The global inflation made consumers tighten spending on non-essential products, causing textile and garment exports to major markets such as the US and EU to drop sharply.
There are many forecasts saying that the domestic textile and garment industry's exports growth will slump this year.
Since the fourth quarter of 2022, textile and garment enterprises have had a shortage of export orders, leading to a sharp drop in export turnover and factories operating at below capacity.
Export orders in the second and third quarters are still shrinking, and workers are working reduced hours.
Garment sector must go green to ensure sustainable development
Digital transformation, creating suitable designs and recycling clothes are now proving to be important target activities for the garment and textile industry towards a circular economy and sustainability.
According to Nguyen Phuoc Hung, Vice President of the Ho Chi Minh City Union of Business Associations (HUBA), the union’s textile and garment enterprises are facing many difficulties, including limited cash flow and failure to access loans, and get disbursement or transfer bad debts. Therefore, since mid-2022, many businesses have not invested, and tended to resell or lose their brands.
In the first quarter of 2023, the city's garment and textile businesses reported an export turnover decrease of 8% year-on-year, he said, forecasting that the coming months will be an extremely difficult period for the industry’s enterprises.
According to the Ho Chi Minh City Association of Garment, Textiles, Embroidery and Knitting (Agtek), Vietnamese firms are weak in and lack supply chain connectivity, as most of them are outsourcing, which results in a low profit margin.
Diversifying material sources opens door to sustainable supply chain
Diversifying sources of materials and stepping up digital transformation have been regarded as the key to the building of a smart, sustainable supply chain in the garment-textile sector, insiders said.
Pham Van Viet, General Director of Viet Thang Jean Co., Ltd., said major importers like the US, Europe and Japan prefer supply-chain linkage, which, however, remains weak in Vietnam.
Given this, the domestic garment-textile sector should make greater efforts and take solutions to integrate more intensively and extensively into the global supply chain, he stressed. Building a sustainable supply chain requires a long-term, well-designed strategy, Viet said, urging Vietnamese enterprises to adopt a long-term mindset in supply chain restructuring and reposition themselves in the market.
Viet pointed out that the cut, make and trim (CMT) manufacturing generates low profits and causes price pressure, forcing firms to shift to the business of freight on board (FOB), original design manufacturer (ODM), or original brand manufacturer (OBM).
Pham Van Viet, Agtek Vice President and General Director of Viet Thang Jean Co., Ltd., affirmed that one of the keys to changing and repositioning Vietnam's textile and garment industry is nothing but digital transformation.
Textile, garment firms switching to green production
Textile and garment businesses in Vietnam are taking steps to switch to green production to meet partners’ demand and achieve sustainable development, the Cong Thuong (Industry & Trade) newspaper reported.
Greening textile and garment production chains is currently a global trend that are compulsory for businesses to achieve sustainability. It is also a requirement placed on manufacturers as the EU, which imports over 4 billion USD worth of textiles and garments from Vietnam annually, has proposed the imposition of some eco-regulations on imports.
Major fashion brands in the world are also prioritising green enterprises to place their orders or requesting suppliers to adopt green practices.
Facing challenges and strict requirements from the market, many Vietnamese businesses are making changes towards green manufacturing, including upgrading factories and using recycled fabric and green energy.
VN garment industry needs to iron out wrinkles to enable growth
Given an unstable global economy with strong consumer demand for transparency and sustainability, Vietnam's textile-garment industry is facing mounting difficulties, prompting a need to transform for growth. Vice General Secretary of the Vietnam Textile & Apparel Association (VITAS) Nguyen Thi Tuyet Mai said the US and EU – two major textile and garment import markets of Vietnam – have recently issued stricter regulations on the origin of products.
Economist Huynh Thanh Dien said that Europe is expected to adopt a common strategy to eliminate ‘throwaway’ consumption toward a goal of having only sustainable and recyclable apparel entering the EU market by 2030.
Kieu Manh Kha, Supply Chain Manager at the Vietnam Office of the Cotton Council International, noted all brands will require their supply chain to provide traceability information by 2030. In the short term, by 2025, about 25-50% of brands will apply the requirement.
About 80% of enterprises operating in the Vietnamese textile and garment industry are small and medium companies. The sector employs over 2 million industrial workers and nearly 1 million service workers, but the labour productivity remains low and production costs have yet to be optimised.
In the context of the current volatile and difficult business environment, experts held that only sustainable and flexible development, investment in digital transformation, and application of scientific advances and circular economy model can help businesses stand firm in the market.
In December last year, the Prime Minister signed a decision approving the strategy for the development of the textile, garment and footwear industry to 2030, with a vision to 2035.
According to Mai, this is the legal corridor for the sector to seize opportunities serving growth in the next 15 years, with an expectation that the nation can completely export with Vietnamese brands by 2035. To this end, enterprises need to comply with labour commitments, sustainably protect the environment, and be profitable, she said.
T.Huong
Source: Vitic/VNA/vietnamnet.vn