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Labor and financial crisis threatens garment exports
17
Jul '08
The garment industry of Vietnam still needs to export goods worth US $5.3 billion in the second half of this year to meet its annual target of $9.5 billion. However, in the midst of burgeoning orders and volatile market situation, the sector is facing serious capital and labor crunch.

Mr Vu Duc Giang, General Director of Vietnam Textile and Garment Group (Vinatex) has also observed that apparel companies are facing a lot of hurdles including high interest rates, rising cost of production and shortage of workers.

Despite huge orders being placed for Vietnamese garments, enterprises are failing to meet the international demand because of a surmounting financial crisis which cannot be resolved even with bank loans because of high interest rates.

Industrial sources informed Fibre2fashion that the situation was worse for enterprises making FOB contract for exports since they do not have enough capital for importing materials.

To add to the already deteriorating conditions, there is a rise in the number of workers leaving their jobs which is creating another pressure on the entrepreneurs. Although most of the garment companies have increased the salary and allowances of labors by 15-20 percent, it is difficult to ascertain if the situation would get any better.

Experts believe that unless the Government steps in to help the garment companies access loans at a reasonable rate, it is unlikely to achieve the export target of $9.5 billion.

However, Mr Le Quoc An, Chairman of Vietnam Textile and Apparel Association (VITAS) is optimistic that manufacturers, especially exporters, would be extended full support to overcome the existing difficulties.

While members of VITAS has recommended that the VND lending rates should be cut to 15 percent and foreign currency lending interests rates to 8 percent, Vinatex proposed slashing fibre import tax rate from 3 to 0 percent as domestic supplies cannot meet the ever growing demand.

Additionally, enterprises are also trying their level best to retain workers and are considering the task of improving their standards of living and giving it top priority as a long term development plan. Most important, there is a need to create an atmosphere where workers and employers can reach a level of understanding.

Fibre2fashion News Desk - Vietnam

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