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Vietnam textile sector orders hit by African competition

Dec '19
Pic: Shutterstock
Pic: Shutterstock
Vietnamese textile firms are witnessing declining orders as buyers are moving to cheaper developing countries, especially in Africa. Many businesses this year do not have enough orders for 2020, with a few have reported a 20 per cent drop in orders from last year. Many have not signed long-term contracts for products, but only monthly or quarterly ones.

Normally, by the end of a year they would have enough orders for the whole of the following year, according to Nguyen Van Thoi, chairman of TNG Investment and Trading JSC, which makes garments.

An anonymous Vietnam Textile and Apparel Association (VITAS) official told a Vietnamese newspaper that many orders have shifted to emerging countries in Africa, while competition with textiles superpowers like China, India and Bangladesh is becoming increasingly fierce.

Even China’s orders are being transferred to countries with preferential tariff rates such as Bangladesh and Cambodia.

Even the fibre industry is facing increasing competition from foreign businesses and rivals in countries such as India, Thailand and Indonesia, he added.

Experts had forecast at the beginning of the year that the US-China trade war and new free trade agreements (FTAs) signed by Vietnam would help it increase textile exports, but had done a U-turn by mid-year to say there would be a lack of orders, VITAS said.

This is due to a slowdown in the global economy, affecting consumer demand, and failure by Vietnamese enterprises to adopt radical solutions to comply with FTAs’ rules of origin, VITAS explained.

Some 70 per cent of the fabric used to produce garments in Vietnam is imported from mainland China or Taiwan, VITAS chairman Vu Duc Giang said.

Other difficulties being faced by Vietnam’s textile industry include rising costs of raw materials from China and lower prices demanded by foreign buyers.

Vietnam is losing its low labor cost edge over other countries even as its use of technology in production remains limited, leading to reduced competitiveness, VITAS said.

Garment exports in the first 11 months of this year were up nearly 8 per cent year-on-year to $30 billion, according to figures from the ministry of industry and trade.

Fibre2Fashion News Desk (DS)

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January 2021

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