Shrinking markets overseas
The Vietnam Textile and Apparel Association (Vitas) says garment exports in the past three months fetched US$3.25 billion (excluding fibres), a year on year increase of 15 percent.
However, exports to the US and EU have started to decline, affecting the sector’s plan to meet the annual target.
Vitas says the volume of garments shipped to the EU from January to mid March 2012 dropped 25-30 percent compared to the same period last year.
Making shirts for export at Tay Do Garment Joint Stock
Company The sharp fall is attributed to the ongoing European debt
crisis that has forced consumers to tighten their belts, and markets to shrink
considerably.
Although the US secured slight growth in quarter 1, there is growing concern about a further decrease in export earnings from this potential market.
Besides the impact of the European debt crisis, a decline in material imports has cast a shadow on the sector’s prospect for high growth in the coming months.
In March alone, accessories imports saw a two-digit drop, with fibres down 3 percent in volume and 13 percent in value, and cotton down 16 percent in volume and 36.6 percent in value.
Orders on and off
Many garment makers complain that they have not been able to win big contracts, but only small ones of just a few thousand products each.
Le Tien Truong, Vitas Vice President, admits that only big, branded businesses with high financial capacity have secured orders for the whole of the second quarter, and they are entering negotiations for new orders in the third quarter.
Small businesses and those which do not directly manufacture products for importers still find it difficult to win contracts.
Fewer long-term orders mean that businesses will be in a real fix in the coming quarters, and they may have difficulty filling large orders if they win them.
According to Truong, urgent orders require businesses to have a strong command of production and management skills to live up to importers’ expectations.
Not all businesses meet these requirements, and they have to face additional fees that may arise in fulfilling short-term orders, says Truong.
Market expansion
Vietnam is among the top 5 garment suppliers to the US and among the top ten garment exporters to the EU, ranking just behind China, Turkey and India. However, the shrinking of overseas markets and short-term orders are placing local garment makers at a disadvantage.
Vitas says garments are among Vietnam’s key export items, with a projected growth rate of 15 percent in 2012. To make up for the decline in key markets, garment makers have no choice but to seek new outlets such as China, the Republic of Korea, Angola, New Zealand, India and Russia.
To increase export earnings, Vitas has encouraged garment makers to reduce reliance on outsourced contracts and focus on exports in the free-on-board (FOB) and original-design-manufacturing (ODM) forms.
The makers are advised to pay more attention to the local market by diversifying patterns, increasing quality and lowering production costs. Their recent efforts have paid off, with many high-quality branded products gaining a firm foothold on the market.
VOV
