Textile sector braces for $473 mln Covid-19 setback
The coronavirus pandemic could cost Vietnam’s textile industry VND11 trillion ($473 million) in revenue, with millions losing their jobs.
Workers at a textile and garment factory in southern Long An Province. Photo by VnExpress/Quynh Tran.
Le Tien Truong, CEO of Hanoi-based Vietnam National Textile and Garment Group (Vinatex), said that the figure was calculated based on the assumption that the pandemic is contained in May and the global economy starts recovering in June.
The estimate factored in contract cancellations since the middle of this month, he said at a meeting with 22 other textile companies. "The bigger the company, the higher the canceled contract ratio."
40,000 shirts produced by Hanoi-based Garment 10 Jsc (Garco 10) have not been taken by a South Korean buyer, who also canceled an order for another 39,000 units next month.
Than Duc Viet, CEO of Garco 10, said that another buyer in the U.S. has suspended ongoing production of hundreds of thousands of products.
"We do not want to hear news of suspending imports from buyers anymore. The damage will be severe if this happens on a large scale."
Da Nang-based Hoa Tho Textile and Garment Jsc reported 500,000 items being canceled or delayed.
Inventory is another issue. The industry imports about $1.5 billion worth of materials each month, but if 20 percent of contracts are canceled, about $300 million worth of materials will become unused inventory and lose value over time, Truong said.
Vietnam textile industry, the country's third largest in terms of export value, struggled to source materials from China last month due to the outbreak.
Now that the supply chain has mostly revived, producers are struggling to sell to major markets such as the E.U. and the U.S, which account for over 60 percent of total textile exports.
Truong said that the canceled contracts will lead to revenue losses for producers and result in job cuts for 30-50 percent of 2.8 million textile workers over the next two months.
The Vietnam Textile and Apparel Association (Vitas) recently asked the Ministry of Labor, Invalids and Social Affairs to provide 50 percent basic salary support for textile workers who are unemployed because of the pandemic.
The support could prevent a large number of job cuts in the industry, it said.
Vinatex has proposed that the government allows local producers to export protective products like masks to other countries to increase revenue.
There are about 6,800 textile businesses in Vietnam. Last year, they exported goods worth $32.85 billion, up 7.8 percent year-on-year, with the U.S., the E.U. and Japan the largest buyers, according to Vietnam Customs.