Textile, garment exports shrink from XL size

06:00 | 15/06/2020 Industry

(VEN)-  Vietnam’s textile and garment industry is facing negative export growth for the first time in many years and is unlikely to achieve its US$42-billion export target in 2020.

textile garment exports shrink from xl size
Vietnam’s textile and garment industry has faced negative export growth

Negative growth

The textile and garment industry’s export value in the first four months of this year dropped 6.6 percent to US$10.64 billion, while its import value totaled US$6.39 billion, down 8.76 percent, compared to the same period last year.

Specifically, export value of garment products dropped 5.98 percent to US$8.2 billion, 0.3 percent to US$664 million for fabric products, 11.54 percent to US$1.19 billion for yarn products and six percent to US$354 million for textile materials.

Meanwhile, the import value fell 7.98 percent to US$893 million for cotton, 2.45 percent to US$758 million for yarn products, 10.99 percent to US$3.63 billion for fabric products, and 5.82 percent to US$1.11 billion for textile materials.

The industry has never faced such low growth in both imports and exports, said Truong Van Cam, Vice Chairman of the Vietnam Textile and Apparel Association (VITAS). Cam attributed the reduction to lack of export orders, adding that those figures are forecast to drop further in May and June because most export orders for those months have been cancelled.

Many enterprises in the industry are also carrying bad debts, he said. Many export garment enterprises are operating at reduced capacity because they do not have new orders.

VITAS reported the cancellation of contracts and lack of new contracts was due to reduced demand for textile and garment in the US and EU during the pandemic. Meanwhile, China also has less demand for imported yarn from Vietnam due to the suspension of production during the outbreak.

The textile and garment industry set a US$42 billion export target for 2020, eight percent higher than 2019, but under the pandemic’s impact, it is expected to reach only US$30-35 billion.

Restoring production

Le Tien Truong, General Director of the Vietnam National Textile and Garment Group (VINATEX), said domestic textile and garment enterprises would focus on exploiting markets of two major trade treaties - the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) that is already in effect and the RCEP (Regional Comprehensive Economic Partnership) that is still under negotiation. Development of these markets will not only help compensate for losses associated with the US and EU markets but also help the industry reach an average annual export growth of six percent in 2020-2025, Truong said.

In preparing for that development, VINATEX is working with major partners including major brand stores such as Uniqlo, H&M, and Zara, among others to move sources of raw and auxiliary materials to Vietnam to meet goods origin requirements in free trade agreements (FTAs). Domestic textile and garment companies will continue to make medical masks and protective clothing while maintaining their readiness for resuming operations as soon as the market is restored.

However, according to Truong, VINATEX and many other textile and garment enterprises need strong support from the government, ministries and sectors to return to normal production. VINATEX leaders proposed that the government and relevant authorities formulate solutions to speed up the realization of bailout packages and free businesses from paying social insurance and trade union fees from May to December 2020. Banks should be flexible in evaluating businesses to help enterprises access credit for production and trade development.

Ministries and sectors need to issue guidelines soon for implementing the EU-Vietnam Free Trade Agreement (EVFTA) so that it can be applied as soon as the National Assembly approves it and businesses can take advantage of the opportunities it provides, Truong said.

In 2020, the domestic textile and garment industry is expected to see its operational efficiency decreasing about 50 percent, and its sales and exports dropping 25 percent compared to 2019.

Viet Nga