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Vietnamese businesses keep indifferent to ASEAN distribution chains   2011-08-26 - SGTT

The ASEAN Federation of Textile Industries (AFTEX) has developed nearly 20 textile and garment distribution chains so far. Meanwhile, Vietnam has had only three enterprises joining the chains.

More orders coming


Vietnam’s textile and garment export turnover in the first seven months of the year reached 7.6 billion dollars, increasing by 30 percent over the same period of the last year. Meanwhile, footwear export turnover reached 3.6 billion dollars, up by 30.7 percent, and the exports of briefcases, handbags, hats, wallets and umbrellas also increased significantly by 35.6 percent.

According to the Vietnam Association of Leather and Footwear Association (Lefaso), the export turnover has increased sharply recently, because foreign importers now tend to place orders with Vietnamese producers instead of Chinese.

“The cheap labor force is now a big advantage which helps Vietnam scramble with China for orders,” said Le Trung Hai, Deputy General Director of the Vietnam Textile and Garment Group (Vinatex).

However, analysts have warned that Vietnam cannot rely only on the cheap labor force, because the pay to garment workers has been increasing due to the high inflation rates in big urban areas like Hanoi or HCM City.

Le Quang Hung, Chair of Garmex Saigon, said: “Doing the outsourcing for foreign partners just can create jobs for workers, while you cannot make profits with outsourcing contracts.”

In order to make profits, according to the Industry and Trade Information Center under the Ministry of Industry and Trade, it is necessary for Vietnamese enterprises to cooperate closely with other ASEAN producers to build up regional distribution chains. One of the cooperation model is SAFTA, the high quality textile and garment distribution chain of ASEAN.

SAFTA is a part of the project on improving ASEAN’s competitiveness initiated by USAID and AFTEX in 2009, which aims to form up the groups of textile and garment factories in the region in order to fulfill the orders from foreign partners.

According to Dang Phuong Dung, Secretary General of the Vietnam Textile and Apparel Association (Vinatas), SAFTA can be seen as a solution to improve the competitiveness of enterprises which benefit both suppliers and clients. Enterprises will gradually shift from doing the outsourcing to providing package services. As enterprises have more choices in selecting suppliers, they can minimize their costs, save time and efforts, while their competitiveness will be upgraded.

SAFTA still cannot attract Vietnamese businesses

Also according to Dung, there are three reasons explaining why Vietnamese enterprises keep standing outside of SAFTA.

First, the enterprises need the materials which ASEAN companies still cannot supply and they still have to import from China.

Second, enterprises have other distribution chains already, and it will take them some more time to change the current situation. At present, China sourced materials prove to be more competitive in many types.

Third, the costs for joining SAFTA remain relatively high: enterprises have to pay 1750 dollars each time for quality appraisal, 1500 dollars for the appraisal on the compliance of SAFTA’s code of conduct, and the membership fee of 500 dollars a month.

Statistics show that in the first half of 2011, the total import turnover of textile, garment and footwear materials reached 1.5 billion dollars, including 408.6 million dollar worth from China, or 27.5 percent of the import turnover, up by 32.8 percent in comparison with the same period of the last year

Ngo Hong Quy, Marketing Director of Ptrotrade, which has been the member of SAFTA for two years, said that he still cannot the measurable profits from the membership status, because it still has not got clients from SAFTA. However, he can see three big benefits 1) the enterprise has become more well known; 2) the enterprise has the opportunities to contact big clients at annual meetings and 3) it can get new fabric samples from textile partners.

In fact, the enterprises, which have loyal clients from Japan, Europe or the US, do not expect the orders from China, and do not need to seek new clients, are not interested in SAFTA. The General Director of a company which has the revenue of 1000 billion dong a year said that SAFTA does not bring benefits to his enterprise, adding that SAFTA is just the place where textile garment in ASEAN sell fabric at the prices which prove to be uncompetitive.

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