VN’s textile and garment firms at risk of missing export target for 2016

Vietnam’s garment and textile export value in the first half of this year reached US$12.6 billion, an increase of 4.72 percent over the same period last year, accounting for 41 percent of the sector’s annual target for 2016. But the growth in the industry’s export value was largely attributed to foreign direct investment (FDI) firms, while local firms had difficulties getting new export contracts, especially orders of shirts, trousers and jackets, said the Việtnam Textile and Apparel Association (VITAS).

At a conference of Việtnam Textile and Apparel Association (VITAS) late last week in Hànội, experts said that local textile and garment enterprises are at risk of missing their export target for 2016 due to reduced competitive ability and lack of export orders.

Trương Văn Cẩm, deputy chairman of VITAS said that Việtnam’s currency policy vis-a-vis the US dollar has remained stable, while competitors in textile and garment products such as India, Bangladesh, ASEAN countries and China, have devalued their currencies, increasing their export competitiveness, said

In addition, interest rates on banking loans are high – between 8 and 10 per cent, making capital more expensive for local enterprises.

Other factors impacting the reduced competitive ability are the minimum wage, which has risen an average 26.4 percent per year for local enterprises and 18.1 percent each year for enterprises with foreign investment in the period of 2008-16.

The increases in minimum wage also entail increased payments of insurance and union dues, further burdening enterprises, according to VITAS.
It warned that the lack of export orders could worsen and many small- and medium-sized firms may have to shut down. Therefore, VITAS predicted the industry might earn only $29 billion from exports this year, down $2 billion from the set target, if the situation does not improve.

To solve those difficulties, VITAS proposed that the Government not increase minimum wage in 2017 and only increase it once every two or three years to create favourable conditions for competition.

Other experts at the conference also urged local textile and garment firms to invest in modern technology for the production of yarn and fabric. High-tech machinery could produce higher quality products, especially fabric for export.

Few local enterprises have invested in the production of yarn, textile and dying because they have large investments in building production and waste water treatment facilities, said Phí Ngọc Trịnh, deputy general director of Hồ Gươm Garment Company.

Local textile and garment enterprises also proposed reducing the frequency and time it takes to check garment materials for customs clearance as a means to increase production and competitiveness.

Many local textile and garment enterprises have also complained about the number of procedures for import and export of textile and garment products. For instance, despite having animal quarantine and origin certificates from exporting countries that are members of CITES (Convention on International Trade in Endangered Species of Wild Fauna and Flora.) for fox fur, feathers and bear fur for processing export jackets, local garment enterprises are still required to get import licences according to domestic regulations. The procedure takes six to 10 days, according to the VITAS representative.

Local firms also encounter overlapping procedures when importing cotton for production. They must also get an import licence each time they want to buy printers for producing garment products and the head of the enterprise must have a degree in printing.

Thanh Phong, representative of Thắng Lợi International Investment and Development Company, said that this was unnecessary because printing was a small part of the textile and garment production process.

The Department for Control of Administrative Procedures has collected all the opinions about administrative procedures from textile and garment companies and submitted them to the Prime Minister to seek solutions.