ODDS FOR VIETNAM’S TEXTILE INDUSTRY IN INTERNATIONAL ARRIVAL

In recent years, textiles and garments products in Vietnam are making a good impression on European and world’s partners. Still, to conquer the global competition it’s an stressful battle for home-ground businesses to upgrade production and fulfil the quality of finished products.

China, the US and Europe dominate the world apparel market

Supplier

Currently, China is the leading country in the production and consumption of natural cotton, besides India, which is also on the rise in recent years. Raw cotton and wood are essential materials to make natural silk fiber. In 2019, this fiber’s total production reached 41 million tons, accounting for 37% of global fibers production. Following China as the leading supplier, the production and export capacity from Bangladesh has also grown enormously in present.

Polyester yarn is dominating the China market when it enjoys a fair price and improved export demand. By the end of 2019, China produces 67% of global polyester, proving its massive position in the world apparel situation. Not stopping there, the value of fabric exports in China also ranks first with a total value of 119 billion USD, outperforming significant rivals such as the EU and India.

 

Source: VIRAC

The European bloc, which consists of Germany, Spain, France, Italy and Portugal accounted for more than one-fifth of the global textile industry and is currently worth more than 160 billion USD. This unit claimed the 2nd most immense export value of finished clothes in the world, about 130 billion USD / year.

India is also a formidable competitor that has grown enormously in recent years, reaching the world’s third-largest in textile and apparel production and holding an export value of more than 30 billion USD. This substantial market is based on a wide range of natural fibers such as cotton, jute, silk, and wool to synthetic fibers such as polyester and nylon.

Consumption

Accounting for more than 75% of the total global textile and apparel value, the EU, the US, China, and Japan are currently the largest consumer market group in this industry. Worth mentioning, the growth rate of revenue in this market disparities markedly, particularly the developed markets such as the EU, US, Japan Growth is relatively low compared to China’s speed (approximately 6%) and India (9%).

Source: VIRAC

Average spending on apparel is limited in the comparison between developed and developing countries. Although China consumes the most garment globally, the average expenditure on textiles in 2014 of Chinese people was only 194 USD, accounting for 10% of total income. Meanwhile, spending of the American is 816 USD, reckoning for only 3% of their earnings.

According to the WTO, the European Union’s import value is the greatest, accounting for more than 23% of the total global textile and apparel imports. Currently, the value of textiles and clothing into the EU unit is growing steadily at 5.8% per year, with the most extensive product segment being knitted. However, the sportswear and fashion range have recently attracted many customers in this market.

Vietnam’s garment market in 2020

As having powerful potential, Vietnam is ambitiously to set foot in the fierce race of the world textile industry. For the first time ever, in 2019, Vietnam surpassed Taiwan and ranked seventh in world’s largest exporter (exports reached $ 8.8 billion, up 8.3% from a year earlier), which marked a drastic change and efforts to enhance the production capacity of local factories.

Situation of Vietnam’s garment industry

Currently, most textile production in Vietnam is trapped in CMT form – buying raw materials and semi-finished products. Since local businesses cannot fully self-supply the production process, Vietnam’s textile industry could only develop with poor added value and low growth potential.

75% of raw materials in domestic business depends on imported supply, in which China and the US are main traders for crude cotton materials. By the end of September 2020, Vietnam is the third-largest cotton importer in the world with consumption of 1.5 million tons per year, of which more than 800 thousand tons are from the US. Artificial fibers such as synthetic fibers and filaments can only be provided by the total of nine home-ground enterprises, the rest mainly produce short fibers and spin yarn.

In 2020, the Covid-19 epidemic had a significant impact on the industry’s revenue in general, especially at the beginning of the year when retail stores have to close to control the spread of the disease. Apparel consumption sales in 9 months of 2020 reached 198 trillion dongs. The consumption of office clothes such as suits, uniforms, shirts, and trousers decreased significantly due to complicated epidemics, many businesses closed production, causing the unemployment rate to increase. In return, protective clothing, mainly medical protective clothing, masks for Covid-19 epidemic prevention raised profoundly, although there were signs of saturation ever since the epidemic was controlled in the third quarter.

Source: VIRAC GSO

In the total of the first nine months of 2020, the wholesale garment service accounts for the largest proportion of about 29%, followed by the wholesale fabrics and retail garments with a negligible difference.

Source: VIRAC  

According to PWC and Wazir Advisors, the demand for apparel from the EU and the US decreases by 45% and 40% respectively, resulting in the first nine months of 2020 Vietnam reducing export value by 9.9% compared to the same period in 2019. For the domestic market, businesses are facing tons of cancelling and restraining orders. Until September, these situations still took place firmly across the country, of which customers withdrew 53.5% of textile and garment enterprises, and 22.9% were unable to export.

2021 is still the year of difficulty and uncertainty for the textile and garment industry, especially when a new cycle of product investment begins. This year, the Vietnam Textile Industry and Vinatex plan to achieve 39 billion USD in export turnover, with the average target of 38 billion USD. Also, to focus on improving and supporting the block associate businesses, Vinatex will attempt to effectively exploit the FTA while requesting the government to have specific policies to develop supporting industries, both spatial conditions and stimulating growth.

New opportunities in the context of harmful epidemic

Lacking raw materials from foreign traders has creating chances for domestic supply to flourish. Besides fulfilling the necessary needs of materials, this was also an escape for the yarn mill’s prolonged dependence on China. With uncertain developments from the global market, strengthening linkages between domestic enterprises is an excellent way to boost essential ODM activities (self-development of design and materials) and OBM (self-branding).

Opportunities for cooperation with India is a valuable supply to Vietnam’s textile industry, which long-time depends heavily on imported raw materials. Despite having lots of development potential, Vietnam only imports 6% of cotton and polyester from this fertile market. In addition to favors from the Indian government, Vietnam can utilize opportunities for cooperation in training the workforce textiles, applying science and technology, and equipment.

The Vietnam and South Korea government has just successfully signed a project to implement an aggregate clause of origin of textile materials in the EU-Vietnam Free Trade Agreement. This agreement helps Vietnamese enterprises to take advantage of high-quality textile and garment from Korea for the EU market’s production and exportation. 

Possibilities from EVFTA market

According to the Ministry of Planning and Investment, textile exports to the EU could increase by 67% next 2025 within the EVFTA agreement. However, to fully utilize the market’s potential its a necessary task for factories to localize input materials or to import from new markets such as South Korea and Japan. In the coming years, domestic enterprises need to strengthen chain-based production to meet the market’s rules of origin, while ensuring output product and its competitiveness with other powers.

Besides, Vietnam’s main rivals embrace outstanding advantages on tariffs, such as Bangladesh and Cambodia are duty-free under the program EBA, Pakistan exempt under the GSP +, which requires Vietnam to have a big step up in terms of both production upgrading and product quality increasing.


Parse error: syntax error, unexpected end of file, expecting ';' in /home/earththe/public_html/viracresearch/wp-content/themes/virac/template-parts/post/single-related-posts.php on line 53