The Vietnam National Textile and Garment Group (Vinatex) predicts that the sector will only achieve a growth rate of 10 percent, much lower than last year’s figure of 30 percent. So far, just one tenth of businesses have signed contracts for the third and fourth quarter. Many say they find it difficult to win bulk orders.
Most of the orders tend to shrink by 20-30 percent in volume, they say.
In addition, raw materials continue to go down, putting businesses in a position to reduce the prices of products for export. As a result, their export turnover to key markets will likely see a 10-15 percent fall.
According to a recent Vinatex survey, exports to some major markets are in a fix. Regarding the Russian market, Vietnamese businesses are facing tough competition with Chinese rivals who often get the upper hand geographically. Moreover, complicated economic developments in the US and public debts in Europe are also major challenges for exporters to this market.
Le Tien Truong, Deputy General Director of Vinatex, says the US, EU, and Japan remain Vietnam’s biggest export markets as they account for 80 percent of its turnover. Therefore, it is no easy task for the Vietnamese garment and textile sector to seek partners in the context of slow US economic recovery, EU public debt default, and Japanese tendency to cut spending.
Vinatex has proposed reducing its independence on manufacturing orders, increasing the number of Free-on-Board (FOB) and Original Design Manufacturing (ODM) contracts, and promoting the use of made-in-Vietnam materials.
Considered as effective methods to turn a big profit, both FOB and ODM represent too small a proportion in Vietnam’ garment export earnings, says Truong, adding that in future, they must provide a firm foundation for the fast and sustainable development of the sector.
The proportion of ODM is expected to increase from 5 percent (US$800 million) in 2011 to 15 percent in 2012, Truong says.
Many businesses have succeeded in building strong brand names and reducing manufacturing operations to sharpen their competitive edge.
Nha Be Garment Joint Stock Company is a case in point. Last year, its export revenues reached US$350 million, with FOB accounting for 65 percent. In 2012, the Company will pull out all the stops to make a bigger profit.
Meanwhile, more than half of materials used by Saigon 2 Garment Joint Stock Company in 2011 came from domestic sources and there is a plan afoot to increase both the volume and value of its products using home-made materials.
Truong says Vinatex aims to improve garment designs and build strong brand names to hold sway over the domestic market.
For their part, Garment 10 Corporation Joint Stock Company and Viet Tien Garment Joint Stock Company have already opened many shops to introduce newly-designed products.