Apparel export target seen unobtainable in 2016 for Vietnam

Apparel export target seen unobtainable in 2016 for Vietnam

Vu Duc Giang, chairman of the Vietnam Textile and Apparel Association (VITAS), told a press conference in Hanoi last week that the sector posted export revenue of only USD 12.76 billion in the first six months, growing 4.72 % year-on-year but representing just 41 % of the full-year target.

Again, the growth was mainly driven by foreign direct investment (FDI) firms while domestic peers struggled to find new orders in the period.

VITAS forecast finding new orders would continue to be tough and that some small and medium enterprises could be forced out of business. If the situation does not improve, the industry would find it hard to obtain outbound sales of US$29 billion this year.

Giang said Vietnamese enterprises are not as competitive as exporters from other parts of Asia.

Cambodia and Bangladesh enjoy tariff incentives offered by the U.S and Europe while wages in Myanmar, Bangladesh, and Sri Lanka are lower than in Vietnam. Recently, China has also lowered social insurance premiums from 20% to 18% in the context that many of its textile and garment companies have been shuttered.

There are signs of buyers shifting their orders from Vietnam to other countries to benefit from lower costs, Giang said.

Global economic woes are presenting an extra headwind to the industry. Particularly, many UK textile and garment enterprises operating in Vietnam have plans to shut down following the Brexit vote to leave the European Union last month.

Speaking at the press conference, VITAS vice chairman Nguyen Xuan Duong pointed out three main negative factors for the local textile and garment industry.

First, Vietnam’s foreign exchange policy has kept the Vietnamese dong currency stable compared with the U.S. dollar while the currencies of major markets such as the EU, Japan and China have fallen by 8-18 % against the greenback. At the same time, ASEAN countries, India, and Bangladesh have seen their currencies down by 10-20 %.

The annual region-based minimum wage raise has also sent production costs of local textile and garment firms up and undermined the competitiveness of Vietnamese garments.

Besides, lending rates of 8-10%, two to three times higher than in other countries that are Vietnam’s apparel export rivals, have placed another financial burden on local companies. As a result, prices of Vietnamese textiles and garments are 20-30 % higher than in other countries.

Bui Duc Thinh, chair of Song Hong Garment Company said: “The directors of some large corporations are my age, but their enterprises can export USD 1.6-1.7 billion worth of products. My company’s export revenue is USD 300 million and we can pocket USD 130 million only.”

“Our businesses were set up at the same time, but different policies created different businesses,” Thinh said, saying that private businesses remain undersized.

The director of the company with 10000 workers said he has had to struggle hard to survive the difficult period, ‘turnover down, profit down, orders not enough’. “I know that garment companies have to try to take any job they can to survive difficult times,” he said.

Nguyen Xuan Duong, chair of Hung Yen Garment JSC, which has 13 subsidiaries and employ 14000 workers, confirmed that Vietnam’s textile & garment industry is experiencing tough days. “By this time of the last years, we had obtained orders to ensure enough jobs until the end of the year. But some of us still don’t have enough jobs for August,” he said. “We have to live from hand to mouth. We have to accept the price decreases of 10-15 % and sometimes 20 % for some orders,” he complained.”

Nguyen Van Thoi, chair of TNG Investment & Trade JSC, confirmed that garment companies are facing big difficulties in both foreign and domestic markets.  “Foreign partners try to force prices down. If we don’t accept lower prices, we will lose the orders. If we do, we will incur losses,” he said.

Nguyen Thi Thanh Huyen, general director of Garment Company 10, said Vietnam now has to compete fiercely with Bangladesh and Cambodia. “Orders are leaving Vietnam for the countries which give support to their enterprises and can enjoy preferential tariffs when exporting products to large markets,” Huyen said.

Meanwhile, as Thinh complained, Vietnamese enterprises are burdened with social insurance, healthcare and unemployment insurance premiums. “We have to pay VND50-60 billion a year on the expenses. While the profit is modest, just 4-6 % per annum, the cost has increased by tens of percent,” he complained.

MOIT the Ministry of Industry and Trade () reported a 6 % export increase in the first half of this year to USD 12.8 billion.

MOIT saw growth in export value to the major markets, including the US, increasing by 5.9 % to USD 4.29 billion, Japan with an increase of 2.9 % to USD 1.04 billion and South Korea with an increase of 15.58 % to USD 764.9 million.

www.moit.gov.vn/en


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