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Vietnam garment industry: Reportedly the world’s second-largest exporter

Vietnam garment industry: Reportedly the world’s second-largest exporter

Tuesday 24, 08 2021
Vietnam became the world's second-largest garment exporter, surpasses Bangladesh in early August. The turnover of the industry was reported to be 29 billion USD.

Vietnam: World’s second-largest garment export

With an export value of 29 billion USD, Vietnam replaced Bangladesh as the second-largest garment exporter in the world. The global market share of Vietnam in 2020 was 6.4%, double the number of 2.9% in 2019.

Vietnam and Bangladesh garment export volume both fell in 2020 due to the COVID-19. However, the latter plummeted at a greater speed and had its value reduced to 28 billion USD, which resulted in a global market share of 6.3%. Bangladesh had been the world’s second-largest garment exporter since 2010.

Bangladesh

Bangladesh’s garment output declined drastically since factories were closed following orders’ cancelation of many big Western brands. Most factories also hat to put their operations on hold in accordance with pandemic prevention regulations.

Globally, Bangladesh is a popular starting point for low-priced manufactured goods. Meanwhile, Vietnam has recently produced many high-end garments with an educated workforce. Bangladesh's Dhaka Tribune newspaper said that this South Asian country has faced great challenges since Vietnam had the EU-Vietnam Free Trade Agreement (EVFTA). In addition, Vietnam also benefited from orders shipped from China during the early stages of the outbreak.

Professor Mustafizur Rahman, a member of the Center for Policy Dialogue Bangladesh (CPD), said that the relatively good Covid-19 control situation in Vietnam last year is an advantage. In addition, the garment industry of Bangladesh also revealed many weaknesses when it was surpassed by Vietnam, in terms of labor productivity, capital productivity, and product diversification.

Mustafizur Rahman

Data from the General Statistics Office shows that Vietnam's textile and garment export turnover in the first seven months of the year reached 18.6 billion USD, up more than 14% over the same period last year. According to the Ministry of Industry and Trade, some main export markets such as the US and Europe increase the demand for clothes and shoes when the economy starts to recover and the social distancing orders are removed. That creates an opportunity for the textile and garment industry to reach the target of 39 billion USD this year, the same growth figure as before COVID-19 appeared.

Difficulties for the remainder of the year

Due to the COVID-19 outbreak in the southern provinces, the growth speed of the Vietnam garment industry for the remainder of 2021 may slow down. The outbreak may disrupt the supply chain again, as companies cannot transport raw materials, not to mention the lack of human resources to ensure the delivery time.

Many businesses receive orders until the end of the year when the aggregate demand for textile products in main export markets such as the US and EU has increased sharply. However, the complicated and prolonged pandemic is becoming a burden for the growth target of the whole industry.

Ms. Nguyen Thi Tuyet Mai, Deputy General Secretary of the Vietnam Textile and Apparel Association (VITAS), shared that only about 3% of enterprises in the industry can implement the "Three on the spot" for production, and they are also asking for help, worrying about F0 appearing in the company. Infected workers are currently isolated at the production site. That causes businesses to stall, unable to continue production.

According to the VITAS, about 50% of Vietnam garment factories are located in the South, and the rate of factories having to close there has reached 30-35%, mainly small and medium enterprises due to insufficient fees to implement “Three on the spot” for employees, causing labor shortage. At the same time, the vaccination rate for the textile industry is still low.

VITAS

Recently, the Textile and Apparel Association; the Leather, Footwear and Handbag Association; the Electronic Industries Association, and the Handicraft and Wood Industry Association of Ho Chi Minh City have actively sourcing vaccines from the UAE. These units requested the Government and the Ministry of Health to lead negotiations with suppliers from the UAE or appoint qualified Vietnamese importers to carry out procedures, giving priority to supporting vaccination associations for workers at the factory.

Another obstacle for Vietnam's textile and garment industry is the high logistics costs. Empty container shortages and rising logistics costs can affect businesses with ODM and OBM orders.

VITAS stated that many companies received orders until the end of the third quarter or even the end of 2021. However, due to the fact that many provinces are carrying out social distancing, transportation between provinces and factories is being affected.

Besides, the stability of human resources is also a problem. The garment industry is one with a large number of laborers. With the human resources being unstable, the production chains of factories will be impacted, and eventually, the impact will also hit productivity and delivery progress.

Ms. Hoang Ngoc Anh, General Secretary of VITAS, said that in the last months of 2021, the garment industry would face many challenges. The outbreak of Covid-19 in the southern region may disrupt the supply chain, as businesses cannot transport raw materials and lack human resources to ensure on-time delivery.

 

Compiled by VietnamCredit

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