VietNamNet Bridge – Several domestic garment and textile companies would face more challenges from large rivals following integration, said Tran Quang Nghi, chairman of the National Garment and Textile Group (Vinatex).

Workers at the Korean-invested DHA Global Co iron clothes for export. Several domestic garment and textile companies would face more challenges from large rivals following integration -- Photo: VNS

Nghi, speaking at a conference entitled "Garment and Textile – Opportunities and Challenges", focusing on integration and held in Ha Noi yesterday, Sept 30, that a shortage of capital and backwards technology, along with weak management capacities, had created difficulties for the businesses.

He added that the development of Viet Nam's garment and textile industry was behind other countries.

‘This caused considerable competitive pressures in the local garment and textile industry after Viet Nam joins the free trade agreements," Nghi added.

Viet Nam has some 5,000 businesses in the sector. Most of them are small- and medium sized enterprises with weak associations.

Echoing Nghi, Truong Thi Thanh Ha, general director of Dong Xuan Knitting Company, said their technology remained backwards, as several machines were purchased 20 years ago.

Of note, domestic garment and textile companies have not been able to invest in modern technology lines to enjoy benefits from the FTA, especially FTA Viet Nam-EU and Trans-Pacific Partnership (PPP).

Ha said domestic firms had been faced with more challenges than opportunities. This was the reason that the Government should provide supports for businesses, in terms of land rental and taxes.

Supply chain needed

In the first half of the year, Viet Nam's garment exports to markets participating in the TPP accounted for 70 per cent of its total export value.

However, Phan Chi Dung, head of the Light Industry Department under the Ministry of Industry and Trade, said there were few enterprises manufacturing in all stages, from cotton to completed products. Especially, local firms have much depended upon imported materials, in combination with low productivity, thus making them difficult to enjoy benefits from FTAs.

Dung said the added value in garment exports was still limited, despite high growth rates of 15-20 per cent a year.

"Domestic garment and textile companies have not developed their own markets and products, which have been shortcomings for the sector," he added.

According to the development strategy for the garment and textile sector to the year of 2020, approved by the ministry, the country's exports would reach US$35 billion and up to $60 billion by 2030.

Further, Deputy Minister Do Thang Hai said investment in material areas and support industries would have special meaning in improving their competitiveness.

Hai also said the association among businesses in this sector could create a large capital base and improve management capacities, as well as technology, which would be a decisive factor for firms to better compete with rivals.

Funding for garment, textile firms

Chairman of the Bank for Investment and Development of Viet Nam (BIDV) Tran Bac Ha has committed to provide loans of US$2 billion to support garment and textile firms over the next five years.

Ha said opportunities for businesses would be considerable, including a wave of foreign investment in the garment and textile, leather shoes, bags, electronics and seafood sectors in Viet Nam. The first benefit was that Viet Nam would have a wider market and investors would gradually shift their production into the country, he noted.

"The opportunity requires businesses to restructure to improve their competitiveness within the integration," he added.

BIDV is to focus on material cultivation areas and investment planning for the garment and textile sector.

VNS