Textiles and garments need steady growth

Although textiles and garments have experienced constant growth, there are still serious problems facing the sector such as a labour shortage and reliance on imported materials

Positive signs of growth

After seeing an average growth of 30 percent in recent years, Vietnam is now one of the world’s 10 biggest textile and garment exporters, accounting for 2.7 percent of the global market. In addition to finished products, Vietnam’s cotton fibre is now becoming popular in markets such as Turkey and Brazil.

With an export turnover of US$4.8 billion in the first two quarters of 2010, up 17 percent compared to last year, and US$1.4 billion more than that of crude oil, textiles and garments are now leading the major export products of Vietnam.

The US is now Vietnam’s biggest market with a growth rate of 15 percent, followed by Japan with 10 percent, and new markets like Taiwan, the Republic of Korea, and ASEAN.

In the US and Japanese markets, Vietnam’s textile and garment products hold the second biggest share after China. Vietnamese businesses also have contracts to export their product through the end of the year.

It seems quite possible for businesses to meet the target of earning US$10.5 billion by the end of this year, says Le Quoc An, chairman of the Vietnam Textile and Apparel Association.

Vietnam’s textile and garment sector currently has many advantages in attracting importers, raising its prestige and the competitiveness of its products.

However, the sector is facing many problems caused by the fluctuation of the financial market, prices of materials, and workforce.

Labour shortage and imported materials

The labour shortage is one of a serious problem that puts pressure on textile and garment businesses.

Nguyen Ngoc Lan from Nha Be Garment Company said that although his company has signed contracts to export products through the first quarter of 2011, he is very worried about the shortage of workers.

It is, therefore, very necessary ensure the workforce for the production by boosting the productivity and increasing salaries for workers, Lan said.

Businesses are also looking forward to the state’s support policies, said Lan, adding that the department of taxation and the customs office need to hold workshops to help export businesses iron out snags.

Over-reliance on imported materials

In addition, the local garment sector relies too much on imported materials. The sector’s exports were valued at US$4.8 billion in the first half of this year, while its import of materials cost US$3.7 billion in the first five months, up 33.5 percent compared to a year earlier.

Economists say that Vietnamese garment and textile products are likely to enjoy more favourable competitive advantages in US and EU markets than Chinese products of the same kind which will have higher prices after China’s adjustment of its currency exchange rate relative to the US dollar on June 22, which increase the value of the Chinese yuan, driving up the price of Chinese garment materials.

However, they estimate that about 70 percent of Vietnam’s imported garment materials come from China, so the surging price will also lead to rising production costs for made-in-Vietnam products. Furthermore, the local garment sector is still facing difficulties in retaining partners and improving product quality to meet demanding foreign markets.

Senior economic expert Bui Kien Thanh emphasises that those products using a high proportion of imported materials from China will not have an export advantage. Only those products using locally-made materials will benefit, he adds.

Creating high added-value for garment products

The garment sector is striving to produce more materials domestically to ensure sustainable growth.

The Prime Minister has approved a cotton-growing project which will be implemented through 2015.

The Vietnam National Textile and Garment Group (Vinatex) also plans to invest more than VND1,400 billion in creating a higher added-value for home-made products. The group is cooperating with the Vietnam National Oil and Gas Group (PVN) to build the Dinh Vu fibre plant in the northern port city of Hai Phong, which is expected to meet the sector’s demand.

Moreover, four garment and dye centres will also be established in Ninh Binh, Nam Dinh, Long An and Tra Vinh provinces to encourage domestic and foreign businesses to invest in producing garment and textile materials.

Developing material input has become an urgent task of the garment sector to reduce production costs and increase competitiveness in the global market. Export growth must match for the increasing added-value of each product so that the sector can sharpen its competitive edge and account for a large proportion in the country’s export structure. – VOV

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