Garment companies brace for fierce competition from foreign firms
Garment companies brace for fierce competition from foreign firms
Vietnamese garment companies now live with the fear that they may be dislodged from the home market by foreign investors who have been flocking to Vietnam to take full advantage of free trade agreements (FTAs).
Vietnamese businesses, especially garment companies, are expected to be the biggest beneficiary of the TPP (Trans Pacific Partnership) Agreement, which is currently in final rounds of negotiation. But many of them do not believe this will occur.
Pham Xuan Hong, deputy chair of the Vietnam Textile and Apparel Association (Vitas), said garment companies were worried about the wave of foreign investment in the textile and garment sector.
“We fear that Chinese investors would not only develop textile and dyeing projects in Vietnam, but also set up their garment factories here,” Hong said. “If so, domestic garment companies will lose their jobs.”
“What Vietnam needs from foreign investors are textile and dyeing factories. We don’t need more garment factories. The existing domestic garment companies are quite capable of handling garment orders,” he said.
Le Quang Hung, chair of Garmex Saigon, explained that if foreign investors set up factories just to provide materials to their garment companies in Vietnam, they would have bigger advantages than Vietnamese companies scrambling for orders from foreign partners.
“If so, Vietnamese enterprises will be the ‘second banana’ in the game,” Hung said, adding that Vietnamese businesses, weak in capital and technology, may not be able to take full advantage of FTAs.
The general director of Phong Phu Textile JSC, Pham Xuan Trinh, said that Vietnamese enterprises seriously lacked capital, and it would be impossible for most of them to set up production lines worth $200-300 million as foreign enterprises have done.
An analyst noted that only if Vietnam could attract foreign direct investment into the textile and dyeing sector would it successfully take full advantage of TPP because of the “yarn-forward” principle applied to textile & garments, the key industry of Vietnam.
Meanwhile, the analyst said, if Vietnam opens the door too widely and welcomes foreign garment companies as well, it will fail to get benefits from TPP.
In such a situation, Vietnamese businesses still do not know what they need to do. Ngo Duc Hoa, chair of Thang Loi Garment JSC, noted that businesses remain indecisive on whether to invest in raw-material growing areas of their own.
“It would cost hundreds of billions of dong to set up a textile or dying factory. Meanwhile, it is unclear if the fabric made in the future can compete with imports or products from foreign-invested enterprises,” he said.
The director of a Hanoi-based garment company said he was still trying to decide on whether to develop a textile factory to provide fabric to existing garment workshops.
“If we don’t, we are afraid that we wouldn’t be capable of undertaking export orders. But if we do, we could be spending big money on ineffective projects,” he said.
vietnamnet
