Local garment firms face uphill tasks as EU shuts borders

Garment makers encounter numerous difficulties caused by the novel coronavirus (COVID-19)

Nguyen Dinh Lap, Deputy General Director of Truong Phuc Co. Ltd. in Hung Yen province, says several garment enterprises, including his company, have already begun to feel the pinch regarding the ongoing COVID-19 pandemic, with the latest decision by the EU likely to put businesses in even hotter water.

“The complex development of the epidemic has caused numerous difficulties for our production in terms of orders being cancelled and material sources in short supply,” Lap complains. “If big markets continue to cancel their orders, we will have to temporarily halt production or, in the worst-case scenario, even go bankrupt.”

This opinion is echoed by Than Duc Viet, General Director of Garment No10 Joint Stock Company, who anticipates that the move taken by the EU will deal a heavy blow to the company’s production, as the large European market makes up between 30% and 40% of the enterprise’s export volume.

According to Viet, when faced with material shortages, Garment No10 scrambled to search for ways to maintain production in February by looking for new sources of material imports. With the company having sufficient materials in hand coinciding with the move to close the EU’s borders, production is certainly set to be affected.

“Businesses will face a huge loss if all markets temporarily suspend the import of garment products,” the executive notes. “For the time being, the state, in addition to support policies such as tax breaks and debt rescheduling, should assist employees with wages in garment and shoe-making businesses that employ large numbers of workers.”

Garment executives believe that their sector is vulnerable to any sort of violent global market fluctuation as it largely relies on material sources and import markets, affecting thousands of businesses and millions of workers as a consequence.

Truong Van Cam, Vice President of the Vietnam Textile and Apparel Association (VITAS), points to the fact that although businesses have yet to report on the number of production lines affected, many markets have already cancelled orders on millions of products.

According to Cam, VITAS has called for assistance to be provided by the government, ministries, and agencies in support of domestic garment firms as they seek ways to weather the storm. The Ministry of Labour, Invalids and Social Affairs recently proposed that the government move to allow businesses to either stop paying social insurance, or alternatively use part of their paid insurance fund as a means of paying employees. However, this move alone is not enough, Cam says.