Garment material imports shooting up, why?

If looking at figures on the structure of import products in the first months of 2010, garment material import revenues were notably high.

Many analysts are trying to find out why the increase occurred. After all, Vietnam is making every effort to reduce its trade deficit by reducing import revenues and high imports of any product that can be made domestically.

The import revenue of garment materials has never been so high as in the first months of 2010. According to the Ministry of Industry and Trade, to date, garment companies have spent more than five billion dollars to import materials, including $2.8 billion worth of fabric, an increase of 27 percent, and $350 million in cotton, an increase of 75 percent over the same period of 2009.

Garment producers argue that needed to expand imports. The garment industry must step up the production to fulfill increasingly high numbers of orders. Most garment companies have orders from foreign importers, thanks to the global economic recovery.

The producers also attributed high import revenues to sharp price increases of materials. Enterprises say cotton saw the sharpest rise over the last seven months, at over 40 percent, while fibre prices have risen 30 percent.

Le Quoc An, Chair of the Vietnam Textile and Apparel Association, confirmed that, since garment material prices have been rising, companies must import more cotton, fabric and fibre to ensure the export growth rate of 15-17 percent and fulfill signed contracts.

Economic analysts warned that material prices will continue rising and Vitas has advised member companies to import necessary materials soon.

Vietnamese firms were right to import cotton in large quantities in the first months of 2010. The low import prices at that time have now allowed Vietnam-made products to be more competitive. The import cotton price has increased from $1.3 per kilo in the first quarter to $1.9 per kilo.

A representative of the Vietnam Textile and Apparel Group (Vinatex) remarked that import revenue from garment materials will not be as high as before, because enterprises have imported enough materials to last until the end of the year.

Commenting on Vietnam’s garment industry, Chu Dinh Quy, Chair of X20 Garment Company, noted that Vietnam is now a factory for the world’s outsourcing. If it wants to export more products, it needs to import more materials. According to Quy, the localization ratio (the locally-made content of products) remains modest at 30 percent.

According to Vinatas, the export revenue of garment products in 2010 is expected to reach one billion dollars, an increase of $200 million over June. The industry has exported $5.8 billion in products in the first seven months already.

Exports to the US have increased by 23 percent, to Japan 15 percent and ASEAN countries 30 percent. Those to South Korea saw a record increase of 80 percent over the same period of 2009. Meanwhile, exports to the EU have reported slight growth of 1.5 percent.

Dau Tu newspaper quoted

Sean Doyle, Head of the EU Delegation to Vietnam, as saying that the EU market is not likely to recover fully by the end of 2010, because consumer confidence has decreased in the context of the public debt crisis.

Vitas believes that the target of $10.5 billion in garment export revenue is within reach for 2010. – Dautu

Tags: Vietnam Garment industry, Vietnam Garment material imports