VietNamNet Bridge - Many small textile and garment companies plan to merge with others, while big companies will have to try every possible means, including lowering selling prices, to retain clients. 

 

The director of a garment company which has been making products for US and Japanese partners for the last 10 years admitted that the company was facing difficulties because the number of orders was ‘dramatically low’ last year.

In 2014, seeing that market demand was increasing, the company decided to set up a new factory in Binh Duong province. However, the number of orders has not increased as expected.

Many small companies in the north, south, as well as HCM City and Tay Ninh have decided to put their workshops up for sale because things are getting more and more difficult for them. 

The prices offered are between VND60 million and VND35 billion, depending on the operational time and factory scale.

Many small textile and garment companies plan to merge with others, while big companies will have to try every possible means, including lowering selling prices, to retain clients.

Not only small businesses, but big corporations are also meeting big difficulties. Vietnam’s largest textile & garment group Vinatex, for example, had revenue in 2015 that was 11 percent higher than the year before, but the pretax profit was the same.

Hoang Ve Dung, deputy general director of Vinatex, said textile & garment companies have had to slash selling prices to compete with rivals from China, India and Malaysia.

Vinatex remains pessimistic about 2016. The group plans a productivity increase of 11 percent in 2016, and aims to have revenue increase by 8 percent only. 

Tran Viet, a senior executive of Vinatex, said Vinatex was cautious in planning the production plan this year because exchange rate fluctuations may affect business performance.

“The high valuation of the dong was one of the reasons that caused Vinatex’s profit to remain unchanged despite higher revenue,” he said. 

“The Chinese renminbi dropped by 4.8 percent, while the currencies of Malaysia and India, rivals of Vietnam, also depreciated more sharply than the dong,” he explained.

Meanwhile, cotton and polyester filament prices have decreased sharply, affecting fiber manufacturers: clients broke contracts or asked for price reductions.

Competing with China remains a headache for Vietnamese companies. Dung of Vinatex said though the Chinese labor costs have increased, Chinese manufacturers still have great advantages in comparison with Vietnamese, because they can control the input material supply.

“Only when Vietnam can increase the production of input materials would Vietnam be able to attract other markets,” he said.

Foreign direct investment in the textile and garment sector has increased sharply recently. A report shows that FDI capital registered in the last year reached $1.5 billion, equal to total domestic investment capital over the last 20 years.


NCDT