It was predicted that the end of the MFA will provide opportunities for exporters of RMG from India & China to grow their exports at anexorbitant rate & thus eating up the share of neighboring low cost suppliercountries like Bangladesh, Sri Lanka & Pakistan and Vietnam.
The end of the Multi-Fiber Agreement (MFA) on 1st January2005 therefore marked the beginning of a significant era in RMG exports from Vietnam. However, as per WTO figures, Vietnams share in World Exports ofClothing was 0.90% in the year 2000 which was 1.76% in the year 2005. Though the growth in exports of Clothing in Vietnam during 2005 was less at 8%as compared to year 2003 when it was 32% and 28% in the year 2004.
The table below reveals the exports of RMG from India, China & Vietnam in the pre MFA & post MFA period along with the growth rates.
| Value In Billion USD | Yr. 2002 | Yr. 2003 | Yr. 2004 | Yr. 2005 | % age Share in | % age change |
| China Exports of RMG | 36.56 | 45.74 | 54.78 | 65.91 | 24.12 | 20.32 |
| India Exports of RMG | 5.60 | 5.45 | 6.34 | 8.07 | 3.17 | 27.29 |
| Vietnam Exports of RMG | 2.44 | 4.00 | 4.49 | 4.82 | 1.76 | 7.35 |
- China's exports of RMG (under HS Code 61+62) have grown exponentially over the years at a CAGR of 24.7% over the 5 year period.
- India's Global Exports of RMG is marginally higher than Bangladesh Global exports of RMG.
- Though China & India have emerged as major competitor in RMG segment, share of Vietnam in World Exports in the year 2005 was 1.76%. India will now have to face competition from neighboring countries in South Asian region in the RMG segment.
- Vietnam ranked 12th as a major exporting country for RMG in the year 2005. India was at 6th position.
- RMG constituted 14.20% share in Vietnam's Total Exports in the year 2005.
Major Export Destinations of Vietnam for RMG
The tabulation below highlights top ten destination countries of Vietnam for RMG Exports.
Table V: Vietnam's major destination countries for RMG:
Click here to enlarge the table
- The top 10 destination countries constituted 91.36% share in Vietnam's Exports of RMG, out of which USA alone constitute nearly 59% share. EU countries have also a major share of 16.72%
- Vietnam's exports of RMG to all the countries have showed growth except France (-2.67%) and Netherlands (-17.72%) where there is decline in Vietnams exports of RMG to these countries has been observed.
- Though the share of UK, France and Belgium is less than 5% in Vietnam's exports of RMG, a significant growth in observed in terms of Vietnam's exports of RMG to these countries i.e. 43%, 63% and 23% respectively.
Reduced prices induced increased exports to EU in 2007
Vietnam ranked as one of the top five apparel suppliers to the EU last year, helped by falling prices and curbs on shipments from China. According to a new report by Textiles Intelligence, Vietnam's EU exports are likely to grow in 2007.
The average price of EU clothing imports from Vietnam was slashed by 40% last year. At the same time, the average price of clothing imports from all sources rose by 1.9%. As a result of these changes, Vietnamese clothing prices were less than half of those from other sources.
The drop in prices - from EUR11.29 per kg to EUR6.76 per kg - coincided with a colossal 147% increase in the volume of imports from Vietnam.
In fact, Vietnam became the EU's fifth biggest clothing supplier in volume last year - although in value terms it did not even rank among the top ten suppliers because its prices were so low.
The increase in supplies from Vietnam can be attributed largely to the introduction of safeguard quotas on Chinese products in mid-2005. The quotas-aimed at curbing growth in EU imports from China - were imposed on four categories of textile products and on six categories of clothing.
In the six clothing categories - T-shirts, brassieres, dresses, blouses, trousers and pullovers - growth in imports from Vietnam varied from 239% to 561%.
All of these rates were well above the 147% increase in total clothing imports from the country. At the same time, the average price of Vietnamese supplies dropped by more than 40%.
Vietnamese producers took advantage of the fact that Chinese producers were forced to reduce exports of the six categories because of quotas. In fact, China cut back its supplies of these products to the EU at rates varying from 30% to 51% last year.
In the case of T-shirts, imports from China fell in volume by 48%. Vietnamese producers, meanwhile, slashed their prices of these items by as much as 73% - to just EUR0.75 per piece - and stepped up their supplies to the EU by a massive 336%.
As a result, Vietnam became the EU's sixth largest supplier of T-shirts in terms of volume. In terms of value, however, it ranked only 17th.
Growth potential in 2007 and 2008
In 2007 it is expected that EU imports from Vietnam will continue to grow. That said, there is still room for growth in imports from China as Chinese exporters have failed to use all of their quota allocation.
Indeed, China could increase its supplies of T-shirts by 94% without exceeding its quota allocation for 2007. In the case of trousers, Chinese supplies could rise by 72%.
For 2008 the future is uncertain. EU imports from China are set for further substantial growth once quotas have been lifted at the end of 2007.
That said, growth will be tempered by the fact that the European and Chinese authorities will monitor shipments, leaving open the possibility that further quotas may be imposed until the end of 2008 in the event of surges.
Source: AEPC newsletter
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