HCM CITY – TUV SUD, an international service provider in testing, inspection, audit and certification yesterday signed a memorandum of understanding (MOU) with the HCM City Association of Garment Textile Embroidery and Knitting (AGTEK) to help its members access global markets.
Under the MOU, the two sides will co-organise quality and safety workshops and awareness programmes related to the textile and garment industry, according to Sathish Kumar Somuraj, general director of TUV SUD Vietnam.
The in-house training sessions would aim to provide local manufacturers an updated and more in-depth understanding of stringent international quality and safety standards, he said.
Pham Xuan Hong, AGTEK chairman, said Viet Nam has improved its business opportunities by signing free trade agreements with some key global players like the EU, US, Japan, Korea, and ASEAN, he said.
While these agreements would bring global market access to Vietnamese businesses, it also means that Vietnamese manufacturers have to comply with more stringent quality and safety regulations, he said.
“International government safety and quality regulations on textile and garment products are changing constantly, especially in today’s free trade business landscape.
“Global buyers, especially those in Europe and the US, are increasingly demanding with respect to the kind and quality of products they want.”
Somuraj said quality and safety control are essential for companies in Viet Nam, especially those looking to take their products to international markets.
The MOU also includes a special promotion for the association’s members, who are mainly small and medium-sized enterprises for whom cost is a concern, he said.
The agreement is expected to immensely benefit member companies and take their business to the next level, he added.
“According to one estimate, Vietnam’s textile exports will double in the decade from 2015 to 6 trillion yen ($55 billion). In addition to low labor costs, expected cuts in tariffs under the agreement are drawing textile companies to the emerging country.”
Vietnam is emerging as a potential new world production center of textile products, as major global apparel makers are expanding their production in the Southeast Asian country.
Avery Dennison RBIS, a U.S. manufacturer of apparel labels and tags, and South Korean clothing maker Panko are building new plants in Vietnam, which is part of the Trans-Pacific Partnership trade liberalization pact among 12 Pacific Rim countries, including the U.S. and Japan.
According to one estimate, Vietnam’s textile exports will double in the decade from 2015 to 6 trillion yen ($55 billion). In addition to low labor costs, expected cuts in tariffs under the agreement are drawing textile companies to the emerging country.
New entrant
State-of-the-art label printers are rolling off paper tags for global apparel brands such as Nike and Adidas at Avery’s brand-new plant in Long An Province in southern Vietnam. The plant, which came on stream in January, can print 10,000 tags per hour containing information like prices and materials used. Its production capacity is twice that of the old plant. The tags are then delivered to factories in the surrounding areas that mainly manufacture sports apparel.
According to Rishi Pardal, the company’s vice president in charge of North Asia, Vietnam will replace China as the principal hub of textile exports to Western and Japanese markets.
Meanwhile, Panko is building a new plant in Quang Nam Province, central Vietnam, at a cost of $100 million. The company is responding to growing orders from global apparel brands, including Uniqlo. Choi Jae-ho, a director at Panko’s local unit, said the company’s sales increased 30 per cent last year and the outlook is for a similar expansion this year, too.
Incidentally, China is still the dominant player in Asia’s apparel business, with a total export value of 30 trillion yen. The figure dwarfs India’s annual apparel exports of slightly less than 5 trillion yen, the second largest in Asia.
But rising labour costs, which have doubled in five years, are threatening China’s status as the regional champion. Textile exports from China fell last year for the first time in six years, signaling that apparel makers are looking to other countries with lower costs.
Clearly, Vietnam has the potential to become a serious challenger to China’s supremacy in textile production and exports. In addition to low labor costs, which are nearly 60 per cent less than in China, the TPP, which is expected to come into force around 2018, will further enhance Vietnam’s competitiveness.
The trade pact will, for instance, immediately scrap tariffs averaging 20 per cent on 70 per cent of the items Vietnam exports to the U.S. Vietnam’s advantage as an exporter will receive an additional boost from its free trade agreement with the EU, which is pending ratification.
To gain the most benefits from the tariff cuts under the TPP, a country needs to have both upstream and downstream sectors. In the textile industry, that means Vietnam needs both spinning and dying as well as sewing businesses.
Huntsman Textile Effects, a division of Huntsman and a leading manufacturer of textile dyes and chemicals, is seeking to capitalise on new business opportunities in Vietnam created by the trade accord.
The company used to transport dyes for yarns and cloths from a warehouse in Thailand to Vietnam, which took two to three weeks to deliver products after receiving orders. But, last year, Huntsman opened its own bonded warehouse in Dong Nai Province in southern Vietnam, which cut delivery times down to as short as four business days.
Acting on time
Meanwhile, even though China has not joined the TPP, Chinese textile companies are also expanding their operations in Vietnam.
Texhong Textile Group, a major Chinese textile manufacturer, has spent 600 million yuan ($92.6 million) to build new production facilities on 220,000 sq. meters of land it purchased in Quang Ninh Province in northern Vietnam. In partnership with a Hong Kong-based knitwear manufacturer, the company is planning to build up integrated textile manufacturing and sales operations in the country, starting with yarn production.
According to Hong Tianzhu, Texhong’s chairman, his company will seek to be the top player in Vietnam, which he describes as the biggest beneficiary of the TPP.
Shoe manufacturers are also expanding in Vietnam. Pou Chen of Taiwan, the world’s largest contract manufacturer of footwear, which counts Nike and other major brands among its customers, made 42 per cent of its products in Vietnam as of the end of 2015, compared with 25 per cent in China.
But Vietnam is facing tough challenges in its quest to become a global textile giant: Minimum wages in the country are rising at double-digit rates, and its underdeveloped petrochemical industry is limiting production capacity.
If it wants to become the world’s new textile plant, Vietnam needs to quickly upgrade its industrial structure while its textile exports still maintain price competitiveness.
Other Asian countries are also trying to benefit from the TPP. Since the trade deal was struck in October last year, Indonesia, Thailand and the Philippines have announced their intention to join. These countries are clearly feeling pressure to keep up with their neighbors in global competition.
Foreign investment in Vietnam’s textile industry totaled $5.7 billion in 2014-15, equal to nearly 70 per cent of the accumulated investment over the past 20 years. Such rapid growth cannot be attributed solely to the TPP, but the trade pact has no doubt been a major factor.
The situation poses a puzzle for Japanese textile makers operating in countries such as Thailand and Indonesia. They must decide whether to expand into Vietnam now or wait for its neighbors to join the TPP.
HA NOI (Biz Hub) — The garment-textile and leather-footwear sectors brought in US$10.5 billion from exports in the first four months of this year.
Of the total, the garment-textile sector generated $6.82 billion, an annual increase of 6.2 percent.
The Vietnam Textile and Apparel Association (VITAS) said most orders sealed in the period came from major markets including the US, EU, the Republic of Korea and Japan.
Overall export revenue increased, but the value of orders stayed unchanged, it said.
According to the Ministry of Industry and Trade, a number of apparel producers have secured enough orders for production until the end of the second quarter; others even have enough work for the entire year.
The leather-footwear industry earned $3.68 billion worth of export turnover in January-April, up 4.8 percent compared to the same period last year.
The Vietnam Leather and Footwear Association (Lefaso) said many firms operating in the sector are ramping up their production to fill export orders in May and June.
Workers process garment products for export at Norfolk Joint Stock Company in Dong Van 1 Industrial Zone. (Photo: VNA)
Hanoi (VNA) – Producers of export quality garments are facing a reduction in orders, according to the Vietnam Textile and Apparel Association (VITAS).
Vu Duc Giang, VITAS Chairman, said they were considering moving export garment orders from Vietnam to Cambodia, Laos, and Myanmar, because customers of those countries would join the preferential export tax when exporting to the United States (US) and Europe.
Meanwhile, the Trans-Pacific Partnership Agreement (TPP) and Vietnam-European Free Trade Agreement have not yet come into effect. Therefore, partners of Vietnam’s export garment producers could not join any preferential tax regime from those agreements.
According to the General Department of Customs, Vietnam gained a year-on-year growth in export values of garments at 7 percent to 7 billion USD in the first four months of this year, lower than the expected rate of 10 percent. Import of materials for export garment production dropped in four months.
Hoang Trong Khang, Deputy Head of the Import and Export Division at the Viet An Joint Stock Company specialising in garment exports to the US, European Union (EU) and the Republic of Korea (RoK), said the company saw reduction in exports to some major markets, including RoK.
In fact, export orders for production in the second and third quarters have reduced by 5 percent to 7 percent against the same period last year, according to the association. The local enterprises were worried about the ability to move export orders of traditional customers to other regional countries in the second and third quarter. That situation would affect exports of enterprises as well as the garment industry.
To take more export orders and set up professional production and business activities, the Vietnam Textile and Garment Group (Vinatex) has developed Vinatex International Joint Stock Company (VTJ) and the Supply Chain Development Center (SCDC).
The two businesses would combine and support member companies of Vinatex to exploit and expand the export market, seek customers and develop a supply chain from material to finished products, Tran Quang Nghi, Vinatex Chairman, said.
So far, the SCDC has had eight regular customers for garment products and been developing 20 customers in the US, the Europe, RoK and Japan.
The centre has had 10 customers for cotton and fibre and has been developing 30 customers of the products in Chile, China, Thailand, and Malaysia, in addition to RoK.
VTJ has had 10 customers and it has concentrated on the US and Japan markets with large export volumes.
Vietnam expected to gain total export value of 30 billion USD for this whole year, which is 3 billion USD more than in 2015.
Vietnam’s small and medium apparel enterprises struggled to survive in the first quarter of 2016, with many of them suspending production, as their customers shifted orders to Myanmar and Laos to enjoy lower prices, Vu Duc Giang, chairman of the Vietnam Textile and Apparel Association (Vitas) said at a conference in Ho Ch Minh City recently.
Vietnam exported $27.4 billion worth of apparel last year and over $8 billion in this year’s first four months, up 6 per cent against the same period a year earlier, Giang said.
But the Vitas chief said that despite rising shipments, the industry is coping with a slew of challenges. Many small and medium enterprises have been mired in difficulties as they have found it hard to compete.
Giang explained that apparel products of Myanmar and Laos enjoy special tariffs for exports to Europe and the US while Vietnamese firms will have to wait until 2018 to make use of preferential tariffs to export products to these two major markets when the new free trade agreements with them take effect.
Additionally, apparel enterprises have become exhausted by so many inspections by customs, taxation, labour, environment and food safety authorities, with up to three or four inspection teams a quarter.
Giang also reiterated Vitas’s request to the Government to revise the master development plan for the textile-garment industry towards 2020 as it is now outdated. Vietnam’s apparel exports exceeded $27 billion last year against a target of $20 billion for 2020.
He also said that the plan must be revised to match the development of industrial parks to facilitate management and wastewater treatment.
In response, Minister of Industry and Trade Tran Tuan Anh said the development plan would be revised next year to make it compatible to the country‘s international integration moves. (SH)
