With many local textile-garment makers unable to confirm when they can resume operations, many of their foreign business partners are switching orders from Vietnam to other countries.
In April this year, Italian fast-fashion group Teddy began signing contracts to place orders with the HCMC-based MyOne Fashion Company, with their cooperation extending until the end of September 2021. However, while MyOne is ramping up efforts to complete orders that have already been signed, it has not made headway with several orders due to Covid-19 related complications in Vietnam.
Le Van Tam, director of MyOne Company, said, “It is impossible for the firm to complete orders signed this year in a timely manner, let alone securing new orders.”
Other businesses in the textile-garment industry are also facing similar problems.
Pham Van Viet, board chairman of the Viet Thang Jean Company in HCMC, said that the stay-at-home mandate under the prime minister’s Directive 16 has significantly affected the firm’s operations.
During the social distancing period, the firm could arrange accommodation for only one-third of its 3,500 workers who were required to work, eat, and sleep at the firm as per the mandate. The firm’s output declined sharply and the productivity of its remaining workers also decreased due to their concern over the spread of Covid-19.
Many business partners of the Viet Thang Jean Company will only place orders once the firm commits that it will resume normal operations. However, since it is still difficult to determine exactly when this will happen, the firm has yet to sign any deal for new orders.
Commenting on the probable shift of orders from Vietnam to other countries, Vu Duc Giang, chairman of the Vietnam Textile and Apparel Association, said that the shift is likely to happen.
According to Giang, 97% of textile-garment makers in the southern localities had to suspend their operations due to the resurgence of the coronavirus, thus making it tough to commit to business partners and consequently, creating concerns among business partners about the disruption of their supply chain.
Some international garment brands have also sought permission to make late payments in 2-3 months, or even six months. This is beyond the original financial plans of local textile and garment firms.
If local textile makers accept the request, they would face obstacles in rotating capital, as the access to long-term loans offered by local banks is currently challenging and risky. If they refuse the request for late payments, these brands would seek new business partners in other countries.
Giang said that the shift of orders to other countries is a temporary move. Once the pandemic is over, Vietnam will still be one of the best destinations for garment brands.
He cited the business performance of the local textile-garment industry, saying that the sector in the first half of this year exported products worth US$18.79 billion, improving 21.27% compared to the same period last year and up 4.23% against the 2019 figure. Of this, the number of textile-garment items shipped to European Union accounted for US$2.263 billion, rising 4.85% versus last year’s figure.
Further, the local workforce has been increasingly upskilled, creating more quality products to meet the requirements of garment brands. Therefore, it is not a big problem when business partners shift orders to other countries, he added.
It is crucial for local textile-garment makers to take measures to retain their employees and ensure they have stable jobs and adequate benefits and allowances, as there will be a number of employees who will seek new job opportunities, resulting in a decline in the number of textile-garment employees returning to work once the pandemic has eased, Giang advised.
As the current outbreak of the pandemic remains complicated, textile and garment makers fear lasting impacts on their operations,