Garment makers expect slowdown
Garment makers expect slowdown
Enterprises in the garment and textiles industry will continue facing difficulties in the remaining months of the year, given the lack of export orders and access to capital, industry insiders said at a seminar in HCM City yesterday.
Jointly organised by the Viet Nam Textile and Apparel Association (VITAS), the Bank for Investment and Development of Viet Nam (BIDV), and Dun&Bradstreet (D&B), the seminar sought ways to help garment and textile enterprises overcome difficulties in finding capital as well as new customers.
Garment and textile exports posted a modest year-on-year growth of 7.3 per cent in the first nine months of the year to reach US$11.2 billion. This compared to the country's overall export growth of 18.6 per cent.
Demand in the EU market has fallen strongly in the past months and export orders have decreased significantly over the same period last year, said Dang Phuong Dung, deputy chairwoman and general secretary of Vitas.
Many garment and textile enterprises chose to outsource work because they found it hard to access capital, Dung said.
According to a BIDV survey, 100 per cent of the polled companies with annual revenues of more than $10 million said they need medium and long-term loans to invest and expand production.
Other problems facing the industry were also highlighted at the seminar.
Dung said low labour costs would be no longer be a competitive aspect of the industry in the coming time.
"We must find out measures to increase our real competitiveness by investing more in equipment and technology to raise labour productivity," she said.
However, it was not easy for enterprises to access bank loans to do this, she said, adding that though interest rates have fallen in recent months, they were still high compared to other countries.
"Moreover, heavy reliance on imported materials and outsourcing orders that carry a low return on investment has meant local firms were unable to add value to their products and make the sector more competitive," she said.
"Furthermore, if the current regulation on the 275-day tax payment grace period is removed as suggested by the Ministry of Finance, garment companies would face more financial troubles," Dung said.
Under current laws, enterprises that import raw materials for production of goods for export receive a 275-day grace period on paying import duties.
However, the Finance Ministry has recently compiled draft revisions for the Tax Management Law that requires enterprises to pay tax before customs clearance, or provide a guarantee from a credit institution before they can secure the 275-day grace period.
Dung said guarantee procedures also caused difficulties for exporters because they were time-consuming and involved mortgaging assets or temporarily freezing bank accounts.
Dung said the association would work with other business associations to petition the Government to reconsider the draft.
Regarding the outlook for garment and textile exports in the coming months, Dung said brighter prospects could be expected for the US market, but the EU was not showing signs of recovery. Viet Nam's membership of the World Trade Organisation and the many free trade agreements that it has signed should provide good opportunities to access new markets, she said.
"However, the industry must solve problems concerning raw materials and meeting strict rules of origin, otherwise we cannot capitalise on the opportunities created by FTAs," she said.
Nguyen Ngoc Hung, general director of D&B Vietnam, said the garment and textiles industry still had potential to develop and expand its presence in international markets.
Herb Cochran, Executive director of Amcham Viet Nam, advised Vietnamese enterprises to study consumers' demand to create suitable products.
Also speaking at the seminar, Dau Tri Dung, deputy director of BIDV's Corporate Products, said his bank would help its customers access capital through several export support programmes.
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