Sun shining on Vietnam's garment industry

Thanh Nien News

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The garment industry is feeling good.
It has not only being receiving more orders this year from major customer US, it is also benefiting as international companies move away from China and Bangladesh.
Better still, it is expecting a windfall from the Trans Pacific Partnership (TPP) agreement slated to take effect in 2015.
Nguyen An, general director of Saigon Garment Manufacturing Trading JSC, told the Thoi Bao Kinh Te Saigon that "Vietnam's garment industry is having its best time."
An said Vietnamese companies are receiving plenty of orders. His own company, for instance, has received enough orders to meet its full capacity, mostly from the US, he said.
The company will also start to work on its first order from Japan this November, as many businesses from the East Asian giant turn away from China, he added.
Nguyen Huu Toan, deputy general director of Saigon 2 Garment JSC, said his company is doing its best to meet many long-term contracts, many of which are from the US.
US firms are also seeking to benefit from more open trade with Vietnam through the 11-nation TPP that also includes Canada, Mexico, Australia, New Zealand, Chile, Peru, Malaysia, Brunei and Singapore.
The TPP is expected to phase out tariffs on most goods traded between member countries over 10 years, while other free trade and bilateral agreements cut taxes on a more limited range of goods.
The garment sector, one of Vietnam's key export sectors, will then enjoy zero percent tariffs in the US market, compared to the current average of 17.2 percent.
A total of 128 US businesses began to look for first-time garment partners in the country late last year, according to the Vietnam office of the New York-based business information provider, TigerTrade Services.
It said US companies are moving their money from China to Southeast Asia, and consider Vietnam the top candidate for garment manufacturing.
Vietnamese garment companies are also looking forward to more contracts with the EU ahead of the Vietnam-EU Free Trade Agreement which will also take effect in 2015.
The Vietnam Textile and Apparel Association estimates that exports from the industry to EU this year will increase 2.89 percent year-on-year.
Some Western investors are also eyeing Vietnam as a replacement for Bangladesh, where a garment factory building collapse in April killed at least 1,127 people, highlighting poor labor safety concerns and protests from workers in other places of the country.
But Vietnamese companies said the shift, if any, won't be significant as Bangladesh has the lowest industry salary in the world at US$38 a month, two to three times lower than in Vietnam.
Toan of the Saigon 2 company said Western investors in Bangladesh might prefer Cambodia with cheaper labor than Vietnam, or other places within Bangladesh. The South Asian nation's garment industry makes up more than three quarters of its exports.
He said northern Vietnam can be an option since the region has lower wage levels than Ho Chi Minh City.
An from Saigon Garment Manufacturing Trading JSC said a Canadian business that worked in Bangladesh approached them early this year, but they were yet to strike a deal as the price offered was lower than the average prices paid by US and EU partners.
Risky supplies
While the industry is getting more orders from customers, it is threatened by unstable material supplies, insiders say.
A report on the government website in April said 70 percent of Vietnam's garment materials are imported.
Industry insiders say they are highly dependent on Chinese materials, which accounted for 30.2 percent of the country's import expenditure last year.
An said suppliers have tried to survive the economic slump with competitive prices, but provided low-quality materials.
He said some material shipments fell far short of the quality required and the company had to ask for another shipment, making workers wait and possibly miss the delivery deadline for the finished product.
The customers will accept the delay if they are the ones who have chosen the material suppliers, otherwise they can cancel the entire deal because of the delay, An said.

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