Vietnam garment and textile firms to face challenges from large rivals

A conference entitled Garment and Textile – Opportunities and Challenges, focusing on integration was held in Ha Noi yesterday as the development of Vietnam’s garment and textile industry was behind other countries. Moreover, many domestic garment and textile companies would face more challenges from large rivals following integration.

Tran Quang Nghi, chairman of the National Garment and Textile Group (Vinatex), speaking at the conference said that a shortage of capital and backwards technology, along with weak management capacities, had created difficulties for the businesses.

This caused considerable competitive pressures in the local garment and textile industry after Vietnam joins the free trade agreements, Nghi added.
Viet Nam has some 5,000 businesses in the sector. Most of them are small- and medium sized enterprises with weak associations.

Echoing Nghi, Truong Thi Thanh Ha, general director of Dong Xuan Knitting Company, said that their technology remained backwards, as several machines were purchased 20 years ago.

Of note, domestic garment and textile companies have not been able to invest in modern technology lines to enjoy benefits from the FTA, especially FTA Viet Nam-EU and Trans-Pacific Partnership (PPP).

Domestic firms had been faced with more challenges than opportunities. This was the reason that the Government should provide supports for businesses, in terms of land rental and taxes.

In the first half of the year, Vietnam’s garment exports to markets participating in the TPP accounted for 70 percent of its total export value.

However, Phan Chi Dung, head of the Light Industry Department under the Ministry of Industry and Trade, said that there were few enterprises manufacturing in all stages, from cotton to completed products. Especially, local firms have much depended upon imported materials, in combination with low productivity, thus making them difficult to enjoy benefits from FTAs.

The added value in garment exports was still limited, despite high growth rates of 15-20 per cent a year. Domestic garment and textile companies have not developed their own markets and products, which have been shortcomings for the sector, he added.

According to the development strategy for the garment and textile sector to the year of 2020, approved by the ministry, the country’s exports would reach US$35 billion and up to $60 billion by 2030.

Further, Deputy minister Do Thang Hai said that investment in material areas and support industries would have special meaning in improving their competitiveness.

The association among businesses in this sector could create a large capital base and improve management capacities, as well as technology, which would be a decisive factor for firms to better compete with rivals.

To support garment and textile firms over the next five years, Chairman of the Bank for Investment and Development of Viet Nam (BIDV) Tran Bac Ha has committed to provide US$2 billion as loan. The businesses need to restructure to improve their competitiveness within the integration. The opportunities for businesses would be considerable, including a wave of foreign investment in the garment and textile in Vietnam. The first benefit was that Viet Nam would have a wider market and investors would gradually shift their production into the country.