Vietnam's textile and garment exports rose to the second highest position in the world during 2020, according to a recent report by the World Trade Organisation (WTO). Enterprises in the industry have flexibly implemented many solutions to promote the production and exportation as well as improve competitiveness and position in the international arena.
However, being second in the world, Vietnam's textile and garment industry security was not due to an increase in export turnover, but because of the reduction in exports of their competitors. Therefore, forecasts show difficulties in maintaining the current position this year if enterprises in the field do not expand investments, renew technology and make good use of new-generation free trade agreements.
Abundant sources of goods
Direct competitors of Vietnam’s textile industry such as India and Bangladesh are recovering strongly thanks to fast control over the COVID-19 pandemic while Vietnam is still struggling to cope with the pandemic and the disruption of its labour supply, creating negative impacts on the recovery process of enterprises.
At present, most textile and garment enterprises have orders to fulfil until the end of the first quarter of 2022 and they continue to renegotiate and sign contracts for the following months, while striving to boost production and exports to achieve the set objectives.
Statistics from the Vietnam Textile and Apparel Association (Vitas) show that Vietnam's total textile and garment export turnover reached more than 32 billion USD in the past 10 months, up 10.8% over the same period last year. The US continues to be the leading import market of Vietnam, accounting for about 48%, followed by the EU, the Republic of Korea, and Japan. This is a great effort of enterprises amid negative effects of the pandemic.
Vitas President Vu Duc Giang affirmed that the biggest challenge for the textile sector is the non-synchronous and unified implementation of pandemic prevention solutions among localities, creating pressure on managers and employees.
In addition, many localities have yet to complete the vaccination of the first dose for workers while income of employees has decreased, especially in southern provinces such as Ho Chi Minh City, Dong Nai, and Binh Duong.
Enterprises are also facing a decreasing number of orders due to failure meeting the schedules and increasing prices of raw materials, making it difficult for enterprises to maintain and restore production.
Therefore, Vitas recommends enterprises to transfer orders from the south to the north in order to keep the schedule commitment with their partners and not disrupt the supply chain. They also need to proactively purchase raw materials to ensure supply for production, strengthen chain links, and invest in modern equipment to increase productivity and competitiveness within the market.
Taking advantage of free trade agreements
In addition to boosting production and export of goods to maintain the position of Vietnamese textiles and garments in the market, enterprises also need to make good use of opportunities from new-generation free trade agreements (FTAs).
Director of the Centre for WTO and Integration under the Vietnam Chamber of Commerce and Industry Nguyen Thi Thu Trang said that in order to enjoy tariff preferences from FTAs, Vietnamese textiles and garments must meet very strict requirements on rules of origin according to each individual agreement. For example, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) requires product origin “from yarn onwards”. This rule is lower in the EU-Vietnam Free Trade Agreement (EVFTA) and the Vietnam - Japan FTA, but also “from cloth onwards”.
In the context that textile raw materials are mainly imported from countries outside the FTAs, rules of origin become the biggest challenge for enterprises in taking advantage of opportunities from FTAs. Therefore, textile enterprises need to identify tariff opportunities under specific FTAs in each market and learn in detail the rules of origin related to their specific products.
In the long term, enterprises should consider improving their product design and creation capabilities, enhancing their position in the production chain, establishing a stable supply of raw materials, and building a brand name specifically for Vietnamese textile products. This is not only a sustainable way to increase localisation rate in products to enjoy preferential tariffs under FTAs, but also a way to increase profits for Vietnam in export value.
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Source: Nhan Dan Online