Domestic
textile firms produce nearly 2.8 billion metres of fabric each year, meeting 30
percent of total demand, so Vietnam still has to import up to 6.1 billion
metres of fabric annually, even from countries not participating in the same
major FTAS like the Trans-Pacific Partnership, the EU-Vietnam FTA, or the
Vietnam Japan Economic Partnership Agreement.
Regarding accessories, production facilities for
sewing thread, cotton sheets, buttons, zippers, or packaging labels can be
found in Vietnam, but they barely meet domestic market demand, so these have to
be imported in large quantities too.
According to a 2016 report of the Vietnam Textile
and Garment Association (VITAS), the industry finds itself in the lowest
value-added segment in the supply chain, having 70 percent of exported products
under outsourcing for foreign firms, 20 percent as domestic production and
direct sales without intermediaries, 2.9 percent as self-designed and
self-manufactured products, and just one percent made and distributed under
original brands.
Nguyen Van Tuan, Chairman of the Vietnam Cotton and Spinning
Association (VCOSA), said during the 2016 Vietnam Textile Summit in HCM City,
that the textile industry is “knotted” in the middle, i.e. highly
productive in terms of making yarn and final products, but stunted in the
production of fabric and other materials.
With the industry’s annual growth rate at about 8 percent,
by 2025, the amount of fabric needed will double to 18 billion metres, meaning
without further investment in domestic production, Vietnam will have to import
15 billion metres, said Tuan.
He also
said that with 7.5 million spindles, the industry’s annual output is
approximately 1.3 million tonnes of thread; of which more than 800 thousand
tonnes are reserved for export, mainly to two major markets – China and Turkey.
Worse still, many countries have intensified their use of
trade remedies against Vietnam. According to the MoIT, from 2007 onwards, Vietnam’s
yarn and thread exports have faced seven lawsuits – five anti-dumping, one
anti-subsidy and one safeguard measure – from Turkey, the EU, India and Brazil.
Therefore, around 80 percent of Vietnamese yarn is
exported to China, since its cotton prices are still relatively high. However,
this cannot be seen as a stable market. Once China decides to use the 11
million tonnes of cotton in storage, Vietnam’s yarn market share in the country
will shrink considerably, according to a VCOSA analysis.
Some insiders have said that the nation’s textiles
and garments sector can still increase productivity and localisation rate
through the development of supporting industries.
VITAS Chairman Vu Duc Giang told the Vietnam News
Agency a few months ago the FTAs are a driving force for growth, but the
textile and garment industry must be prepared for it.
Giang suggested that domestic businesses invest in
the dyeing process, implement a solid human resource training strategy as the
4.0 Industrial Revolution gets closer, and focus heavily on building an
integrated value chain between domestic producers.
Hoang Ve Dung, Vinatex’s Deputy General Director,
said at a meeting in August 2017 between Vinatex and the Vietnam Oil and Gas
Group, that administrative agencies should coordinate with textile associations
to push for appropriate policies on the purchase and production processes,
covering both raw materials and finished products.
According to the MoIT, total textile and garment
exports in the first six months of 2017 reached 14.58 billion USD, up 11.3 percent
over the same period in 2016, despite difficulties.
However, industry insiders have said that the
turnover of the first six months is not sustainable.-VNA