The apparel industry’s local sourcing rate is on the rise, but challenges lie ahead

VIETNAM, September 21 – HÀ NỘI — Local purchases by the textile and apparel industry hit a record 57% in the first eight months of this year, approaching the 60% target set for 2025, Lê Tiến Trường, chairman of the Vietnam National Textile and Garment Group (Vinatex), said.

He added that this was a big improvement as the rate had remained at around 50% for a long time.

The Vinatex report also revealed that export revenue for the entire sector between January and August was $30.2 billion, an increase of almost 20% compared to the same period. last year and the highest growth rate in the last decade. The industry is estimated to have recorded a trade surplus of around $17 billion over the eight months.

Trường said that among the textile and garment exporting countries, Việt Nam was the first to open normal operation policies after the COVID-19 pandemic compared to Bangladesh, India and China, which which enabled the country to seize the opportunity to promote garment exports.

However, challenges remained for the rest of the year, Trường said.

He pointed out that other exporting countries are also implementing similar policies to promote post-pandemic recovery and resume normal production and business. Meanwhile, global demand was declining due to the global economic slowdown and rising inflation.

Vinatex expects average export revenue to decline to $3.1-3.2 billion per month in the remaining four months of this year, from an average of $3.8 billion per month through August.

Trường said the textile and garment industry expects government support in terms of taxes and credits.

In the medium and long term, he indicated that Vinatex would invest in the promotion of a green and circular economy, adding that the investment would however be significant.

Trường said support policies should be strengthened for industries with high local supply rates and high trade surplus, such as the garment and textile industry.

Invest in textiles and dyeing

The Vietnam Textile and Garment Association said Vietnamese garment and textile companies face fierce competition from other major exporters in China, Bangladesh, India and Turkey, on markets with free trade agreements.

The association pointed out that the rule of origin based on yarn and fabric was a weakness of the garment industry in Việt Nam, which had to rely on the import of 80% of the fabrics to produce garments for the export.

Statistics showed that on average, Việt Nam spent around $2 billion to import raw materials, mainly from China.

In addition, importing countries were also increasing the product criteria. The Việt Nam Trade Office in Sweden recently said that the EU and other Nordic countries such as Norway and Iceland are demanding that the textile and clothing industry develop in a more sustainable and circular way.

These countries set stricter requirements for natural and synthetic fibers, which must be organic, recycled or of biological origin. For example, cotton used in eco-labeled Nordic clothing must not be genetically modified, fully organic or recycled.

Some Vietnamese companies were investing in research and development of raw materials to reduce dependence on imported materials, but supply remained limited.

The association urged the development strategy of the textile and footwear industries until 2030 with a vision until 2035 to be approved early to create the conditions for the formation of large industrial parks with the sewage treatment system concentrated, advanced technologies and green technologies to attract investment in textile and dyeing.

The association said it would help solve bottlenecks in fabric sourcing for garment export and meet origin requirements for tax incentives from free trade agreements.

The Ministry of Industry and Trade said it is important to find solutions to encourage technological renovation of the weaving and dyeing industry and build a support industry for the garment industry.

The focus should be on attracting investment in wastewater treatment and establishing production chains. —VNS

Michael O. Stutler