2011 saw export growth in almost all of Vietnam’s key hard currency earners, with garments and textiles leading the way.
Vietnam’s garment exports were estimated at $13.8 billion in 2011, accounting for 16.5 per cent of the country’s total export turnover and increasing nearly 38 per cent over 2010 for its highest growth rate in the last five years.
The sharp rise is attributed to both price increases and the number of export contracts in traditional markets such as the US, the EU and Japan, with exports to these markets growing by 14 per cent, 41 per cent and 52 per cent, respectively, over 2010.
Mr Le Tien Truong, Deputy President of the Vietnam Textile and Apparel Association (VITAS) and Deputy President of the Vietnam National Textile and Garment Group (Vinatex), pointed to better market forecasting, greater creativity by textile and garment businesses in dealing with the impact of the economic downturn and high input material costs, more efficient investment and production and growing efforts by exporters to win the trust of international partners.
The US remains the largest buyer, accounting for over 50 per cent of Vietnam’s garment exports, followed by the EU with 17 per cent and Japan 12 per cent
Mr Truong said that despite the challenges in the global economy, Vietnam’s garment and textile sector has set a target of recording export turnover of $15 billion this year, a year-on-year increase of 10-12 percent.
But it will be no easy task as the sector will face challenges from difficulties in the macro-economy, the impact of the global economic downturn, serious public debt in some European countries and, especially, falling prices on orders this year, which could possibly lead to a decline of 10-15 percent in the country’s export turnover growth in major markets. Production costs, including electricity, water, fuel, salaries and loan interest rate, are also all on the rise.
Mr Truong said that growth of 12 per cent in export volumes in 2012 can be reached. However, the exact growth rate remains unpredictable because it depends on the ups and downs of prices in the world market. He advises that businesses choose markets and specific products and work out plans to become a long-term strategic partner of major suppliers.
They should also focus on seeking markets by being competitive, increase the value-added quality in every free-on-board (FOB) contract, reduce their reliance on offshore outsourcing contracts and increase their original design manufacturer (ODM) contracts.
As at the end of 2011 ODM contracts had earned only $800 million for the sector, or 5 per cent of total export turnover, Mr Truong said, adding that the industry aimed to raise the ratio to 15 per cent in 2015 and 20 per cent in 2020.
Footwear in third place
The Ministry of Industry and Trade (MoIT) has revealed that footwear became one of Vietnam’s major export commodities in 2011. With export turnover of $6.5 billion the leather and footwear sector was ranked behind only apparel and crude oil on the list of the country’s Top 10 export items. The major foreign markets for Vietnam’s footwear products are currently the US, Belgium, Italy, France and Spain.
Since 2007 footwear exports have coped with a number of difficulties, including a decline in markets, an EU anti-dumping tax, high production costs and labour shortages. But the sector has worked hard to keep growing, with export value reaching $3.99 billion in 2007, $4.76 billion in 2008, $4.1 billion in 2009, $5.1 billion in 2010 and $6.5 billion in 2011.
2011 marked the return of footwear producers to the domestic market. The consumption of “Made-in-Vietnam” footwear in the domestic market reached nearly 70 million pairs, accounting for nearly 50 per cent of total demand, which is estimated at 130-140 million pairs per year. In 2012 the leather and footwear sector expects to still face challenges, with the greatest being declining demand from importers, especially the EU, Vietnam’s traditional market, due to the public debt crisis.
EU supervision over leather-capped shoes imported from Vietnam will terminate in March, but it is hard to expect a sudden change in exports to the market. Other markets such as Brazil, Mexico and Argentina also plan to investigate footwear imports from Vietnam. In particular, Brazil has officially begun an investigation into Vietnamese and Indonesian imported footwear. Vietnamese footwear and handbag exports will also have to compete with rivals from Taiwan, Australia, Mexico and elsewhere. Meanwhile, in the domestic market, locally-made footwear must compete with imports from China.
Nevertheless Mr Nguyen Duc Thuan, Chairman of the Vietnam Leather and Footwear Association (Lefaso), said that there were some bright signs for exports from the industry as quite a number of orders that used to go to China have now come to Vietnam, and Vietnamese businesses have also managed to sign many more contracts with the US market.
It has been reported that over 50 footwear and leather companies have finished signing contracts for the first two quarters of 2012. Key buyers, including the US, the EU and Japan, still maintain more or less the same prices as last year. The US is forecast to be the largest import market after the Trans-Pacific Partnership (TPP) takes effect in 2012, under which Vietnamese products will enjoy a tariff reduction to below the level imposed on similar Chinese products.
Exports of leather products and footwear are expected to reach $8.5 billion in 2012, up nearly 9 per cent over 2011, according to Lefaso, which predicted that leather handbag exporters in particular will see growth of about 15 per cent. MoIT has recently released a new development scheme for the industry to 2020 and 2025, in which the industry will be a key national export and is expected to earn $9.1 billion in export turnover by 2015, $14.5 billion by 2020, and $21 billion by 2025.