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Textile and Garment Industry: Improving Adaptability to Weather the Storm

18/08/2022 09:27 AM
Although in the first six months, the export turnover of Vietnam's textile and garment industry reached US$22.3 billion, up17.7% over the same period in 2021, the sector will still face numerous hardships, said Mr. Vu Duc Giang, Chairman of the Vietnam Textile and Apparel Association, in an interview with Vietnam Business Forum regarding the six-month performance and the effort to achieve US$42-43 billion of export value in 2022. 

Despite a lot of difficulties caused by the COVID-19 pandemic, did the textile and garment industry obtain better-than-expected export value in the first six months of the year?

The textile and garment export value reached US$22.3 billion, up 17.7% year on year in the first six months of 2022, including apparel with US$16.94 billion (up 19.5%), materials with US$1.4 billion (up 20.8%), fibers with US$2.76 billion (up 4.4%), accessories with US$ 734 million (up 22.3%) and non-woven fabrics with US$452 million (up 25.5%).

Input and accessory imports reached US$13.4 billion, up 9.8% year on year. The trade surplus was US$8.86 billion in the period, 32% more than a year ago. This can be viewed as a great effort of textile and garment firms when the world economy is still facing enormous difficulties.

What caused that success?

Quick adaptation and quick capture of opportunities brought that success amid mounting challenges.

The first factor was the safe and flexible adaptation to and effective control of the COVID-19 pandemic as per the Governmental Resolution - the legal framework to open the door for industries, including the textile and garment industry.

In addition, admittedly, textile and garment companies quickly restructured their products and the market. Export textile and garment orders were relatively stable, especially from the five largest markets in the order of value: The United States, the European Union, Japan, South Korea, and China.

In fact, Vietnamese textile and garment companies continue to invest in equipment, technology, and automation to meet customers' requirements for fast delivery and sophisticated orders. In spite of labor shortages due to the COVID-19 pandemic, Vietnam's textile and garment industry still kept technology and management solutions and labor productivity remained relatively good as in previous years.

Another factor was the chain link solution. From January to June, the share of imported textile and garment inputs contracted from a year earlier. Difficulties from shorter delivery time, rising transport costs, China's "zero-COVID" policy and supply disruption from China to Vietnam created opportunities for Vietnamese companies to actively seek domestic input supplies. The chain link helped improve the outcome of Vietnamese textiles and garments.

System administration and cost management are the driving force for enterprises. Given only logistics pressures, it will be very difficult for enterprises if they cannot reduce domestic transportation and export transportation. Governance solutions gave rise to such cost pressures.

What will Vietnam's textile and garment industry focus on to achieve the export target of US$42-43 billion this year?

There are two factors to this matter: Challenge and the solution.

Although the export performance was quite good in the first and second quarters, Vietnam's textile and garment industry is likely to face huge challenges of inflation and contracting global purchasing power in the third quarter and possibly the fourth quarter of this year. In particular, inventories of importing countries resulted in a starting decline in orders for Vietnam’s traditional key products. Some export items are likely to face shrinkage till the first quarter of 2023. When the global purchasing power contracts, the Vietnamese textile and garment sector is forced to look for new markets and create new products. The transition from previously specialized products to non-specialized products has led to new challenges due to the need to replace workers and invest in new equipment, which affects labor productivity and income of workers and affects the cost of ensuring minimum wages for employees and enterprises.

To address these three challenges, the Vietnamese textile and garment industry has come up with five solutions to recommend for businesses.

Firstly, textile and garment companies must focus on fundamental changes in the structure of previous traditional markets such as the U.S., Europe, Japan, South Korea and China, penetrate new markets such as the Middle East, invest in export items for Africa, or restructure some items to export back to China.

Secondly, the Vietnam Textile and Apparel Association and businesses continue to call for investment and stimulate investment in supply sources that are short. Currently, the textile and garment industry is calling on investors to invest in raw materials, fabrics and yarns to prepare for a stable and sustainable development strategy from 2023 onwards.

Thirdly, Vietnam's textile and garment industry is facing great pressure on labor competition, labor transformation and the labor movement to rural and remote areas. Thus, the sector is encouraging businesses to further invest in digital equipment, digital management and automation technology to take the initiative in labor and enhance labor productivity.

Fourthly, it is necessary to strengthen closer chain links, and enhance support and sharing among businesses, especially orders, to enable them to establish cooperation for the development path ahead. In addition, the textile and garment industry is fostering equipment and technology investment for textile dyeing and printing and seeking to produce several types of yarns and fabrics.

Finally, it is important to accelerate integration to demonstrate the social responsibility of a Vietnamese product. This is exactly what the Vietnam Textile and Apparel Association has done for many years by launching green development programs and sustainable development programs together with Vietnamese textile and garment companies seeking sustainable development.

Source: Vietnam Business Forum

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