Garment exporters see drop in orders in first half

Big firms like Viet Tien, Nha Be, May 10 and even member companies of the State-owned Vietnam National Textile and Garment Group (Vinatex) are no exception. They are struggling to keep themselves busy until the end of this year.

According to Tran Van Khang, Director-General of Dong Binh JSC, there has been a lack of export orders since the beginning of the year, triggering stiff competition between domestic manufacturers for customers.

Khang said his firm saw a year-on-year drop of 30% in the number of orders in the first five months, for which he blamed overstock and falling demand in import markets.

In addition to that, export prices have plunged by 10%-15% while the firm still has to pay wages, insurances and transportation costs, which are on the rise, he added.

Phi Viet Trinh, Deputy Director-General of Ho Guom Garment SJC, said the orders the company received from overseas customers fell significantly in March and April, and only started to rebound in June.

Several trade deals, including the Trans-Pacific Partnership (TPP) and the Vietnam-EU Free Trade Agreement, have not yet come into effect so that Vietnam’s garment customers could not benefit from any preferential tax regime from those agreements and importers tend to turn to other foreign manufacturers with more tariff advantages.

Many traditional customers of Vietnam have shifted their orders to Myanmar, Laos and Cambodia as these countries enjoy reduced import duties from the United States and the EU, the two largest buyers of Vietnamese garments, noted Chairman of the Vietnam Textile and Garment Association (Vitas) Vu Duc Giang.

Statistics by the Ministry of Industry and Trade show that the textile and garment industry earned about US$8.6 billion from exports during the first five months of 2016, an increase of 6.1% from the same period last year, largely thanks to exports by foreign direct investment (FDI) enterprises.

However, Vinatex, who contributes about US$4 billion to the annual export revenue of the sector, forecast that the entire industry could only fulfill 93.6%, or US$29.5 billion, of the export goal.

Experts recommend that apparel producers can boost orders and make the most of the FTAs by focusing on improving productivity and strictly following the pacts’ rules of origin.

It is vital for them to cooperate with each other to invest or draw foreign investment in developing domestic sources of materials and cut export middlemen.