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Testing times ahead for Vietnam garment makers

Oct '12
No relief is expected for the ailing garment and textile enterprises of Vietnam in the coming months, and difficulties faced are mainly due to restricted or no access to capital and dearth of export orders, industry circles said during a seminar organized to deliberate on ways to help the garment firms to overcome the problems faced in securing new orders and capital.
According to Bank for Investment and Development of Vietnam (BIDV) all the companies, with revenues of over US$ 10 million that it considered for a survey, were in need of medium and long-term loans for supporting their production enhancement or investments plans.
BIDV was one of the joint organizers of the seminar along with Vietnam Textile and Apparel Association (VITAS) and Dun & Bradstreet (D&B).
VITAS Deputy Chairwoman and General Secretary, Dang Phuong Dung, said a sharp decline has been observed in demand from the EU over the past few months, which has led to a year-on-year fall in exports.
Meanwhile, owing to lack of access to capital, several domestic textile and garment firms are outsourcing their work, she added.
Ms. Dung said large-scale dependence on imported inputs and outsourcing orders, which generate considerably low returns on investment, show that domestic enterprises are not being able to add value to their goods, which can help boost the sector’s competitiveness.
She further said low labour cost would not help the industry to sustain its competitiveness in future, and hence the industry should look at other ways like raising investment in technology and equipments, to boost its labour productivity and thereby its competitiveness.
However, enterprises in the sector face several difficulties in obtaining bank loans. Moreover, though the interest rates have declined in recent times, they are still quite high as compared to those in other nations, she added.
According to Ms. Dung, if the existing rule allowing garment makers a 275-day grace period is ended as proposed by the Ministry of Finance, it would increase difficulties of domestic garment firms. She said VITAS is trying to get together with other business associations to urge the Government to review the proposal.
On near-term prospects of the country’s garment and textile exports, she said there are good prospects in the US market, however, no signs of revival are yet seen in the EU market, she added. 
The industry should try to resolve the issues relating to raw material and adhere to stringent rules of origin in order to tap the opportunities extended by free trade agreements (FTA), as these FTAs and Vietnam’s World Trade Organization (WTO) membership are expected to open ways for entry in new markets, she added.
Amcham Vietnam Executive Director Herb Cochran suggested that Vietnamese firms should study consumer’s choices so as to churn out products meeting their requirements.

Fibre2fashion News Desk - India

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