Which Solutions to Raw Apparel Materials?

“Given the current growth rate and no sudden changes on global market, the objective of obtaining US$13 billion from exporting apparels in 2011 is within reach,” Mr Le Tien Truong, Deputy General Director of Vietnam National Textile and Garment Group (Vinatex), said in a State-owned group’s online conference held on June 24.

 

Vietnam’s garment and textile exports rose nearly 30 percent year on year to US$6.1 billion in the first six months of 2011 - the highest growth in the first half in the past four years. In June, the value was estimated at over US$1.15 billion, up 11 percent from May. The garment and textile industry reports a net export value of US$2.1 billion in the first six months.

 

In spite of positive results in the first six months of this year, the garment and textile industry is still encountering numerous difficulties. For example, electricity expenses account for some 10 percent of production costs and the recent power price hike has added 0.38 - 1.33 percent to production costs. Moreover, as working capital is mainly relying on commercial loans which bear very high interest rates (usually above 20 percent, and even 25 percent), hardly any company can endure such a high rate, let alone very hard conditions to access credit sources. In addition, escalating inflation has caused adverse impacts on workforce of the garment and textile industry. Last but not least, Vietnam has to compete fiercely with heavyweight competitors on international markets like China, India, Bangladesh and Indonesia.

High exchange rate, rising lending rate, higher prices of electricity, water, fuel, transport and cotton inhibit many Vietnamese companies from signing long-term contracts because they cannot anticipate trends of raw materials market. Cotton fibre price is very volatile, hitting the peak of US$5.2 per kilo in the first quarter of this year and being traded at US$3.4 per kilo. The current cotton price has doubled from the same period in 2010. Volatile cotton prices have affected product prices, payment capability and business performance of many companies. The price hike is attributed to higher exchange rate and speculative behaviours.

 

These difficulties pose challenges to the ability to complete business targets set for the last six months of 2011. Each month, the industry must achieve planned revenue of VND16,500 billion (striving for over VND17,500 billion) and export turnover of US$1.113 billion (striving to reach US$1.2 billion). The Vietnamese garment and textile industry is in need of supports of all concerned organs in addition to efforts of businesses to reach and beat the targets.

 

Mr Truong said although world economies are forecast to keep recovery momentums in 2011, many are afraid of unpredictable volatilities. However, with experience accumulated in the past years, Vietnamese garment businesses will certainly know how to overcome these daunting challenges and snatch up all opportunities. Hence, if the market goes smooth, the industry will take advantage of this good opportunity to hit the target of US$13 billion ahead of schedule.

 

Cotton prices will encourage farmers to grow more cotton. Previously, this crop is cultivated in southern central regions like Binh Thuan, Ninh Thuan and Dak Lak but now it has reached northwest provinces like Dien Bien and Son La. Productivity is rather high, opening up a brighter prospect for the Vietnamese garment and textile industry. This is one of most important foundations to create a stable source of raw materials for the sustainable development of garment and textile industry.

 

Seeing the need for the cotton industry development, Vinatex has mapped out cotton industry development strategy for the period. Cotton fibre production output is estimated to reach 40,000 tonnes by 2015 and 60,000 tonnes by 2020. This strategy will strengthen the material security for the garment and textile industry and will help meet 10-15 percent of domestic demand for material cotton. Currently, Vinatex is planting cotton on three farms covering 10,400 ha (expected to be expanded to 15,000 ha this year). The group also plans to cooperate with Cambodia and Laos to grow cotton. It is also building yarn and fibre production factories in Ninh Thuan province and scaling up capacity of its facilities in Vinh Phuc, Nam Dinh and Hai Phong. The Dinh Vu fibre and yarn factory in Hai Phong City is scheduled to be put into operation in August 2011 with a monthly output of 15,000 tonnes of fibres and yarns.

 

Besides, to deal with difficulties more effectively, Truong said the group will submit a cotton growing plan for the period to 2015 and vision to 2010 to the Ministry of Industry and Trade in accordance with the Prime Minister’s Decision 29 dated January 8, 2010. Accordingly, cotton acreage will be expanded to about 30,000 ha by 2015, with average productivity of 1.5 - 2 tonnes per ha, and to 76,000 ha by 2020, with productivity rising to 2 - 2.5 tonnes per ha. With this positive development strategy, the plan is really an important key to material cotton shortage facing the Vietnamese garment textile industry.