11:05 | 21/06/2019 Companies
(VEN) - Vietnam Economic News’ Viet Nga spoke with Cao Huu Hieu, Executive Director of the Vietnam National Textile and Garment Group (Vinatex) about the impact of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on the textile and garment industry.
|Vinatex Executive Director Cao Huu Hieu|
The CPTPP took effect early this year. How has it influenced the textile and garment industry?
Production and trading activities of textile and garment enterprises remain quite stable. In the first quarter of this year, textile and garment enterprises exported products worth US$8.7 billion, up 11.3 percent from the same period last year. Fiber enterprises are no longer suffering losses and inventories, gradually reaching a saturation point or starting to make a profit. Most fiber producers have orders for the second quarter of 2019, while many garment enterprises have orders for the third quarter of 2019 or even the remaining months of this year.
Canada and Australia are the two biggest CPTPP markets for Vietnamese textile and garment businesses, with Canada importing US$13-14 billion and Australia US$9 billion worth of Vietnamese textiles and garments each year. However, Vietnam has carved a small niche of only five percent in these two markets.
Vietnamese enterprises need to satisfy fiber-related origin requirements if they are to benefit from preferential tariffs of CPTPP countries in general and these two markets in particular. The CPTPP has been in effect for a short time and its impacts on the industry should be assessed in the next several years. We haven’t seen any signs of export growth from CPTPP markets, but we do see growth in traditional markets.
Why is the number of businesses self-certifying the origin of goods still small even though the self-certification helps them save time and minimize cost?
Vietnam’s goods origin certification procedures are more complicated than those of other CPTPP countries. Commitments in CPTPP allow Vietnam to apply at the same time the traditional mode of granting Certificate of Origin (C/O) and self-certification of goods origin. Here in Vietnam, the traditional mode has attracted a large number of enterprises, while the number of businesses self-certifying the origin of goods remains small.
This situation is expected to change given that the CPTPP gives Vietnam, Brunei, Malaysia, Mexico and Peru five years to shift to self-certification of goods origin.
How can more businesses be convinced to apply self-certification of goods origin and make full use of the CPTPP’s incentives?
I think it is necessary to provide clearer regulations and simpler procedures on issuing C/Os for exports in order to help domestic textile enterprises apply self-certification of goods origin. Relevant state authorities should hold workshops and training in self-certification of goods origin for businesses, helping them avoid mistakes in implementing the regulations.
How does the electricity tariff hike affect textile and garment enterprises?
The increased electricity price not only negatively affects businesses’ profit but also their competitiveness. Fiber and knitting enterprises are major consumers of electricity, while the impact on garment companies is smaller because they are labor intensive. Chain producers are all affected, especially those that use chain members’ products to create goods for export.
However, the increased electricity price forces enterprises to increase productivity and use power efficiently to minimize cost. Of course, no business supports any increase in the electricity rates.
What will Vinatex do to help textile and garment enterprises cope with increased power costs?
Vinatex businesses have been transformed into joint stock companies that are financially independent so the group will not support them financially to compensate for power price hikes. However, the group has launched programs encouraging member enterprises to use energy in general and gas and electricity in particular efficiently, apply advanced equipment and technology to improve productivity and minimize the negative impact of higher electricity prices on their profits.
The group has a Risk Management Board that regularly warns member businesses of risks, if any.