Output acceleration
Output and export acceleration in the textile industry has been seen from the first days of 2014. After the Lunar New Year holiday, textile factories resumed operations in order to meet export orders. This year, textile companies saw stability in employment, as most workers got back to work in the early days of the new year.
On the fifth day of the lunar year, 10,000 workers at 17 facilities of the Hanoi-based Garment 10 Corporation (Garco10) began their first working day of the lunar year with high hopes that the year of the horse would bring success. Bui Thi Hang Nga, who has been working at Garco10’s Factory 5 since 2009, said that although half of the workers in her team come from provinces outside Hanoi, they were all present on the fifth day of the lunar year in order to fulfil orders placed by BONODI, a German customer. Nga said she received nearly VND10 million (US$470) as a Tet bonus this year. “We are very excited, more work means higher income so workers in the company all make efforts to increase productivity so that they can get higher Tet bonuses.”
Garco10 CEO Than Duc Viet said that in 2014, the company strives to earn nearly US$90 million in export revenue, 11 percent more than in 2013. In addition to maintaining exports to traditional markets such as the United States, the EU and Japan, Garco10 is looking to expand exports to future Trans-Pacific Partnership member states. The corporation is also taking steps to shift its production model to become an ODM (original design manufacturer).
In order to increase production capacity, the corporation has invested in two new shirt production lines at the Trieu Do Company in Thanh Hoa Province, 10 shirt production lines at Ha Quang Factory in Quang Binh Province and a premium vest production line at Hung Ha Factory in Thai Binh Province. Garco10 is also introducing some specialised software in order to remove redundant operations and increase productivity.
Similarly, at the Dong Nai Garment Corporation, an official said that it has received many large orders for delivery through September. In 2014, the corporation aims for an export revenue of US$47 million, 10 percent higher than in 2013. In order to increase production capacity, the corporation has put into operation seven production lines in Dong Xoai Town, Binh Phuoc Province. Another 15 production lines at Dong Xuan Loc Company are expected to become operational this June.
At the Duc Giang Garment Corporation, export revenue in January was estimated at US$7.5 million, up 15 percent compared with January 2013. The corporation has received orders for delivery until the second quarter of the year, and is building a factory in Hoa Binh Province to increase its production capacity. It has set a target of grossing US$89 million in export revenue in 2014, up 20 percent over 2013. According to Vice General Director Pham Thanh Tung, the corporation has been exporting ODM products to Japan since 2013 and is planning to expand this model to other markets so that revenue from ODM exports can account for 3-5 percent of its total export revenue.
Opportunity utilisation
So far, most textile enterprises have orders until the end of the first and second quarter of this year. Vice Chairwoman and General Secretary of the Vietnam Textile and Apparel Association (VITAS) Dang Thi Phuong Dung said that when the economies of large markets such as the US, the EU, Japan and the Republic of Korea (RoK) recover, the textile export revenues of Vietnam to such markets will increase.
It is forecast that Vietnam's annual textile export revenue to the US market will rise to US$10 billion by the end of 2014, up 17 percent compared to that of 2013. If the Trans-Pacific Partnership (TPP) is signed and takes effect, Vietnam will have more opportunities to export to the US, as the textile import tariff will be cut down to zero percent. The exports of Vietnam's textiles to the EU will also see a strong increase when the Vietnam–EU Free Trade Agreement is signed. Japan is also a high potential market for Vietnam and textile exports to the country are estimated to reach US$3 billion in 2014, an increase of 20-25 percent against 2013. In addition, the market share of Vietnam textiles in RoK has also increased strongly since the ASEAN–RoK Free Trade Agreement took effect in 2007. The export of textiles from Vietnam to Rok in 2013 witnessed a rise of nearly 54 percent compared to 2012.
Although there are many opportunities for export growth, textile companies still face many difficulties and challenges. According to VITAS Vice Chairwoman Dung, the competitiveness between textile exporting countries will become fiercer and more commercial barriers will be built, particularly by the US, such as strict requirements for social responsibility, eco-labels and environmental protection, among others.
Moreover, many EU importers are shifting orders from Vietnam to Bangladesh, Laos and Cambodia, as these countries have zero percent import tax rate to the EU market.
Meanwhile, domestic enterprises have to bear the pressure of rising input costs, including electricity, transport and wage hikes, in addition to the shortage of senior human resources and the existence of inefficient management.
According to VITAS, the added value of Vietnam textile products remains low as domestic enterprises do mostly processing and outwork for foreign companies. Thus, textile enterprises should minimise outwork and move to FOB (Free On Board) and ODM (Original design manufacturer) models to increase the added value and competitiveness of products. The Vietnam garment and textile sector has set a target to increate the proportion of FOB model production from 38 to 50 percent, and ODM model production from 5 to 10 percent in 2015.
Currently, the textile sector depends largely on imported materials. Thus, more investment in the development of materials would help increase the localisation rate of the sector, increase the value of the products and reduce the trade deficit as well. The textile industry is expected to achieve a localisation rate of 60 percent by 2015 and 70 percent by 2020.
To fulfil such targets, in 2014 Vinatex plans to invest in projects producing raw materials, such as two plants to make solid dyed yarn at a capacity of 40 million metres per year and two other plants to make dyed yarns at a capacity of 12 million metres per year.
