The changing textile, garment export market

The Thuy Dat Joint Stock Company has signed contracts to maintain exports until the end of June. Director Nguyen Van Chau predicted a 19-percent increase in the export value of the first half of 2017 compared with the same period last year.

Customers see that our products are becoming more reliable. Many importers are moving their orders from China to Vietnam. The 20-22 percent export growth target set for 2017 is therefore feasible,” he said.

However, most export orders for 2017 are small to medium in size, due to the unstable situation in major export markets. And whereas in previous years, domestic businesses often received export orders for a period of five to six months, this year the orders are generally only for just three months.

At the same time, Vietnamese manufacturers are facing difficulties due to increases in insurance costs, workers’ salaries and land rentals. They also have to compete with rivals from major textile and garment exporting countries such as Indonesia, Malaysia, Bangladesh, India, China, Pakistan and Cambodia.

New markets are developing

Following the signing of the free trade agreement (FTA) between Vietnam and the Eurasian Economic Union, Russia had become a major export market for Vietnamese textiles and garments, according to Pham Xuan Hong, President of the Association of Garment-Textile-Embroidery-Knitting in Ho Chi Minh City. Many domestic companies have shown an interest in this market, but most of them are small with limited capability to meet the demand of Russian importers. They also encounter problems in payment and delivery when exporting to Russia. The Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) has opened a branch in Russia to facilitate payment in trade with Russia.

The FTA between Vietnam and the Republic of Korea that took effect in late 2016 is also expected to facilitate exports to this market in 2017. Currently, South Korea is not a major export market for Vietnamese textiles and garments. Exporters say that to boost sales to Korea, the state needs to increase support for businesses through appropriate policies and mechanisms. For their part, businesses should make their own efforts to enhance labor productivity.

In the opinion of Le Tien Truong, businesses need to increase automation and make the most of existing equipment to raise productivity while reducing production costs.

In addition, businesses need to tighten linkages in the production chain to meet textile and apparel rules of origin in international trade and improve their position in supply chains in order to take advantage of various FTAs. Le Tien Truong advised domestic companies to continue seeking small and medium but hard-to-fill orders so that they can display their advantages in terms of technical skills.