Vietnam’s textile exports fray to 10-year slump in 2016
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A strong Vietnamese dong and sluggish demand from key markets have dragged on textile exports this year. Vietnam’s exports of textiles and garments are projected to increase by 7 percent this year to $29 billion, according to Vinatex, the country’s top textiles manufacturer, far below the trade ministry’s previously-targeted $31 billion and the lowest growth in the last decade.
Customs statistics show that Vietnamese textiles and garment exports hit about $21.56 billion from January to November, up 4.6 percent from the same period last year.
Vietnam, the world’s fifth largest garment exporter, has maintained double-digit growth, ranging on average from 10 percent to 36 percent, since 2001 when the country earned $2.2 billion from exporting textiles and garments.
The investment ministry, in a recent report, attributed the downturn to sluggish demand from key markets, including the U.S., the European Union and Japan.
Customs figures show that from January to November this year, Vietnam’s textiles and garment shipments to the U.S., which accounted for 47.9 percent of the total during the period, edged up 4.7 percent from a year ago to about $10.33 billion.
Besides, the State Bank of Vietnam has so far this year managed to keep the dong from weakening against other major currencies, said clothing exporters, adding that a stronger dong was the final straw that broke the camel’s back for their businesses.
Garment exporters are also faced with increasingly intense competition from outsourcing hubs Cambodia and Bangladesh, which are currently subject to import tariff breaks in the U.S. market. Market access for Vietnam’s clothing in the U.S. is limited by an average tariff of about 11.1 percent, with tariffs on some textile and apparel products nearing 30 percent.
“The investment ministry, in a recent report, attributed the downturn to sluggish demand from key markets, including the U.S., the European Union and Japan.”
About 85 percent of Vietnamese enterprises in the textile industry are focused on labor-intensive cutting and sewing, making the country an outsourcing hub for foreign fashion companies, said Le Tien Truong, chief executive of Vinatex.
However, foreign investors are eying emerging hubs such as Myanmar, Bangladesh and Sri Lanka where labor costs are lower than in Vietnam.
Vietnam has four regional minimum wage brackets currently ranging from VND2.4 million to 3.5 million (from $105 to $154). The regional minimum wage has increased by about 12-15 percent on a yearly basis between 2014 and 2016, and is forecast to go up by 7.3 percent next year.
Vietnam’s exports rose an estimated 6.7 percent on-year in the first nine months to $128 billion, well below the 10 percent growth target set by the government.
The economy, widely seen as among the most resilient in a turbulent Asia, expanded by 5.92 percent from January to September, much lower than 6.53 percent a year ago, said the General Statistics Office.
The annual growth forecast for this year has been lowered to between 6.2 and 6.5 percent from the 6.7 percent previously targeted, according to Prime Minister Nguyen Xuan Phuc.
Questions & Answers
Q.Which key markets experienced a slowdown in demand for Vietnamese textile products this year?
Which key markets experienced a slowdown in demand for Vietnamese textile products this year?
The investment ministry identified sluggish demand from key markets, including the U.S., the European Union, and Japan. This downturn contributed to the overall slump in textile exports for Vietnam.
Q.What factors are making Vietnam's textile exports less competitive compared to some other countries?
What factors are making Vietnam's textile exports less competitive compared to some other countries?
Vietnam faces increasingly intense competition from Cambodia and Bangladesh, which receive import tariff breaks in the U.S. Market. Also, Vietnam's market access in the U.S. Is limited by an average tariff of about 11.1 percent.
Q.What impact is the strong Vietnamese dong having on the country's textile industry?
What impact is the strong Vietnamese dong having on the country's textile industry?
A strong Vietnamese dong makes exports more expensive for international buyers. Clothing exporters stated that the dong's strength was a significant burden, described as 'the final straw that broke the camel's back' for their businesses.
Q.Why are foreign investors looking at other emerging hubs for textile manufacturing instead of Vietnam?
Why are foreign investors looking at other emerging hubs for textile manufacturing instead of Vietnam?
Foreign investors are considering emerging hubs like Myanmar, Bangladesh, and Sri Lanka because labor costs there are lower than in Vietnam. Vietnam's regional minimum wage has seen significant annual increases in recent years.
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