Textile and garment industry situation in the first 3 months of 2020
By the end of Q1/2020, the export turnover of the whole textile and garment industry was estimated at over US$ 8 billion, down 2.02% over the same period last year. In which, textile and garment export (including fabric) in Q1/2020 is estimated at over US$ 7 million, down by 1.4% in value compared to the same period in 2019. Particularly in March 2020, Vietnam’s textile and garment export turnover has witnessed a decrease of 7.42%.
Export of textiles and garments (including fabric), 2014 – Q1/2020
Source: VIRAC, GDVC
The United States, Japan and South Korea are the largest textile and apparel importing countries of Vietnam. At the beginning of 2020, export turnover to the US reached more than US $ 3 million, down 0.42%, contributing 47% of Vietnam’s total textile and garment revenue. The second is Japan with an export profits of more than US$900 million, up 2.12%, adding up to 13%. South Korea ranked third with US$700 million, down 7.12%, accounting for 10% of total exports.
Difficulties and challenges
From the start of 2020,the spread of COVID-19 “nightmare” around the world is negatively affecting almost all economic sectors. Although achieving satisfactory results, the textile and garment industry is severely infected among them.
US-China trade tensions
This tension affects the exchange rate between currencies and processed goods prices in Vietnam. Compared to some countries in the region, it results in a decline in export orders, especially textile groups. Particularly, the consumption of fiber and raw materials faces many difficulties because the main export market is China (accounting for 60%) cutting down on imports.
Sparse localization capability
Vietnam has advantages in the textile industry but the ability to localize products is not large. Especially the stage of dyeing in the textile industry is still weak. Some free trade agreements signed recently reduces import tax and opening the retail market for investors. It is an opportunity for foreign fashion brands such as Zara, H&M, Topshop, Old Navy … to land and compete.
Moreover, the main export products are plain cloth and raw fiber. The imported products are finished cloth and all kinds of raw and auxiliary materials. Despite the garment and textile industry contributes more than 13% to Vietnam’s export turnover, the added value is only 25%. The reason is that domestic enterprises are mostly small and medium-sized, mainly producing in the form of CMT and FOB. Manufacturing by CMT method accounts for 85%, FOB accounts for 13% and ODM is 2%.
The shortage of raw materials for production
China, a supplier of up to 80% of materials, closing its border to quell the pandemic. Hence, textile enterprises have spent more than four months of the year facing a shortage of raw materials and supplies. Many businesses lost their liquidity at the end of April. The number of unemployed laborers is estimated at 40-50% and the inventories in April and May will lose about 50% of the value.
Development orientation for textile and garment industry
According to a survey of the International Textile Manufacturing Federation (ITMF), an average of 8% of orders decreased worldwide and sales are expected to drop by nearly 10% in 2020 compared to 2019. Vinatex forecast that 30% of workers in the textile industry will be underemployed in April 2020. While 50% of underemployed workers will be employed in May 2020, the total damage is estimated at over VND 5,000 billion. Since then, Vietnam’s textile industry has set specific goals for 2020 and a vision to 2030:
- Formulating a program on fabric production for export and development of technical textile and medical textile products
- Developing sources of cotton fibers, fibrous plants, man-made fibers and auxiliary materials
- Strengthening export garment industry thanks to trade agreements
Specific objectives of the textile and garment industry until 2030
Source: VIRAC, GDVC
Specifically, the goal is reaching US$ 60 billion in 2025, with profits of more than US$ 40 billion, up 7.7% compared to the implementation of 2019. But the number of employees maintained at the current level (2.5 million public employees) and labor productivity per capita increased by 150%.