The General Director of Vietnam Textile and Garment Group (Vinatex) said that 2023 is the most difficult year in the history of the textile industry and the group.
"In the 30 years of Vinatex's establishment, we have never faced difficulties like 2023. The worst scenario has happened and many units do not know when the difficulty will stop," Mr. Cao Huu Hieu, General Director of Vinatex shared at a press conference on January 8.
According to him, 2020-2021 - when the Covid-19 pandemic broke out, the whole world and Vietnam closed down to prevent the epidemic, but businesses were still able to "survive" thanks to orders for masks and epidemic prevention clothing.
But 2023 is a different story, as the global and domestic economies are negatively affected by geopolitical conflicts. This is the first year that Vietnam's textile and garment exports have decreased by 11%, reaching 40 billion USD.
The economy has also been "soaked" by the pandemic, leading to recession in many countries. Consumer demand has dropped sharply, consumer behavior, especially in the garment and fashion industry, has completely changed. Traditional export markets for Vietnamese textiles such as the US and Europe have decreased sharply.
In this context, Vinatex's revenue and pre-tax profit still exceeded the plan by 4% and 2%, respectively. However, compared to 2022, the profit decreased by 60%, reaching only 377 billion VND.
"We have proposed many scenarios since the beginning of the year, but we did not expect the actual market developments to follow the worst scenario, greatly affecting production and business," Vinatex CEO explained.
Mr. Cao Huu Hieu, General Director of Vinatex (sitting in the middle) shares about the textile and garment market in 2023 and forecasts for 2024, January 8. Photo: Cao Nam
Not only is the market difficult, but textile and garment enterprises also face disadvantages in terms of prices, exchange rate differences and interest rates compared to competitors such as Bangladesh and India.
According to Mr. Nguyen Duc Anh, Chief of Office of the Board of Directors (BOD) of Vinatex, the cost of workers' wages accounts for 55% of the cost of textile and garment products. Currently, the income level of this industry in Vietnam is 330 USD per month, 90 USD lower than China. However, this cost is 3 times higher than Bangladesh, more than 2 times higher than India and 1.8 times higher than the labor cost in Cambodia.
In addition, the VND exchange rate was stable while other countries decreased, and interest rates in the first half of last year were about 3% higher than other countries. "These factors put Vietnamese textile and garment at a disadvantage in price competition with competitors, even though productivity and quality are 10-15% higher than theirs," said Mr. Vuong Duc Anh.
Like many other businesses in the same industry, Vintex is forced to sacrifice profits and dividends to retain employees and ensure that wages do not decrease too much. The average salary of this group's employees is about 9.5 million VND per month, down 4% compared to 2022. According to Mr. Cao Huu Hieu, this income is 11% higher than the average salary of workers nationwide (8.5 million VND per person per month).
Mr. Hieu emphasized the flexibility in switching production between units. Small orders, fast time requirements of 1-2 weeks, so production arrangements need to be flexible to meet the needs of buyers. "In this difficult time, if there are orders that cannot be met, customers will be lost to competitors," he said.
Forecasting the textile market in 2024, Vinatex CEO said that signals in some major markets, such as the US, have "warmed up" again. The group set a revenue and profit target of 10% increase compared to 2023, but Mr. Hieu said this is also a challenging target because in the long term "it is impossible to predict how the market will be in the face of geopolitical conflicts".
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