Vietnam's Textile Profit Margin Down 8 per cent since WTO Membership

The profit margin of the textile and garment industry has dropped to 5 per cent-8 per cent since the country joined the World Trade Organization two years ago, the Saigon Times Daily reported, citing the Institute for Policy and Strategy Research.

 

The low profit margin was not a new problem, much research was required to help the sector grow in quality instead of quantity, the institute said.

 

Local producers have imported nearly 90 per cent of their cotton, 100 per cent of their synthetic fiber and 70 per cent of their cloth and other materials since last year. The industry’s low added value results in a small profit margin of 5 per cent-8 per cent, the institute explained.

 

In the global textile and garment industry’s value chain, around 90 per cent of Vietnamese producers with cheap labor take charge of the last manufacturing step with the lowest profit earned. Meanwhile, the U.S., China and India conduct steps with higher profits like design, cloth and input accessories production.

 

Most domestic producers manufacture with the designs of the original equipment manufacturer (OEM). However, they still have to learn more to meet the standards of OEM providers in Eastern Asia.

 

It is a big challenge for Vietnamese enterprises to involve steps of the original design or brand manufacturer which create much higher profits in the value chain.

 

Experts agreed that outsourcing was the wrong direction of Vietnam’s textile and garment industry.

 

Vietnam expects to export more than US$9 billion worth of apparel products in 2008, US$12 billion in 2010, US$18 billion in 2015 and US$25 billion in 2020. (Saigon Times Daily, Investment)