Apparel industry could suffer huge losses caused by pandemic

Despite being the third largest export item in terms of value whilst also being a major contributor to the country’s exports for a number of years, the textile and apparel industry has been heavily influenced by the recent COVID-19 outbreak. Some of the issues the sector is facing include a shortage of raw materials, difficulties when companies attempt to export products, and drops in revenue.

According to Vinatex, the first two months of the year saw the entire industry’s export turnover suffer a fall of 3% to US$5.3 billion, the first drop of its kind for five years. However as in previous years, the export turnover during the same period recorded a surge of approximately 10%.

The latest statistics released by Vinatex indicate that the sector has been suffering from cancelled, deferred, or suspended orders since mid-March which is set to cause a drop in employment figures in April and May. It is worth mentioning that there has also been a major reduction in terms of producing products for major brands, with currently no timescale in place for a recovery.

As a result of the economic slowdown, the volume of goods consumed in the domestic market is forecast to see increases. Meanwhile, China has resumed its operations with low market demand which is said to lead to a sharp decline of over 20% in global prices.

According to Le Tien Truong, Vinatex General Director, this crisis will put great pressure on apparel firms in terms of finance and their workforce. If there remains no policy adjustment in place, it is highly likely that many enterprises will lose their liquidity by the end of April, causing the number of underemployed workers to rise to between 30% and 50% in April and May.

“Estimated damage to the textile and garment industry is estimated to stand at over VND5,000 billion, including US$403 billion to the Vietnam National Textile and Garment Group alone. If these difficulties persist, the industry will lose up to VND3,000 billion per month,” the Vinatex leader notes.

The Group also has also hypothesized the possibility of the epidemic ending in late May and the national economy starting bouncing back from June. In this scenario, the industry will lose VND11,000 billion, of which Vinatex will suffer a loss of VND 1,000 billion.

In an attempt to minimise damage to the textile industry, the Group has set out a number of key tasks to follow. Some of the measures include taking advantage of opportunities to find export orders for preventive products such as masks, antibacterial medical clothing, and disposable non-woven clothing.

This can be done alongside applying flexible working methods and reducing working hours to between 32 to 40 hours per week, in addition to working alternately on the basis of an agreement with employees.

There will also be an increased focus on increasing communication in a bid to help employees share and overcome difficulties alongside their respective firms.

The Group has also requested that the government move to exempt and postpone social insurance, unemployment insurance, and trade union fees. Simultaneously they have also asked for permission from the government and relevant ministries to allow the Group to export masks and epidemic prevention clothing.

It is hoped that this can be done alongside exemptions, reductions, and postponement of taxes, land rents and policies regarding the use of an unemployment insurance fund and support for underemployed workers.