As a result, we have reached a point where numerous products are available to cater to the growing global demand for innovative textiles and fresh designs. The world leaders in the textile and apparel industry, such as the United States of America, the European Union, and Japan, handle top aspects of business like designing, marketing, and distribution, while developing countries focus on basic business or manufacturing activities. China continues to dominate the manufacturing part of the textile and apparel industry, but in recent years, countries like Vietnam have also made their mark in the sector. With a total export value of US$ 17.9 billion in 2013, the textile and apparel industry ranked second among the largest export industries in Vietnam.
A steady journey
The Vietnam textile and apparel sector is growing at a Compound Annual Growth Rate of 9.8 percent annually, and if it maintains this growth, it will achieve an export value of US$ 55 billion by 2025. Additionally, if the Trans-Pacific Strategic Economic Partnership Agreement (TPP) is adopted, there will be a shift in the import of raw materials from China, South Korea, Taiwan, etc., and Vietnam, being a TPP member, will benefit.
According to the Vietnam National Textile and Garment Group (Vinatex), Vietnam's garment and textile exports helped the country earn approximately US$ 24.5 billion in 2014, marking a 19 percent increase over 2013. Apparel exports accounted for US$ 21 billion, and textile exports represented US$ 3 billion of this growth. Currently, Vietnam boasts around 6,000 textile and apparel enterprises that provide employment for more than 2.5 million workers. As of 2015, the ministry of industry and trade has set a revenue target of US$ 18 billion to US$ 21 billion for the textile and apparel industry. For the period through 2020, the revenue target is US$ 27 billion to US$ 30 billion. The development goal for export turnover has been set at US$ 18 billion for 2015 and US$ 25 billion for 2020.
Vietnam's main textile and apparel partners include the United States of America, the European Union, Japan, and South Korea. Total apparel export turnover to these markets was approximately US$ 15.3 billion in 2013, with around 85.5 percent of total apparel exports going to these four markets.
The import value of the Vietnamese textile and apparel industry increased at a CAGR of 20.5 percent annually between 2009 and 2013. In 2013, textile and apparel imports reached US$ 13,547 million, accounting for 10.25 percent of Vietnam's total import value in that year. Fabric imports were estimated to be around US$ 8,397 million in 2013, representing 62 percent of Vietnam's total textile and apparel imports.
Cut above the rest
Vietnam's textile and apparel sector has to face some serious challenges including competition from countries like China, India and Bangladesh. The good news for Vietnamese textile and apparel is that trade pundits are expecting Chinese trade share in the global textile and apparel trade value to decline from the current level of 40 per cent to 35 per cent by 2025. This decline can reap positive results for Vietnam's textile and apparel sector. According to a McKinsey report titled The Global Sourcing Map, the shift in production from China will first start in Vietnam and Bangladesh.
The biggest impediment in Vietnam's growth is fierce competition from low-cost countries like Bangladesh, India and Indonesia, which according to Vietnam National Textile and Garment Group (Vinatex), have more material and labour resources. The country has already started working on its production methods and is concentrating on improving competitiveness. Apart from this, the low labour productivity in Vietnam is a challenge that needs to be addressed immediately. According to UNIDO China statistical yearbook, in comparison to China and Indonesia, which have labour productivity index of 6.9 and 5.2, respectively, Vietnam's index is merely 2.4. A labour-intensive country like Vietnam cannot thrive on such low labour productivity index.
Vietnam's trade relations concerning textile and apparel are strong with India. "India is capable of supplying textiles in both small and big lots, with the quality of products as desired by the buyers, and our prices are competitive. India is not a competitor to Vietnam but a collaborator, and optimising the synergies will create a win-win situation for both countries," said Synthetic and Rayon Textiles Export Promotion Council of India's (SRTEPC) director Srijib Roy.
Vietnam mostly depends on India for import of textile items like polyester viscose and synthetic fabric, polyester wool fabric, and polyester filament yarn. During the financial year ended March 2014, India exported more than US$ 440 million worth of textile products to Vietnam. SRTEPC's former chairman Vinod K Ladia also said that Vietnamese apparel sector can benefit a lot if it gets access to India's huge market. Thus, more than competition, India and Vietnam are complimenting each other by supporting the textile trade.
Even as lower wages in Vietnam give the country an edge over China, the competition with Bangladesh is intense. The export value of Bangladesh and Vietnam in terms of textile is almost equal. Vietnam's textile and apparel can take over Bangladesh by working on labour productivity. Another close competitor is the Philippines. Even though the textile capacity of the two countries is similar, in the Philippines, there is no employment support. Also, the capacity of apparel industry is much bigger in Vietnam than in the Philippines.
Political stability and social safety also give Vietnam an edge over other Asian countries. The country has also shown commitment to bring economic reforms for development, which makes it an attractive option for investors.
Shaping the future
The export and import of Vietnamese textile and apparel are promising. Though the country still needs to become self-reliant as far as raw materials are concerned, its efforts in this direction are laudable. According to the preliminary data released by the Customs IT & Statistics Department, General Department of Customs, Vietnam's Ministry of Finance, fabric and garment exports from Vietnam grew at approximately 12 per cent and touched US$ 3.249 billion mark in the first two months of 2015. Apart from supporting international trade, the Vietnam government is also supporting the domestic market for textile and apparel. Supporting Vietnamese fashion brands can further fortify foreign demand and encourage competition with top garment producers like France, Spain and Italy.
The Vietnamese manufacturers are also exploring the benefits of niche clothing and furnishings. In addition to the markets like the United States of America, European Union and Japan, the Vietnamese textile and apparel sector is also discovering new markets such as Russia, Singapore, Taiwan and Middle East.
Vietnam's textile and apparel industry has low entry barriers, as the government policies are conducive to development of textile and apparel sector. There is also moderate requirement of technology and capital following easy availability of cheap labour. In addition, access to inputs and distribution channels are also easy in comparison to the other countries. Vietnam has also signed free trade agreements with Singapore, Malaysia, Australia, Chile, Brunei, New Zealand and Japan.
The textile and apparel industry of Vietnam has upheld the principles of quality, timely delivery and product diversification, which has made it easier to maintain the impressive growth momentum.
References:
1. Sourcingjournalonline.com
2. Vietrade.gov.vn
3. Fpts.com.vn
4. Vtgvietnam.com
5. Theneweconomy.com
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