| Despite difficulties, in 2023 Vinatex achieved consolidated revenue of 104.4%. In 2024, will textile and garment orders to the US market improve? |
Resonance of many difficulties
2023 is the peak year of difficulties for domestic textile and garment enterprises, especially for enterprises in the fiber industry. In 2023, the industry's export turnover reached 40 billion USD, down 10%, even lower than in 2020 (8%) - the peak of the Covid-19 pandemic.
Mr. Vuong Duc Anh - Chief of Office of the Board of Directors of Vietnam National Textile and Garment Group said: The world's total textile and garment demand in 2023 decreased by 11% to 670 billion USD. Import demand of Vietnam's main textile and garment export markets also decreased sharply, of which the US decreased by 20%, China decreased by 10%, only the Japanese market maintained demand compared to last year, correspondingly, Vietnam's textile and garment exports to this market did not decrease in turnover.
In that context, countries competing in textile and garment exports with Vietnam are in a similar situation, China decreased by 8%, India decreased by 13%, and Bangladesh only decreased slightly compared to the previous year.
“ In 2023, the textile and garment industry will face many unfavorable factors. Vietnam's wage costs are only lower than China's and 3 times higher than Bangladesh's, 2 times higher than India's and 1.8 times higher than Cambodia's, while labor costs account for over 55% of the cost price, ” said Mr. Vuong Duc Anh.
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| Textile market in 2024 still has many fluctuations |
In addition, the VND exchange rate remained stable during the first 8 months of the year while the Chinese Yuan depreciated by 5%, the Bangladeshi Taka by 5.9%, and the Turkish Lira by 31%. Interest rates in Vietnam in the first 6 months of the year were about 3% higher than the average of competing countries.
“ The combination of factors has created many disadvantages for Vietnamese enterprises in price competition, although the productivity and quality of Vietnamese enterprises may be 10-15% higher than average ,” Mr. Vuong Duc Anh emphasized.
Along with the deep price reduction, customers also require small orders and short delivery times, only about 10 - 14 days, while previously it was 40 days for CM goods, 70 days for FOB goods... creating a lot of pressure on businesses.
It is very difficult to predict market movements.
Regarding market developments in 2024, Mr. Cao Huu Hieu said that it is very difficult to forecast. Therefore, the export growth target of 10% in 2024 is only temporary and the plan can be changed when the market warms up. In the garment industry, orders have improved since January 2024, but the yarn industry is still very gloomy and cannot improve in the short term.
Regarding the industry’s export markets this year, Mr. Vuong Duc Anh said that basically nothing has changed. The US, EU… are still the traditional and main markets, while new markets such as UAE… have been exploited by Vietnamese enterprises but on a small scale, only about 6-7 billion USD. Therefore, it is imperative to maintain traditional markets.
According to Mr. Vuong Duc Anh, it is likely that the traditional market of Vietnam's textile and garment industry will be "less difficult" than last year. In particular, the US election in November 2024 will take place, before that there will be a big change, the FED committed to lowering interest rates 3 times with a total reduction of 0.75%. If the interest rate reduction takes place, consumer demand in the US will return from the second half of 2024. This is very important, because this is a market with large purchasing power, accounting for a large proportion of Vietnam's total textile and garment export turnover.
The EU market hopes for a major change in policy, with GDP forecast to increase by less than 1% in 2024, although not large, this is a positive number compared to the decrease in 2023.
Competing countries face many labor problems and armed conflicts at home, while Vietnam is a safe destination, which is also an advantage for orders that are likely to return to Vietnam.
The domestic macro economy continues to be stable, with GDP growth forecast to be higher than in 2023, but domestic textile and garment enterprises also face new challenges such as a 6% increase in minimum wages from July 1, 2024, possible fluctuations in electricity prices, and many unpredictable factors in the raw material market. Along with that is the pressure from the transition to green production with many costs.
“ In the current context, there is no other way for businesses to proactively monitor market developments to respond appropriately. At the same time, flexibly implement production and business plans and meet the quality standards of the import market, ” said Mr. Cao Huu Hieu.
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