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Poverty of garment companies   2008-11-19 - Viet Nam Net

Vietnam is witnessing the bankruptcy of many of its garment companies, said Diep Thanh Kiet, Deputy Chairman of the HCM City Association for Textiles, Garments, Embroidery and Knitting, during a discussion about the Vietnamese garment industry’s development.


What would you say about achievements and losses in the last two years, since Vietnam officially joined the WTO?


The biggest thing Vietnamese garment companies have got from WTO membership is more opportunity, though Vietnamese goods exported to the US are still being monitored by US agencies.


The loss is that most Vietnamese companies were not well prepared for the integration, so they have been influenced by the economic recession in the world, especially in the US, the biggest export market for Vietnamese companies.


In other words, Vietnamese enterprises were told to get ready for the fight, but they have not armed themselves well enough.


Before Vietnam joined the WTO, experts predicted that a lot of small garment companies would go bankrupt. How many garment companies have gone bankrupt so far?


Bankruptcy has now begun occurring with some enterprises which have weak ‘resistance’.


China has reckoned that 67,000 of its businesses have gone bankrupt. I think that the Vietnamese garment industry will also suffer heavily in the time to come due to the difficulties of the US economy and higher domestic labour costs.


The big advantage of Vietnam’s WTO membership is that Vietnamese apparel products now are not hindered by trade barriers anymore. Could you please tell us how Vietnamese companies have been taking advantage of this?


The trade barriers have been removed, but technical barriers installed in their place. Vietnamese enterprises were warned about this but not all have been able to avoid it.


One of the advantages of Vietnamese garment companies is the cheap labour cost. However, Vietnamese garment companies are now under pressure to raise the salaries of their workers. What do you think Vietnamese garment companies need to do?


Garment companies still can have low labour costs if they go the right way. For example, they need to make products with high commercial value in order to offset labour costs. They also need to improve productivity, which allows higher values with the same production chains and numbers of workers.


Moreover, enterprises should also strive to export products under the FOB mode instead of doing the outsourcing for foreign partners.


As of January 1, 2009, China will enjoy the non-quota scheme. Worries have been raised that orders will flow into China instead of Vietnam. What do you think about this?


I think the problem is not worth worrying about. We can foresee three scenarios. The best one is that the US would remove the monitoring scheme on Vietnam, while continue applying the scheme on China. President elect Obama’s speech implied that the US would control imports from China.


The less positive scenario is that the US would apply the monitoring scheme on both Vietnam and China, and the worse scenario that the US tightens imports from Vietnam and loosens imports from China. But I don’t think the third scenario will occur. China remains the biggest exporter to the US, while Vietnam is only in the top 10.


I have also heard other information, such as that US importers want to shift orders from China to Vietnam due to increased costs, especially labour costs.

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