indutry overview
TRANSCRIPT
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VIETNAMS GARMENT INDUSTRY OVERVIEW
I. THE NUMBER
Over the last many years, Vietnam textile and garment (T&G) industry has
witnessed strong development. The annual average capacity of the garment alone was
2,000 million pieces in 2008 and increased to 2,400 million pieces in 2009. Products
made in Vietnam have penetrated to the world market, thus it is contributing to the
economic development of the country. The export values have increased rapidly and
the sector is one of the industries that for many consecutive years has ranked very
high with respect to the countrys key export product. In the world market, Vietnam
T&G has been enhanced its position. In 2006, Vietnam T&G sector was ranked at
16th position with export turnover valued US$ 5.2 billion; yet by the end of Oct 2007,
the sector increased and occupied the 10th position. In present, Vietnam has ranked
fifth among the worlds major T&G exporters.
In spite of the world crisis from 2007-2009, Vietnams garment sector stood
firm. While the global T&G industry dropped out by 12-15%, Vietnam still
maintained its export turnover and increased its share in the three markets (the US,
the EU, and Japan). Since 2009, the T&G sector has taken the lead in Vietnams key
export industries, but still constituted a very small proportion of the world total T&G
export turnovers, at about 2.69% in 2008 and decreased to 1.6% in 2009. In 2009,
Vietnams garment products made up only 5.8% of the USs total garment import
values of US$ 86.7 billion (Source: www.trademap.org). This fact implied a large
market for garment products and potential opportunities of further development for
Vietnams garment industry.
The US has remained as the most important partner of Vietnams garment
industry for many years. The export values to this market has accounted to more than
50% of Vietnams total garment export, followed by the EU (18%) and Japan (11%),
South Korea (3%), and ASEAN member countries (2%). Of the three major markets,
the sector attained the highest growth rate in the US market (19% per year in
http://www.trademap.org/http://www.trademap.org/ -
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average). The corresponding figures in the EU and Japan were 17% and 12%
respectively. Figure 1 illustrates Vietnams garment exports to these markets from
2005 to the first 5 months of 2010.
Figure 1. Vietnams garment exports to the EU, the US, and Japan from 2005-
2009 and the beginning 5 months of 2010 (Unit: US$ mil.)
Source: Vietnam Customs
In 2010, the sector earned an export turnover of more than US$11.2 billion.
Vietnam became the 2nd and 7th largest garment suppliers for the US and the EU
markets respectively. Refer to Table 1 and Table 2 to see Vietnams T&G export by
market and by categories in 2010.
Market2010
(USD)
Change to 2009
(%)
Dec/2010
(USD)
Change to
Nov/2010
(USD)
Change to
Dec/2009
(%)
USA
6,117,914,84722.48
591,648,930
23.85 20.65
EU
1,883,486,83117.50
239,990,884
32.95 50.76
Japan 1,154,491,648 21.01 120,088,749 -4.79 25.22
Korea
431,633,58178.00
51,560,362
2.97 145.87
ASEAN
242,535,34323.13
25,848,869
9.62 44.96
Canada
217,032,78621.55
21,383,982
23.11 35.45
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Taiwan
181,468,817-15.83
17,342,027
0.20 6.10
China
93,551,932102.68
11,695,767
-10.76 128.86
Turkey
87,031,576
51.46
11,079,583
30.82 102.59
Russia
76,063,10535.72
9,551,123
56.42 50.17
Hong Kong
49,080,76440.91
5,985,809
22.34 84.79
UAE
44,125,14926.20
5,529,337
19.62 39.18
Australia
43,977,33342.56
4,867,728
12.84 75.57
Mexico
64,943,70921.80
5,637,599
35.28 62.32
India 21,473,167 52.34 475,621 -83.05 31.12
South Africa
18,419,67379.86
1,852,272
-29.04 21.85
Arab Saudi
29,850,981-1.06
2,054,582
-17.29 -8.48
Brazil
18,760,38367.46
2,633,751
9.10 18.57
Panama
14,152,88839.80
1,946,281
37.51 127.51
Ukraine
15,331,75923.71
2,861,180
131.12 196.98
Switzerland
2,373,830-76.81
989,903
3.63 50.80
Norway
10,574,65949.36
1,996,023
156.40 193.30
Cuba924,725
-91.28318,205
102.24
Table 1. Vietnams T&G export by market in 2010
Source: www.vietnamtextile.org
Cat.Jan - Nov
/2010
(USD)
Change 2009
(%)
Nov/2010
(USD)
ChangeOct/2010
(%)
ChangeNov/2009
(%)
T-Polo shirts
2,083,084,33517.53
202,525,452
-1.28 30.44
Shirts
552,976,94716.88
54,611,000
6.40 37.85
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Trousers
1,551,770,00516.85
147,057,841
-5.76 38.06
Shorts
315,278,7337.26
23,625,668
90.05 5.36
Jackets
1,837,588,796
20.89
181,502,155
-16.00 52.98
Skirts
445,196,68021.40
42,513,353
41.48 39.38
Underwear
378,652,44233.80
41,059,623
0.64 56.81
Swimmingwear
75,313,304
32.71
9,996,8630.06 -0.10
Sport wear
94,071,3910.49
7,586,284
-1.69 -25.27
Sleep wear
101,461,5321.22
9,807,970
-22.97 17.80
Children wear 403,954,114 30.95 34,692,143 -19.94 23.37
Fabric
541,052,37639.52
62,277,074
14.26
Table 2. Vietnam's Textile and Garment Export by Categories
in January - November 2010
Source: www.vietnamtextile.org
Right from the beginning months of 2011, the sector has seen positive signs.
Specifically, garment exports increased by 27.9% to US$2.8 billion in the 1st quarter
of 2011 compared to the same period last year. Many businesses have signed
contracts for the 3rd quarter of this year. It is possible for Vietnam to expect to export
over US$13 billion of garments in 2011. This was resulted from Vietnams
traditional competitiveness such as relatively inexpensive labour cost. Besides,
established partners have recently agreed to a price increase of between 15-20%.
Domestic suppliers, therefore, still received large orders from foreign importers.
Regarding the three main market, the Vietnam Textile and Apparel Association
(VITAS) estimated that Vietnamese garment share in the US would increase 4.6 -
5.1% in 2011. Vietnamese faced a lot of challenges in the EU (sovereign debt crisis),
yet they still experienced an 18% growth in export value from last year to US$
1.8billion. It is estimated that Vietnamese T&G sector will have many development
opportunities in this market in the few next years. In terms of Japanese market,
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Vietnamese businesses have not received any unfavorable signals from Japanese
importers/exporters. Some garment products as shirts, jackets, vestons, trousers, etc.
still remained the performance. Especially, after the earthquake and tsunami, Japans
demand for Vietnams protective clothing has surged. Therefore, Vietnamesebusinesses can adjust the orders exported to this market if there are some negative
impacts in the future as a result of natural disaster.
II. INDUSTRY ISSUES AND TRENDS
1. The current situation of the industry
Vietnamese garment industry has been witnessing the scale expansion of manygarment enterprises. Whereas the supplier base does not have any significant
changes, existing garment businesses have been carried out many new projects to
build new plants so that they can control more phases in the production process.
2. Challenges and responses
2.1. Challenges
- Labour shortage is the biggest issue facing the garment sector. Each business
lacked around 18% of the total workforce, especially after the traditional Lunar New
Year Festival (Tet). The reason is that the salary for workers in the garment sector is
quite low compared to other industries. In addition, the proportion of skilled,
experienced labour is low.
- Increases in interest rates and surging price of many raw materials pushed
production costs up by 15-20%. For example, the price of cotton imported from the
US had increased by 74.1% in comparison with the same period last year. The cotton
fiber price from domestic sources has increased by 50-60%. - The costs of labour,
transportation and power have also gone up. This is a part of the world common price
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increase in garment raw materials and a consequence of recent high inflation in
Vietnam in particular.
- As the domestic materials cannot meet production demand in terms of either
quantity or quality, the heavy reliance on imported materials leads to low profitmargins compared to total export values (Table 3). The design industry for the
garment sector is till underdeveloped, so the majority of the garment production for
exports in Vietnam is under a contractual agreement (doing outsourcing tasks for
foreign partners). In other words, garment production under this agreement involves
only the labor intensive assembly processes of cutting, sewing (making), and
trimming while input materials including textile and accessories as well as designs
are provided by buyers. This high import intensity of production is due to the
relatively weak domestic textile and accessory industry, which are perceived by
buyers as weak particularly in terms of quality, price and timely delivery.
- Massive investment of foreign companies in the garment sector has created a lot of
challenges for local suppliers, especially a shortage of labour when FDI companies
are increasingly competitive in attracting labour.
- Tough competition from other countries such as China, India, and Bangladesh.
No. Category 2007 2008 2009 2010 E Q1/11Change
Q1/10
1 Export 7,780 9,130 9,070 11,210 2795 27.9%
2 Import 6,356 7,064 6,692 8,912 2553.1 49.3%
Cotton 268 468 392 664 338.5 126.6%
Fibre/yarn 744 788 811 1,164 403.6 70.9%
Fabric 3980 4454 4226 5,378 1410 42.0%
Accessories 1364 1354 1263 1706 401 21.1%
3 Import to Export 4,844 5,317 4,826 6,562 1820.386 61.3%
4 Balance Ex - Im (1-3) 2,936 3,813 4,244 4,648 974.6136 -7.8%
5 Value added Rate (4/1) 37.7% 41.8% 46.8% 41.5% 34.9
Table 3. Vietnams T&G industry export-import until Q1/2011
Source: www.vietnamtextile.org
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2.2. Responses
- Stabilize the workforce and improve their skills
- Recruit labour in remote areas
- Apply advanced technologies to increase productivity and sharpen competitive
edge.
- The Ministry of Industry and Trade has passed a development plan until 2015 and a
program for training human resources for the industry.
- Material importers have negotiated reduced prices, helping domestic producers
overcome difficulties.
- Many businesses decide to obtain growth in-depth rather than focus on quality by
investing in supporting industries like materials processing, textiles and dying to
switch from subcontracting for foreign partners to selling products of their own
designs. For example, Nha Be Garment Corporation has been initiating a series of
projects to expand production that may cost thousands of billions of dong. Of the
new projects, two are especially notable: the expansion of An Nhon Garment
Company in Binh Dinh Province, which specializes in making suits for women,
sportswear, and the extension of Tam Quan Garment Company, which specializes inmaking trousers, jackets and shirts. These two alone have investment capital of over
200 billion dong.
- To promote exports in 2011, the Vietnamese garment and textile sector has outlined
key tasks to obtain stable growth in 2011-2015 such as maintaining existing clients
and continuing assisting businesses to seek markets for high added value products.
Apart from taking advantage of trade agreements, Vietnamese garment and textile
businesses will continue expand exports to other potential countries in Asia andAfrica. In addition, to guarantee business efficiency, businesses should enter into
long-term contracts related to production capacity and establish prices for each
quarter as opposed to permanent prices, in order to avoid losses caused by unstable
market prices. Apart from developing export markets, garment and textile businesses
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should attach importance to the domestic market, make concrete strategies for
expanding domestic market, branding and establishing distributionchains to promote
domestic consumption.
- The industry has made best effort to increase the localization rate as a way todecrease the dependence on imported sources of materials and world material price
fluctuation. In accordance with the garment and textile development plan in 2010-
2015, the industry will meet about 45% of the domestic fibre demand in 2011, and
this figure will increase to 70% in 2020. In 2015, the localization rate is expected to
be 70-80% (See Table 3).
Strategies 2010 2015 2020
Turnover 13 - 15 bil. USD 18 - 21 bil. USD 27 - 30 bil. USD
Export Revenue 10 - 12 bil. USD 14 - 16 bil. USD 20 - 22 bil. USD
Labour 2.5 mil 3.5 mil 4.5 mil
Fabric Production1000 thousandtons
1500 thousandtons
2000 thousandtons
Fiber Production 350 thousand tons 500 thousand tons 650 thousand tons
Localization 50% 60% 70%
Table 4. Strategies of Vietnam Textile & Garment from 2015 to 2020
Source: www.vietnamtextile.org
3. Major trends
As mentioned before, one of the main trends in Vietnameses garment sector
is businesses scale expansion and in-depth investment in an effort to switch from
subcontracting to undertaking various phases of the production process for
international orders by 2015. This trend is mainly adopted by large companies due to
the requirement of initial huge investment. Vietnam Textile and Garment Group
(Vinatex) Vietnams garment market leader, is a typical example of following this
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trend. The group will particularly focus on investment strategies, namely building
important plants, especially in terms of textile production and dying; developing
plans of cotton production; investing in machinery and technology, moving plants to
remote areas to stabilize workforce and create employment opportunities for locallabour; investing in ecologic inspection department to inspect both the input and
output of garment products, putting plants with the core investment in high added-
value products into operation. The group intends to produce high-end veston products
with the introduction of four new factories.
III. INDUSTRY COMPOSITION
1. An overview of supplier database
By 2009, the number of garment enterprises was 3,719 with the classification
by capital and geographic location as indicated in the Table 4. More than 70% were
small and midsize enterprises with the workforce of under 300. The enterprises with
the workforce of 300-1000 accounted for about 20% and only 6% of garment
enterprises had the workforce of more than 1000 people.
Vietnams garment sector was a highly export-oriented industry and had a
dual structure depending on the market orientation - domestic or foreign. Suppliers
for the global markets were enterprises including SOEs, joint ventures, private
enterprises and foreign firms. These were typically large enterprises in terms of
number of workers and capital endowments. The domestic garment market, on the
other hand, was catered primarily by smaller private firms, of which a significant
proportion operated in the informal economy (Goto 2005). The suppliers in the
export oriented industry were also much more advanced in terms of production
processes, accessed to formal financial resources and to foreign markets1.
1 Textile & Garment industry in Vietnam: Research on Garment Producers in Vietnam (InternationalBusiness Research Vietnam 2008).
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The focus of the sector was classified to be on massive quantities of low to
mid-level quality. These massive quantities were needed because the main reason for
customers to go to Vietnam for production of garment was its low prices, which had
the interest of huge corporations mostly from the USA. There was a little market forthe production of small, fashionable orders. This situation may be improved in the
future when large firms perform their in-depth investment strategies2.
2. Industry leaders
The industry leader is Vinatex - a complex that is owned by companies
including Vietnam Textile Garment Group (the mother company), the centers for
research and training, and nearly 120 sub-companies. These sub-companies are joint
stock companies that do business in different fields, e.g., produce textile garments
and run commercial services. They also have their distribution systems including
wholesale and retail dealers. They invest in finance and in supporting main garment
textile production. Vinatex is one of the largest and the most competitive textile
garment corporations in Asia.
Top 20 largest T&G enterprises in Vietnam are presented in Table 5. As seen
from the table, nearly one half of these companies are foreign-based companies, allof which are from South Korea and Taiwan. Vietnams garment industry has recently
attracted more and more foreign investment, mostly from Hong Kong, Taiwan, Korea
companies. Cheap labor and high skills were the two main temptations that led
foreign firms to choose Vietnam as a new place to do business. Although they were
warned that Vietnamese labor market wasnt as cheap as it had been the past, a
market with the capacity to succeed in the clothing industry like Vietnam still
attracted them like months to a flame. 18 FDI garment industry projects, worthUS$20 million, were licensed in the first four months of 2008. Vietnams clothing
exports to these markets have increased as most investors are also traders or
2 Textile & Garment industry in Vietnam: Research on Garment Producers in Vietnam (InternationalBusiness Research Vietnam 2008).
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importers. Vietnams garment export turnover in the first two months of 2011 was
US$ 1.8 billion with the export turnover of FDI companies accounting for about
63.2% (US$ 1.4 billion).
Table 4. Classification of Vietnams garment enterprises
Source: www.vietnamtextile.org
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No. G1000Ranking
Company Location note
1 21 VIETNAM NATIONAL TEXTILE & GARMENT GROUP - VINATEX Hanoi
2 92 HUNG NGHIEP FORMOSA COMPANY LIMITED Dong Nai
3 151 HANSOLL VINA COMPANY LIMITED Binh Duong foreign company
4 192 HANSAE VIETNAM COMPANY LIMITED HCMC foreign company
5 196 PHONG PHU JOINT STOCK CORPORATION HCMC
6 253 TAINAN SPINNING COMPANY LIMITED Dong Nai foreign company
7 317 10/10 TEXTILE JOINT STOCK COMPANY Hanoi
8 326 GIA DINH TEXTILE & GARMENT CORPORATION HCMC
9 374 HA NOI GENERAL PRODUCTION & IMPORT- EXPORT COMPANY Hanoi10 389 HUNG LONG GARMAY & SERVICE JOINT STOCK COMPANY Hai Phong
11 392 ALL SUPER VIETNAM COMPANY LIMITED Dong Nai Foreign company
12 413 INTERNATIONAL CHUTEX COMPANY LIMITED Binh Duong Foreign company
13 441 NAMYANG INTERNATIONAL VIETNAM COMPANY LIMITED Dong Nai Foreign company
14 467 NHA BE GARMENT JOINT STOCK CORPORATION HCMC
15 489 VIET TIEN GARMENT JOINT STOCK CORPORATION HCMC
16 493 HA NOI TEXTILE & GARMENT CORPORATION Hanoi
17 499 SONG HONG GARMENT JOINT STOCK COMPANY Nam Dinh
18 511 SHINWON EBENEZER VIETNAM COMPANY LIMITED Vinh Phuc Foreign company
19 515 NOBLAND VIETNAM COMPANY LIMITED HCMC Foreign company
20 517 EINS VINA COMPANY LIMITED Binh Duong Foreign company
Table 5. Top 20 largest T&G enterprises in Vietnam
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8/3/2019 Indutry Overview
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IV. PRODUCTION HUBS
Production activity of Vietnam textile namely focuses on two key economic
areas of the country, the Northern Delta and the Sothern Delta. Over 80% of
production capacity is located in the Southern Economic Area, primarily in Dong
Nai, Binh Duong, Long An and Ho Chi Minh City.
Major reason for this distribution of production activity at these two main
regions is that infrastructure there is much better than other regions: near sea port,
convenient traffic, abundant and skilled labor force. There are many foreign-invested
enterprises operating there with their factories because of advantages of
competitiveness and policies of investment and production encouragement.