Textile and garment firms in Vietnam will face new challenges once the country joins free trade agreements (FTAs), especially the Vietnam-EU FTA and the Trans-Pacific Partnership (TPP), experts said at a seminar this week in Hanoi.
The use of outdated technology, shortage of capital, and weak management capacities would create considerable competitive pressure from large global companies, once the FTAs are in place, said Tran Quang Nghi, chairman of the National Garment and Textile Group (Vinatex) while speaking at a conference on ‘Garment and Textile – Opportunities and Challenges’.
Elaborating on the use of outdated technology, Truong Thi Thanh Ha, general director of Dong Xuan Knitting Company, said domestic textile and garment companies have not invested in modern technology in recent times and several of them use machines that were purchased about two decades ago.
In view of more challenges than opportunities arising from the trade pacts, the Vietnamese government should support domestic businesses by easing tax burden and land rentals, he said.
Talking about shortcomings, Phan Chi Dung, head of the Light Industry Department under the Ministry of Industry and Trade, said many domestic companies depend to a great extent on imported materials, which along with low productivity, would make it difficult for them to take advantage of FTAs.
He said that despite the high growth rates seen in recent years, the added value in garment exports is still limited. Further, there were only a few enterprises that have integrated manufacturing from yarn to apparel. In addition, local companies have not yet developed their own markets and products.
Tran Bac Ha, chairman of the Bank for Investment and Development of Vietnam (BIDV), said the once the FTAs are in place Vietnam would have access to a wider market, and investors would prefer to gradually shift their manufacturing base to the country. This would require that businesses to restructure to enhance their competitiveness.
Bac Ha said BIDV has committed to provide loans of $ 2 billion to support domestic garment and textile firms over the next five-year period.
There are around 5,000 businesses, mostly small- and medium-sized enterprises in the Vietnamese textile and garment industry. The 12 countries that are part of the ongoing TPP negotiations together account for nearly 70 per cent of the total value of garment exports made by Vietnam.
The Government of Vietnam has targeted to increase the country’s textile and clothing exports to $ 35 billion by 2020 and further to $ 60 billion by 2030. (RKS)