Garment production at the Hoa Tho Textile and Garment JSC’s factory in South Dong Ha Industrial Park, Quang Tri province (Photo: VNA)Hanoi (VNA) - Continued dependence onraw and auxiliary materials imports will constrain Vietnam’s textiles andgarment industry from taking real advantage of various Free Trade Agreementssigned by the country, industry insiders said.
It will also blunt the industry’s competitive edgefurther, they added.
According to a 2016 report from the Ministry ofIndustry and Trade (MoIT), by the end of last year, 99 percent of cotton usedin the textile industry, reaching 1.03 million tonnes worth about 1.7 billionUSD, was imported, a year-on-year increase of two percent in quantity and 2.5 percentin value.
Thread import turnover in 2016 also went up 8.8 percentin volume and 5.9 percent in value to 861,000 tonnes and 1.6 billion USD,respectively. Import of whole fabric last year increased by 3.2 percent over2015 to reach 10.5 billion USD.
Currently, Vietnam is only able to supply 0.3 percent ofdomestic cotton demand and 40 percent of thread demand, so the rest is importedchiefly from the US, China and Taiwan.
Paradoxically, more than 70 percent of thenational thread output of 1.4 million tonnes is exported, while the Vietnamesegarment industry imports nearly 0.1 million metric tonnes of high-grade fibrefrom China, the Republic of Korea and Taiwan per year.
Each year, Vietnam earns tens of billions ofdollars from textile and garment exports, but businesses make modest profits ofless than 2 billion USD because the garment industry spends more than half ofits earnings on importing raw materials, according to the MoIT.
It will also blunt the industry’s competitive edgefurther, they added.
According to a 2016 report from the Ministry ofIndustry and Trade (MoIT), by the end of last year, 99 percent of cotton usedin the textile industry, reaching 1.03 million tonnes worth about 1.7 billionUSD, was imported, a year-on-year increase of two percent in quantity and 2.5 percentin value.
Thread import turnover in 2016 also went up 8.8 percentin volume and 5.9 percent in value to 861,000 tonnes and 1.6 billion USD,respectively. Import of whole fabric last year increased by 3.2 percent over2015 to reach 10.5 billion USD.
Currently, Vietnam is only able to supply 0.3 percent ofdomestic cotton demand and 40 percent of thread demand, so the rest is importedchiefly from the US, China and Taiwan.
Paradoxically, more than 70 percent of thenational thread output of 1.4 million tonnes is exported, while the Vietnamesegarment industry imports nearly 0.1 million metric tonnes of high-grade fibrefrom China, the Republic of Korea and Taiwan per year.
Each year, Vietnam earns tens of billions ofdollars from textile and garment exports, but businesses make modest profits ofless than 2 billion USD because the garment industry spends more than half ofits earnings on importing raw materials, according to the MoIT.
Tran Thanh Hai, Deputy Director of the MoIT’sImport-Export Department, said in an announcement on the MoIT’s online portal,that the textile industry’s dependence on imported instead of locally producedraw and auxiliary materials has significantly limited its competitiveness andadded-value component.
Domestictextile firms produce nearly 2.8 billion metres of fabric each year, meeting 30percent of total demand, so Vietnam still has to import up to 6.1 billionmetres of fabric annually, even from countries not participating in the samemajor FTAS like the Trans-Pacific Partnership, the EU-Vietnam FTA, or theVietnam Japan Economic Partnership Agreement.
Regarding accessories, production facilities forsewing thread, cotton sheets, buttons, zippers, or packaging labels can befound in Vietnam, but they barely meet domestic market demand, so these have tobe imported in large quantities too.
According to a 2016 report of the Vietnam Textileand Garment Association (VITAS), the industry finds itself in the lowestvalue-added segment in the supply chain, having 70 percent of exported productsunder outsourcing for foreign firms, 20 percent as domestic production anddirect sales without intermediaries, 2.9 percent as self-designed andself-manufactured products, and just one percent made and distributed underoriginal brands.
Nguyen Van Tuan, Chairman of the Vietnam Cotton and SpinningAssociation (VCOSA), said during the 2016 Vietnam Textile Summit in HCM City,that the textile industry is "knotted" in the middle, i.e. highlyproductive in terms of making yarn and final products, but stunted in theproduction of fabric and other materials.
With the industry’s annual growth rate at about 8 percent,by 2025, the amount of fabric needed will double to 18 billion metres, meaningwithout further investment in domestic production, Vietnam will have to import15 billion metres, said Tuan.
He alsosaid that with 7.5 million spindles, the industry’s annual output isapproximately 1.3 million tonnes of thread; of which more than 800 thousandtonnes are reserved for export, mainly to two major markets – China and Turkey.
Worse still, many countries have intensified their use oftrade remedies against Vietnam. According to the MoIT, from 2007 onwards, Vietnam’syarn and thread exports have faced seven lawsuits – five anti-dumping, oneanti-subsidy and one safeguard measure - from Turkey, the EU, India and Brazil.
Therefore, around 80 percent of Vietnamese yarn isexported to China, since its cotton prices are still relatively high. However,this cannot be seen as a stable market. Once China decides to use the 11million tonnes of cotton in storage, Vietnam’s yarn market share in the countrywill shrink considerably, according to a VCOSA analysis.
Some insiders have said that the nation’s textilesand garments sector can still increase productivity and localisation ratethrough the development of supporting industries.
VITAS Chairman Vu Duc Giang told the Vietnam NewsAgency a few months ago the FTAs are a driving force for growth, but thetextile and garment industry must be prepared for it.
Giang suggested that domestic businesses invest inthe dyeing process, implement a solid human resource training strategy as the4.0 Industrial Revolution gets closer, and focus heavily on building anintegrated value chain between domestic producers.
Hoang Ve Dung, Vinatex’s Deputy General Director,said at a meeting in August 2017 between Vinatex and the Vietnam Oil and GasGroup, that administrative agencies should coordinate with textile associationsto push for appropriate policies on the purchase and production processes,covering both raw materials and finished products.
According to the MoIT, total textile and garmentexports in the first six months of 2017 reached 14.58 billion USD, up 11.3 percentover the same period in 2016, despite difficulties.
However, industry insiders have said that theturnover of the first six months is not sustainable.-VNA
VNA
