The major problem for textile enterprises is the output

Mr. Pham Xuan Hong - President of The Association of Garment Textile Embroidery Knitting in HCMC.

Dear Sir, the year of 2014 and 2015 are the peak years of attracting FDI to textile, dyeing. However, in midyear of 2016, the situation of attracting FDI in textiles has been slowed down. How does it affect the issue of supplying raw materials for textile enterprises in order to gain benefit from the FTAs that Vietnam has signed and is preparing to sign?

In the year of 2014 and 2015, the brightening prospects of TPP helped to promote FDI into Vietnam faster, especially in investment projects in the raw materials sector in order to exploit the advantages of TPP when valid. However, in midyear of 2016, FDI invest in textiles began to have signs of slowing down because TPP was problematic. So far, the practicability of the TPP was clear after US President Donald Trump announced that they would pull out of TPP. Many projects have been deployed slowly while the projects which have been started were suspended. The projects which were implemented have operated slowly.

However, there also have a number of domestic investors, such as the Vietnam Textile and Garment Group investment in the raw materials sector, although investment capital is not large. The enterprises in the textile sector also cooperate to materials enterprises in order to take advantage of opportunities from FTAs which Vietnam has signed. In addition, Vietnam's investment environment is still an attractive place for foreign textile investors. Although TPP has been suspended, Vietnam has support from investors through FTAs ​​with countries like Japan, Korea, Europe, ...

Due to the slowing of TPP, the export situation of the textile industry is quiet. Moreover, the world market has difficulties so garment enterprises are trying to conserve their capacity in a difficult position facing increasing costs but the output price does not increase. If having TPP, the export growth of the textile industry to the US could reach 12-15%. In contrast, if there is no TPP, the textile industry will still grow with an increase of 5-10%.

For a long time we are afraid to invest in textiles and dyeing due to environmental pollution problems. However, for Vietnam, investing in weaving and dyeing is essential to be able to take advantage of preferential treatment from the FTAs. What are your opinions about this issue?

So far, the State has advocated to plan industrial zones in order to develop supporting industry so the environment is not a problem. The biggest problem for the textile industry is the output. Once the FTA takes effect, what does the output of textile enterprises look like? For example, Vietnam FTA - EU to take effect in 2018 but the demand of Europe is still not having positive signs.

Textile enterprises are still trying to find their market. So do enterprises have any suggestions for the State?

To solve their problems, currently, there are some potential markets to consider. We already have FTAs ​​with South Korea, this agreement has been in effect since the end of 2016 and enterprises are also very interested, but this is not a major market for textile enterprises.

The market worth mentioning is the Russian market with the signing of the FTA Vietnam - Eurasian Economic Union. Russia is considered the largest market for textile products. There are many companies interested in this market, but it is mainly small businesses thus the ability to meet market demand is low.

However, when exporting to Russia, enterprises have 2 obstacles - payment and delivery. For payment, the State has established the Bank for Investment and Development of Vietnam (BIDV) in Russia but probably still needs additional support for businesses in the payment process. Current problems faced delivery problems, especially those from the Russian side. If it is difficult to remove, the Russian market will be more favorable.

Currently, FDI enterprises take a large proportion in the textile industry. It could mean that domestic enterprises will increasingly be dominated by FDI enterprises, sir?

I do not think so! FDI enterprises have advantages but Vietnam enterprises have their own advantages. The important thing now is to have mechanisms and policies to link the two blocks together in order to be able to take better advantage of opportunities from the FTA.

In your opinion, apart from the difficulties, which are the intrinsic difficulties of the industry that are affecting businesses?

Intrinsic difficulties of the textile industry are high costs as the cost of insurance, the basic wage increase, while output prices increase. Besides, land lease fees also rose. These are issues that companies need to tighten to compete with other countries in the region. Currently, enterprises in Cambodia, Indonesia, Myanmar have low costs so they have competitive prices. I think the State should have the support of textile companies in the promulgation of mechanisms and policies so enterprises can compete better, but the companies must also raise their productivity.

Thank you!