Lack of long-term orders, garment and textile enterprises fails to reach the set targets

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The US-China trade war has caused significant impacts on Vietnam garment and textile trade in this year. Photo: Nguyen Thanh

Reducing import volume and splitting orders

According to General Department of Customs statistics, import and export turnover of garment and textile in the first nine months was US$29.2, up 9.1 percent from the same period last year.

The Ministry of Industry and Trade evaluated that in the context of changing world, domestic garment and textile enterprises have been facing many challenges in their business and production

The tension of the US – China trade war has affected the exchange rate among foreign currencies, the price of products processed in Vietnam has been higher than in some regional countries such as South Korea and China, hampering exports.

Especially, fibre and raw material consumption has had a lot of difficulties because China has cut import volume. Meanwhile, garments orders have also been cut. If in 2018, at mid-year, many large garment and textile enterprises had orders until the end of the year, in 2019, these enterprises have only received monthly orders with small volume

Buyers are concerned the US-China trade war will escalate and orders are divided, the Ministry of Industry and Trade said.

In a report on business and production in the first nine months, Vinatex gave detailed analysis on the difficult consumption situation of the garment and textile industry

Particularly, the unstable world politics and economy environment, including the US- China trade war which has not shown the signs of ending, has been badly affecting Vietnam’s garment and textile enterprises, including Vinatex and its members.

In the past nine months, fibre enterprises have been most seriously affected, especially enterprises exporting fibre to Chine as the fibre price has been constantly reduced. Although the US has suspended applying tax (from 25 percent to 30 percent) for China’s orders valued at $250 billion until October 15th, this is a temporary suspension and has not effectively helped the market

“With the context of the difficult fibre industry, the competition on orders from FDI enterprises as well as from other countries such as India, Thailand, Indonesia and Pakistan are increasingly fierce,” Vinatex said.

For garment enterprises, despite not being directly affected by the trade war, these enterprises are suffering significant impacts.

As of September, lmost garment enterprises have not orders enough for the end of the year. Big enterprises such us Garment company 10, Duc Giang, Hoa Tho and Hanosimex have only received orders to November, while only Viet Tien has orders till the end of the year.

Remarkably, most customers have not been interested in long-term orders to consider the international market movement, especially offering prices lower than in 2018, making enterprises’ profits fall. Orders from China have tended to shift to countries offering tariff preferences such as Bangladesh and Cambodia.

Failing to reach the target of US$40 billion

The Ministry of Industry and Trade identified that in the first nine months, garment export and production maintain the growth. However, due to changes in orders, enterprises need to take many measures to change their business and production form to meet market needs.

For sharp reduction in export orders in this year, Vice Chairman, General Secretary of Vietnam Textile & Apparel Association Truong Van Cam said that this may come from impacts of free trade agreements (FTA).

Deals like Vietnam-EU Free Trade Agreement (EVFTA) were thought to have strong impact, actually this agreement has just been signed and has not taken effect and export goods must be subject to tax. Customers think that FTA will bring many opportunities but opportunities are not remarkable.

Vinatex predicted exports of the garment and textile industry for the whole year will reach US$ 39.6 billion, up 9.8 percent compared to 2018. Thus, the whole year’s export will fail to reach the set target of US$ 40 billion.

For Vinatex only, facing complicated movement of the global economy, especially the US- China trade was which has not shown the sign of ending, the business and production result for the whole year of the Vinatex will not reach the set target.

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Specifically, industrial production value will be VND 45,439.6 billion, equal to 96 percent of the year’s plan. Revenue (without VAT) will be VND 49, 184.3 billion, equal to 97.7 percent of the year’s plan. Profit before tax will be VND 1,281.55 billion, equal to 73.95 percent of the year’s plan.