16:23 | 11/03/2018 Trade
(VEN) - Textile and garment exporters will face challenges this year with consumer demand in traditional markets trending downward while input costs keep rising.
According to Le Tien Truong, General Director of the Vietnam National Textile and Garment Group (Vinatex), large economies, such as the EU, the US and Japan, are forecast to grow at lower rates in 2018 compared with 2017, leading to a decline of the global textile and garment market. This will require exporters to compete fiercely in price.
Last year, the Vietnamese textile and garment sector achieved an export growth rate of 10 percent, while exports by its rivals decreased or grew slightly, for example China, down 1.2 percent; Bangladesh, down 1.3 percent; Turkey, down four percent; India, up three percent; and Indonesia, up three percent. These countries will take advantage of trade preferences to increase their global market share. Bangladesh, Myanmar and Indonesia, for example, will benefit from the EU’s Generalized Scheme of Preferences (GSP), hindering Vietnamese textile and garment exports to this market.
Compared with its competitors, the production cost and minimum wage in Vietnam have grown more rapidly. In 2018, the minimum wage in Vietnam grew from US$130 to US$180 per month, while Bangladesh still maintains a minimum wage of US$68, and Cambodia US$110-120. Moreover, the exchange rate of the Vietnamese dong to the US dollar has been stable, while other countries have tended to devalue their domestic currencies to stimulate exports. For these reasons, Vietnamese exports are often more expensive than products of other countries.
In the era of Industry 4.0, automation will require businesses to reorganize production. Those that can base manufacturing facilities in countries that are their export markets will sharply reduce delivery time and costs. Meanwhile, it takes Vietnamese textiles and garments from three weeks to one month to reach consumers in export markets.
According to Le Tien Truong, domestic textile and garment companies are striving to achieve export value of US$34 billion in 2018 and maintain their competitiveness in terms of price, delivery and quality.
In his opinion, businesses should promote the export of complex products to win the competition with rivals that lack skilled workers and technology to create these products. Vietnamese textile and garment businesses have certain experience in shifting from providing outsourcing services for foreign firms to operating as original design manufacturers (ODMs), which enables them to export free on board (FOB). This also allows them to maintain their global market share and create good jobs.
Le Tien Truong emphasized that Vinatex is willing to invest in automation to reduce unit labor costs.
Currently, machine operators account for 70 percent of the workforce required to run a garment production system, while service workers account for 30 percent. Vinatex is striving to increase the percentage of machine operators to 85 percent and reduce the percentage of service workers to 15 percent through the automation of packaging and internal transportation. The number of workers required to operate a yarn plant with 10,000 spindles has also been reduced from 100 to 40.