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Lack of export orders worry Vietnam’s textile, garment firms

In the first half of this year, Vietnam’s garment and textile export value reached $12.6 billion thus registering an increase of 4.72 per cent over the same period last year. But now, local textile and garment enterprises are at risk of missing their export target for this year due to reduced competitive ability and lack of export orders, according to experts who spoke at a conference of Vietnam Textile and Apparel Association (VITAS) late last week in Hanoi.

The country’s currency policy in relation to the US dollar has remained stable while competitors in textile and garment products such as India, Bangladesh, ASEAN countries and China have devalued their currencies, increasing their export competitiveness. Additionally, interest rates on banking loans are high between 8 and 10 per cent, making capital more expensive for local enterprises. Other factors that are impacting the reduced competitive ability are the minimum wages that have risen an average 26.4 per cent per year for local enterprises and 18.1 per cent each year for enterprises with foreign investment during the period 2008-16.

The increases in minimum wage also entail increased payments of insurance and union dues, further burdening enterprises, according to VITAS. The association reported that Vietnam’s garment and textile export value in the first half of this year reached $12.6 billion, an increase of 4.72 per cent over the same period last year. This accounted for 41 per cent of the sector’s annual target for 2016.

The growth in the industry’s export value was largely attributed to foreign direct investment (FDI) firms while local firms had difficulties getting new export contracts, especially orders of shirts, trousers and jackets, maintained the association. It warned that the lack of export orders could worsen and many small- and medium-sized firms may have to shut down. Therefore, it has predicted that the industry might earn only $29 billion from exports this year, down $2 billion from the set target, if the situation does not improve.

 
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