Expanding export market of textile and garment sector

Wednesday, 2019-06-19 17:35:01
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Textile and garment enterprises should take initiatives in preparing sources of raw materials.
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NDO – Vietnam’s textile and garment sector posted a total export revenue of US$11.43 billion in the first four months of this year, a year-on-year increase off 9.56%; however textile and apparel products were exported mainly to traditional markets.

In order to take full advantage of any opportunities, particularly from member countries of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), enterprises should take initiatives in preparing sources of raw materials as well as improve their competitiveness to develop new potential markets.

Taking initiatives in preparing sources

According to Chairman of the Board of Directors of Hung Yen Garment Corporation (Hugaco) Nguyen Xuan Duong, the corporation’s member companies have had stable orders and actively expanded production to strive to earn VND550 billion in total revenue and VND65 billion in profit before tax. The company also continued to expand several new markets, towards original design manufacturing (ODM) and original brand manufacturing (OBM) models in order to increase the products’ values and improve the competitiveness.

General Director of Phong Phu Joint Stock Company Pham Xuan Trinh also affirmed that to boost the efficiency of production and business activities in time to come, the corporation has innovate modern technology and equipment, proceeding to automate each stage, following the trend of the industrial revolution 4.0.

According to statistics of the Vietnam Textile and Apparel Association (VITAS), the total export turnover of the sector reached US$11.43 billion in the first four months of this year, a year-on-year increase of 9.56%. The US remained the largest importer of Vietnamese garments and textiles, accounting for 39.6% of total export turnover, followed by CPTPP members (over 17%), EU (nearly 13%) and the Republic of Korea (nearly 10%). Despite the positive results, Vietnam’s textile and apparel products have been exported mainly to traditional markets, but not strongly promoted in new markets, particularly CPTCPP member countries.

Executive Director of Vietnam Textile and Garment Group (Vinatex) Cao Huu Hieu said that after four months of CPTPP taking effect, the country’s textile and garment exports to internal markets have not shown any signs of growth. Currently, CPTPP is valid for seven of the 11 member countries including Japan, Singapore, Canada, Mexico, Australia, New Zealand and Vietnam. In 2018, the export revenue of Vietnamese textile and apparel products to these countries reached around US$5.3 billion, including US$4 billion from Japan.

Taking full advantage of opportunities

Among CPTPP member countries, Canada and Australia are ideal markets for the Vietnamese textile and garment sector to boost its exports in the near future. In addition, Vietnamese enterprises are looking forward the EU-Vietnam Free Trade Agreement (EVFTA) that is expected to take effect this year. If it goes smoothly, Vietnam’s total export turnover to the EU market will increase by around US$16 billion.

One of the difficulties that the Vietnamese textile and garment sector is facing is its dependence on raw and auxiliary imported materials. Meanwhile, in order to take full advantage of any opportunities, enterprises should take initiatives in preparing domestic and intra-regional materials in order to meet the requirements, particularly from new generation FTAs such as CPTPP and EVFTA.

Vinatex’s Executive Director Cao Huu Hieu said that in order to enjoy tax incentives from CPTPP, Vietnamese textile and apparel products must meet the strict yarn-forward rule, meaning they must be produced in Vietnam and other CPTPP countries from yarn forward. However, internal countries meet only 7% of Vietnam's demand for imported yarns and fabrics.

In fact, it would be nearly impossible for Vietnamese textile and garment enterprises to meet the rules of origin. To make the best use of advantages from CPTPP and reduce import tax rates from 18% to 30% in some new markets that have not signed any FTAs, such as Canada, Mexico and Peru, they should promote investment in the yarn-forward chain with an appropriate roadmap and steps.

Businesses should also flexibly grasp some exceptions on the rules of origin. On the other hand, they should pay much attention to trade promotion and directly work with customers to avoid unnecessary intermediate costs. Moreover, enterprises need to promote the joint ventures and links to invest in chains. It is crucial to build centres to supply raw materials for textile and garment enterprises in all regions and areas.

The export results of the textile and garment sector in recent time has shown that without the preparation of the suitable equipment, the skill level of workers,, the management methods and the initiatives in raw and auxiliary materials, opportunities from the CPTPP will turn into challenges. Therefore, businesses must pay attention to meeting the standards of foreign markets. Meanwhile, state management agencies should have policies to support enterprises as well as practical measures to remove barriers for administrative reforms and improving their business environment.