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Textile exports facing harsher competition

Released at: 15:02, 11/05/2016

Textile exports facing harsher competition

Growth of just 1.4% in textile exports in Dong Nai province during first four months of the year reflect an increasingly competitive environment.

by Thien Huong

Textile export turnover in southern Dong Nai province reached nearly $543 million in the first four months of 2016, up 1.4 per cent year-on-year, according to the Dong Nai Department of Industry and Trade. The province’s and the country’s textile sectors, however, are dealing with fierce competition from Chinese and Indian products.

Footwear, textiles and wooden products account for the largest export turnover in Dong Nai province, but while footwear and wooden product export turnover increased over 16 per cent year-on-year in the first four months the figures for textile exports fall short of expectations.

The three industries are forecast to benefit most from free trade agreements (FTAs) Vietnam has signed but textiles growth is actually falling due to difficulties caused by higher input costs and stagnant prices. Export markets are also subject to increasingly fierce competition from China and India, with most textile exporters in Dong Nai acknowledging that their competitive position is on the decline.

Vietnam’s textile industry remains largely in the hands of foreign companies, with more domestic enterprises focusing on garments than textiles. The majority, however, simply process products under requests from foreign partners and only a few produce goods under their own brand name for export.

“Garments from India and China in many markets have ousted Vietnamese equivalents because of their advantages in lower prices and raw materials, while Vietnam must import 60 to 90 per cent of raw materials,” said Mr. Nguyen Van Hoang, Deputy General Director of the Dong Tien Joint Stock Company. “The two countries also record high workplace productivity, while Vietnam’s is very low.”

Vietnam has signed many new FTAs in which textile tariffs are cut or eliminated, such as those with South Korea, Chile, Japan, and ASEAN. Domestic textile enterprises, however, still face a host of difficulties as lower tariffs can’t compensate for rapidly increasing input costs.

“Our garments, which are mainly exported to Russia and European markets, are facing major competition in the market,” said Mr. Nguyen Huu Tri, Chairman of the Tan Mai Joint Stock Company. “In five to ten years, when the advantages from FTAs have passed, if workplace productivity does not rise and logistics costs do not come down, Vietnam’s garment enterprises will have serious problems.” He added that the government should support textile enterprises with practical policies in credit, provide specific market information, and hold trade promotion activities.

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