Vietnam’s strong but not stable textile-clothing industry

Vietnam has risen to the rank of the top three exporters of textiles and garments in the world. However, it is worrying that the development structure of enterprises in the textile and clothing industry is unbalanced, with garment enterprises being in the majority and those producing raw materials being very few. This fact places the textile industry in the face of the challenges of growth instability.

Dependence on imported raw materials

Ms. Nguyen Thi Tuyet Mai, Deputy Secretary General of the Vietnam Textile and Garment Association, said that the total number of enterprises participating in the textile and apparel sector in Vietnam, including foreign enterprises and companies, is more than 7,000. Among them, only 18% produce fabrics, 12% produce yarn, 2% produce other materials, and the rest are garment enterprises. This fact has presented the textile industry with the challenge of unstable growth due to its dependence on imported raw materials.

Currently, each year, Vietnam imports 100% cotton worth an estimated $3.2 billion and 60% fabric worth an estimated $14 billion. The United States is Vietnam’s largest cotton and fabric import market, followed by China, Japan, South Korea and Europe.

In fact, in 2020 and 2021, when the Covid-19 pandemic broke out in many countries and developed in a complicated way, the domestic textile and clothing industry was badly affected. Many manufacturing plants had to temporarily close or go bankrupt due to supply chain disruptions, and companies had no raw materials for production. Mr. Pham Xuan Hong, Chairman of the Board of Saigon No.3 Garment Joint Stock Company, said that with the current high proportion of imported materials, domestic companies are extremely vulnerable to fluctuations in the global market. For example, year-to-date, commodity prices have risen steadily and are 20-50% higher than the same time last year, depending on the type.

In addition, the sharp increases in domestic gasoline prices have caused many difficulties for businesses. Many garment companies have had to switch to receiving short-term orders instead of long-term ones or let pricing conditions open. This considerably reduces the competitiveness of exporting companies.

According to Mr. Vu Duc Giang, Chairman of the Vietnam Textile and Garment Association, the export turnover of textiles and garments is high. However, the turnover of raw material imports is also high, which has reduced Vietnam’s trade surplus in the textile and clothing sector. Currently, the trade surplus of the textile and clothing sector fluctuates at 15 billion dollars. Meanwhile, the export turnover has reached nearly 41 billion dollars.

Vietnam’s textile and apparel export turnover has grown steadily in double digits over the past five years. This proves that textile and apparel companies have made flexible changes to overcome difficulties and maintain their ability to grow. Specifically, the textile and apparel export turnover reached $35 billion in 2020 and $40.45 billion in 2021. In the first five months of 2022, it accelerated to 11 .8 billion dollars.

However, in the long term, garment enterprises still need the support of domestic production activities to increase the localization rate of raw materials. It is considered a vital factor for textile companies to maintain and accelerate their development, taking advantage of the opportunities offered by free trade agreements.

The supply of raw materials must be diversified

Ms. Sevil Abilova, director of the department of international relations and event management at the Azerbaijan Foundation for the Promotion of Exports and Investments, said that the source of raw materials for the textile and clothing industry in the world is quite diverse and plentiful.

In the context where Vietnamese textile and clothing companies have not acquired autonomy in supplying the domestic market, there is an opportunity to increase the supply of raw materials from many import markets. .

It is a solution to avoid dependence on a few markets, which easily leads to the risk of production disruption due to supply chain disruption. Therefore, Vietnamese companies should actively participate in trade promotion activities with many markets supplying textiles and garments in the world.

Vietnamese textile enterprises said the scale of Vietnam’s textile and garment export market is extremely large. This is a favorable opportunity for many foreign manufacturers of textile raw materials. However, companies need the support of the authorities to verify factors such as the supply capacity of partners, as well as the obstacles to be overcome in order to access and enter the market. Mr. Vu Duc Giang recommends that companies understand the ordering methods and payment and delivery methods of partners.

At the same time, domestic enterprises must transform their production to meet the requirements of green production, sustainable development and the implementation of a circular economy. This comes not only from the requirements of import partners and the development trend of green fashion in the world, but also from the Vietnamese government’s commitment to environmental protection globally.

In the long term, the companies recommend that the government and the Ministry of Industry and Trade strengthen investment promotion in the direction of helping domestic companies to invest in the production of raw materials in countries with large sources of cotton in the world in order to increase security and stability for the development of the textile and clothing industry.

Source: SGGP

Michael O. Stutler