human resources are more abundant. Vietnam is one of these labour-rich countries.

Furthermore, its Asean, Asem, Apec and WTO memberships has enabled Vietnamese products in general and textiles and garments in particular to face less discrimination in the international market. Vietnam has also signed free trade pacts and many other multilateral and bilateral economic cooperation agreements to help its textiles and garments penetrate some important markets.

The US market sets an example. In 2001, Vietnam’s textile and garment export to the US was only $47 million and was not yet an important market player. However, the figure surged to $5 billion in 2009, enabling Vietnam to become the second biggest exporter of textiles and garments. In the same year, Vietnamese exporters also secured the same status in Japan with export earnings exceeding $1 billion.

At present, Vietnam’s textiles and garments have made their way to most economic powerhouses. In 2009, Vietnam ranked eighth in the list of top textile and garment exporters, earning $9.1 billion. This was 78 times as much as that in 1991 when the country earned $116 million.

However, is there still room for Vietnam to boost export of textiles and garments, considering that such advantages as ample labour supply and low prices are being eroded? To answer this question, it is vital to analyse market trends both at present and in the next 10 years.

In the past 10 years, the world’s three biggest importers of textiles and garments were the US, the European Union (EU) and Japan, which accounted for nearly 70 percent of global demand. Besides, the main suppliers of textiles and garments, including North America, South America, Central America, Eastern Europe, Southern Europe and North Africa have had to slash their share of the above markets due to labour and cost constraints. In particular, Mexico’s share of the US’s market for imported textiles and garments fell from 16.7 percent in 2000 to merely 5.37 percent in 2009.

The leading exporters of textiles and garments to EU, notably from Eastern Europe and North Africa, have also suffered a shrinking market share. Morocco’s proportion plunged from 5.92 percent in 2000 to 3.45 percent in 2009, and Poland’s from 4.1 percent to 0.98 percent. Turkey, the leading exporter to EU, can only maintain its market share at 14 percent.

In Japan, the share of such Western exporters as Italy, the US and France dropped from 13.2 percent in 2000 to 6.1 percent in 2009.

In contrast, the share of Asian countries has gathered rapid pace, rising from 52.7 percent in 2000 to 75.11 percent in 2009 in the US, from 47.46 percent to 85 percent in EU, and from 81.71 percent to 91.51 percent in Japan. This trend indicates that Asia is the world’s leading textile and garment exporter both at present and in one or two decades.

The issue is which Asian countries will capture the biggest slice of the pie. China, India and Pakistan enjoy advantages in the labour force and material supply. Thailand and Malaysia are better at designing, marketing and ensuring the quality of their products.

Bangladesh, Indonesia and Cambodia boast cheap labour. Meanwhile, Burmese and North Korea will have the most competitive workforce in the textile and garment industry.

Over the past 10 years (2001-2009), Vietnam’s textile and garment export increased by 100 times in the US (previously there had been no export due to daunting tariffs), nearly three times in EU and about two times in Japan.

Still, it is unlikely for Vietnam’s textile and garment export to the US to continue soaring, unless the Asean-US Free Trade Area or the Trans-Pacific Partnership Agreement are in place without imposing the “yarn forward” condition. There is, of course, room for growth if the sector can make optimal use of the generalised System of Preferences (GSP) in EU and the Economic Partnership Agreement (EPA) in Japan.

Internal improvements may play a role. Productivity can rise by 30 percent and localisation by 20 percent by virtue of better supporting industries. Product quality may rise, too, and so can design capabilities. In so doing, Vietnam can transform its export strategy from OEM (original equipment manufacturer) to ODM (original design manufacturer).

Low added value is arguably the Achilles’ heel of Vietnam’s textile and garment industry, but it can be tackled.

Efforts to address this concern are also the highlight of the “Vietnam’s best-performing enterprises in textile apparel and leather-shoe industries” awards given by Vitas and the Saigon Times Group over the past few years.

Saigon Times

Tags: Vietnam garment exports, Vietnam Garment industry, Vietnam textile industry