15:53 | 19/01/2016 Trade
(VEN) - If the global textile and garment supply chain is illustrated through a parabola, Vietnam currently stands at its lowest point. The links between domestic textile and garment businesses need to improve in order for Vietnam’s position to advance up the supply chain.
Domestic textile and garment companies just do outsourced manufacturing work for foreign firms
Textiles and garments are a key sector for the Vietnamese economy. In 2014, the sector exported US$24.7 billion worth of products, accounting for about 10 percent of the country’s total export value. In the first 11 months of 2015, the sector’s export value exceeded US$20 billion.
According to Dang Phuong Dung, former Vice President of the Vietnam Textile and Apparel Association (VITAS), despite its impressive export results, the added value of the textile and garment sector remains very low. Together with Sri Lanka and Bangladesh, Vietnam currently stands at the bottom of the global textile and garment supply chain, mainly relegated to just cutting and sewing jobs.
This low position is attributed to the fact that Vietnamese textile and garment businesses have for a long time operated as outsourced manufacturers for foreign firms, while depending too much on imported materials. Domestic production of fabrics and yarns remains weak.
VITAS Secretary General Truong Van Cam said that made-in-Vietnam fabrics and yarns were poor in quality and range. Each year, the Vietnamese textile and garment sector exports about US$2 billion worth of yarn and also spends that much on material imports. This explained why foreign investors had invested billions of US dollars into yarn production in Vietnam while negotiations on the Trans-Pacific Partnership and other free trade agreements were still underway.
The chicken and egg conundrum
For the last many years, VITAS has appealed to its member companies to cooperate with each other to promote the domestic production of fabrics and yarns. However, the association has failed to receive a response.
According to Nha Trang Garment Accessories Joint Stock Company General Director Dang Trang, domestic garment and yarn manufacturers still lack a common voice and remain unprepared to cooperate. While garment manufacturers want material producers to show stable product quality and high manufacturing capacity before placing orders, material producers want to sign contracts with garment manufacturers before investing in production.
In Trang’s opinion, material producers should work out clear strategies for production development and strive by themselves to improve product quality and increase output to meet demand, while garment manufacturers need to propose mechanisms through which they can maintain sustainable links with material producers. If it does not take action, the domestic textile and garment sector won’t be able to improve its position in global supply chains and fail to benefit from trade agreements.
Dang Phuong Dung gave an example. Thai Binh Shoe is a large business in the leather and footwear sector. The company has attracted clients through its designs and marketing activities. It has become capable of manufacturing toecaps and soles and joined regional supply chains.
“Cooperation with clients can be a good suggestion for textile and garment companies to find ways for material development and improve their position in global supply chains,” Dung said.