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Increasing costs and competitors may hamper Vietnam’s textile growth in 2022

 

Increasing costs and competitors may hamper Vietnams textile growth inWith thousands of employees quitting their jobs, 2021 proved to be an ‘unprecedented’ year for the textile and garment industry in Vietnam, says Cao Huu Hieu, General Director, Vietnam National Textile and Garment Group. Around 94 per cent of the Viet Tein Garment Corporation’s employees quit their jobs during the year. Many other firms had to stop production due worsening COVID-19 situation in the South.

The industry was particularly hit hard during the third quarter, says a VN Express International report. During the quarter, Ho Chi Minh City and Southern provinces witnessed massive disruption due to COVID-19. This compelled businesses to adopt ‘stay at work’ model for employees. The garment and textile industry faced enormous pressures in Q2 and Q3, 2021 as logistics and other costs increased, there were raw material shortages.

The pandemic forced many businesses in the Southern region to either close temporarily or operate at half capacity. This led to a fall in textile exportsIncreasing costs and competitors may hamper Vietnams textile growth in 2022 turnover by nearly 16 per cent in September compared to July, and the downward trend continued till the end of year.

Market reopening helps achieve targets

Relaxation of prevention and control measures in October provided some relief as the US, the European Union and Japan markets reopened, allowing Vietnam’s industry an opportunity to grow once more. Around 90 per cent employees returned to work after reopening, says Hieu. Production in the country returned to normal in Q4. This helped the industry meet its target of $39 billion exports during the year.

The US continued to be the largest market for Vietnam’s textile and garment sector with exports worth $16 billion in 2021. Other markets included, the EU with $3.7 billion, up 14 per cent; South Korea $3.6 billion, and China $4.4 billion in exports.

Growth in the midst of pandemic

Despite pressures, few companies in Vietnam experienced impressive growth amidst the pandemic. For example, Vietnam National Textile and Garment Group’s consolidated profits more than doubled in 202. The company succeeded on account of its business restructuring which boosted revenues and profit growth to 50-55 per cent.

Another company that experienced growth during the period was the TNG Investment and Trading Joint Stock Company (Thai Nguyen) Nguyen Van Thoi, Chairman, TNG Joint Stock Company (Thai Nguyen) points out the company remained operational during the pandemic as all factories are concentrated in Thai Nguyen Province. The company also benefited from shifting textile and garment orders to Northern plants.

Experts advise caution

Despite these successes, industry leaders have advised caution as a spike in Omicron cases may again affect business goals. The industry also needs to reduce logistic costs, make empty containers available, resolve congestion issues in sea transportation and other shipping difficulties, changes in major markets. The pandemic is expected to remain complicated and unpredictable in 2022. However, the industry may also experience few growth opportunities, says La Tien Troung, Chairman, Vinatex. In 2022, Vietnam’s garment and textile exports may rise to 43.5 billion, adds VITAS. However, new COVID cases, increased logistic costs and increasing competition from India, China and Bangladesh, could dampen growth.

 
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