Although they have suffered from many difficulties such as a sharp drop in consumer demand, canceled orders or delayed delivery due to the spread of the new coronavirus epidemic (Covid-19), Vietnamese textile and garment enterprises have gradually overcome the difficulties due to their agility and transformation of production varieties. difficulty.
Difficulties abound
In January this year, Vietnam’s textile and clothing exports were approximately US$2.6 billion. A year-on-year increase of 3.3%. Among them, the export of some products increased sharply, ranging from 9.3% to 35.6%. This shows that the export growth of this industry has released a considerable signal this year and strives to achieve this year’s export target of US$39 billion. However, what worries companies is the complex spread of the Covid-19 epidemic. If the epidemic cannot be controlled as soon as possible, it will have a serious impact on production and operation activities, because companies will lack funds and products will not be able to find sales channels.
Ruan Chunyang, chairman of Xing’an Garment Company, affirmed that various garment companies will encounter more difficulties in the future, especially in terms of supply, so it will be difficult to ensure the employment of workers and the Maintain production activities. This year has been even more difficult because original orders have been completed and reserves are gradually dwindling. In 2020, the company’s turnover reached 2.6 trillion VND, a year-on-year decrease of 5%, and its profit was 300 billion VND, a year-on-year decrease of 20%. Processing fees are increasingly decreasing. The company’s immediate goal is to continue to find new orders and expand markets, aiming to ensure employment for workers and strengthen export activities.
Shen Deyue, president of No. 10 Garment Corporation, said that due to the impact of Covid-19, many export markets were “frozen”, orders were canceled and delivery times were delayed. Under this circumstance, the company has formulated a new strategy, which is to produce products with competitive advantages such as fabric masks, medical masks, anti-epidemic clothing, knitwear, or other products that bring high value and short production time.
In addition, the company focuses on research and production organization. As a result, the company’s turnover reached 3.507 trillion VND, exceeding 29.9% of the planned plan and growing by 3.7% year-on-year. In 2021, the company strives to achieve the goals of a turnover of 3.636 trillion VND, a profit of 82 billion VND, and an average monthly income per capita of 8 million VND. In order to achieve the above goals, the company will focus on researching the market, selecting suitable products, and improving labor productivity. Continue to maintain traditional customers and combine them with finding new customers.
When evaluating the difficulties faced by the textile and garment industry in 2020, Le Tien Truong, chairman of Vietnam Textile and Garment Group, emphasized that this is the first time in 25 years that Vietnam’s textile and garment exports have experienced a negative growth of 10.5%. In the past year, it was US$35 billion in 2020 and US$39 billion in 2019. However, in the context of the global textile and apparel industry’s total trade volume falling from US$740 billion to US$600 billion, an overall decline of 22%, with competitors generally declining by 15-20%, and some even falling by 30% due to long-term isolation policies. This can be regarded as the result of the efforts of all companies.
Production has not been interrupted, so Vietnam’s textile and apparel market share continues to grow, reaching 20% of the US market share for the first time, ranking first for many months in a row. With various free trade agreements, especially EVFTA, taking effect, although it is not enough to make up for the decline, it has also played an important role in the case of reduced orders.
Take advantage of the opportunities brought by the free trade agreement
According to predictions, the textile and apparel market may be the most It will return to 2019 levels as early as the second quarter of 2022 and as late as the fourth quarter of 2023. This year, processing fees have plummeted, and the trend of simplicity and convenience has replaced high-end fashion, resulting in overcapacity on the one hand and insufficient new capabilities on the other. In order to achieve the export target of US$39 billion, companies need to find new partners and expand markets, among which free trade agreements are seen as a great opportunity to strengthen exports.
Vinatex Vice President Gao Youxiao said that in order to take advantage of the tax exemptions in the FTA, companies must prove that the origin of their products is Vietnam or a signatory country to the agreement. Facts have shown that most Vietnamese orders are based on processing conditions, and fabrics are mainly imported. Therefore, it is very difficult to meet the rules of origin “starting from yarn”. Although there are some exceptions in CPTPP, which allow people to enjoy preferential tariff treatment even if they do not meet the principle of origin, the feasibility of using the above exceptions is not high because the yarns and fabrics specified in the supply source list are in short supply, are relatively special, are highly technical, and Rarely used in general clothing production.
EVFTA has very strict requirements on product raw materials. However, the high-end clothing raw materials produced in Vietnam have not yet met the needs of enterprises. Although companies can temporarily use raw materials from countries outside the area recognized by EVFTA such as South Korea, Japan, and Turkey, this is a big problem because the price gap of raw materials is large. Therefore, in the long term, we should take the initiative to ensure the supply of raw and auxiliary materials and invest in the development of auxiliary industries to provide support for the development of Vietnam’s textile and garment industry.
Vu Duc Giang, chairman of the Vietnam Textile and Garment Association, said that in addition to the above two agreements, the Regional Comprehensive Economic Partnership (RCEP) is expected to strengthen exports for enterprises and change the Covid-19 epidemic The epidemic has not yet been controlled and has created opportunities and injected impetus into some markets that have had a huge impact on the industry’s export business. RCEP will provide Vietnam with opportunities to expand into a larger market than China. In addition, Japan will be a potential market because it is made using raw materials and auxiliary materials imported from China.Products can also enjoy preferential tariff treatment when entering this market. In addition, RCEP provides convenience for textile and apparel companies to easily tap into the benefits of signed agreements and promote production chains in the region.
Le Jin Chang, chairman of Vinatex, believes that the Vietnamese textile and apparel market is expected to return to the level of 2019 by the middle or the end of 2023. Therefore, the 2021-2023 period will be the years that determine whether companies will recover, improve their competitiveness, move to a more sustainable development position, or be left behind and eliminated. Accordingly, this year will be the first year of a critical stage that determines the direction and speed of corporate development.
From the above practices, Vinatex focuses on taking five core measures, namely improving the production capacity using the original equipment manufacturer (OEM) model, implementing the entire operating process of the enterprise, especially It is the digital transformation of production, inventory, logistics and other links, retraining human resources under new conditions, ensuring financial security, aiming to implement long-term development and meet new requirements in the environment and labor services. Continue to take multiple measures to promote the market and shift the export method from OEM processing to FOB (procurement of auxiliary materials-production-shipment) and ODM (design-production-shipment). Actively ensure sufficient supply of input materials, establish chain relationships within the group, and call for investment in weak links in Vietnam’s textile and garment industry.
It can be seen that in addition to the efforts of enterprises, it is very necessary for the government and various departments and institutions to care and assist in strengthening investment and production of raw materials and auxiliary materials that meet the origin principles in FTA. Specific policies should be introduced, including providing development space and stimulating conditions to develop textile and garment auxiliary industries. All localities should support the development of the textile and apparel industry based on the principles of sustainable and clean production, and each company must comply with the practices of the global supply chain. Continue to guide the reduction of non-productive expenses, especially logistics service fees and other tariffs and funds. </p
