Garment making is cheaper in the country

A new trend in the garment and textiles industry to establish production facilities in provinces far away from cities could prove beneficial on many counts, industry insiders say

Apart from addressing the almost chronic problem of labour shortage, it would help reduce production costs by way of lower land rents, and ease infrastructure and other pressures on major cities, they add.

A 10-year (2011-20) development strategy prepared by the Viet Nam Textiles and Garment Corporation (Vinatex) plans to invest over US$2 billion in building 31 fibre production plants, 21 dyeing and weaving factories and 164 sewing factories.

Most of these new facilities will be located in provinces in different parts of the country, marking a shift from the past when Vinatex member companies were located in major cities.

Vinatex deputy general Le Tien Truong said this shift was expected to help address the chronic labour shortage that the industry has suffered until now.

At end of 2010, Viet Nam had 3,710 companies in the textile and garments industry, 62 per cent of them in the southern region with more than half located in HCM City and the remainder in Binh Duong, Dong Nai and Long An provinces.

Ha Noi also accounted for nearly half the total member of textile and garment enterprises in the north.

Because it was a labour-intensive industry, it had to compete with other sectors for workers needed to fulfil export orders, Truong said.

In this tussle, the textile and garments industry often lost out because it could not offer higher wages, he added.

At present, the average income of the industry’s workers is just $120 per month so it cannot afford to keep workers in major cities in coming years, according to Truong.

Although the textile and garment industry is determined to use modern technology and equipment to improve product quality and reduce labour demand, the number of workers needed to increase the industry’s production capacity would still be high and is estimated to reach 1 million in the next 10 years.

In addition to the labour difficulties, the industry also found land rentals too high compared to low profit margins, Truong said.

To implement the shift away from major cities and neighbouring localities, many surveys were conducted to find ideal investment locations.

The target localities include Phu Tho, Tuyen Quang and Thai Nguyen provinces in the north; Thanh Hoa, Nghe An and Quang Tri in the north-central region; Thua Thien-Hue, Quang Nam, Binh Dinh, Phu Yen in the south-central region; and Tay Ninh, Tien Giang and Dong Thap in the south.

“These localities have the advantage of having plentiful labour resources and relatively low land rentals, but they also have the disadvantage of insufficient infrastructural facilities, particularly those needed for export activities, which will push transportation costs to a very high level, Truong said.

However, the development of textile and garment factories in rural areas would not only benefit the industry, but also the localities by creating jobs and increasing local incomes.

Truong said that the move would also help cities like Ha Noi and HCM City by easing pressures relating to increasing number of immigrants, transportation demand and environmental pollution. — VNS

Tags: Vietnam garment exports, Vietnam Garment industry