A diversified supply chain and numerous free trade agreements (FTAs) have
set the stage for a strong comeback for Vietnam''s footwear and textile sector,
said experts and industry leaders.
Despite the Covid-19 pandemic, the sector reported strong export figures for
2020 with foreign brands and partners already saying they would either
increase production or place additional orders from Vietnamese textile
makers in 2021, according to the Vietnam Textile and Apparel Association
(VITAS).
"In the short-run, firms should be trying to seek new markets and diversify
their products. In the long-run, they must eye sustainable development and
advanced automation," said Đỗ Quỳnh Chi from the Ministry of Labour,
Invalids and Social Affairs. The pandemic encouraged domestic firms to connect among themselves in
order to secure supply materials and establish joint production operations.
It was especially important for smaller firms as they were able to learn from
bigger players, to adopt better technologies and access more advanced
machines.
Nguyễn Văn Thời, CEO of textile maker Thái Nguyên-based TNG, said
international supply chain disruptions caused by the pandemic forced his
firm to look for domestic suppliers.
In addition, FTAs such as the EU-Vietnam Free Trade Agreement (EVFTA)
and the Comprehensive and Progressive Agreement for Trans-Pacific
Partnership (CPTPP) set strict standards for textile firms on product
origins, forcing firms to source production materials domestically, said
VITAS'' president Vũ Đức Giang.
Giang said Vietnamese firms retained certain advantages as their products
typically fetch higher value and required more sophisticated production
techniques compared against competitors.
For instance, Vietnamese firms overtook their rivals to become the largest
exporter to the US in June this year, a place usually held by Chinese firms.
While Vietnamese firms only hold a modest market share in the EU, the
EVFTA, which came into effects on Aug 1 this year, is said to provide a major
boost to Vietnamese exports. Among them are footwear and textile
products, which were forecast to increase by 50 per cent and 67 per cent,
respectively by 2025.
According to VITAS, demand for textile products in major markets such as
the US and the EU is set to return to pre-pandemic levels in the latter half
of 2022.
The association urged firms to stay connected, to share solutions and to pool
their resources to overcome the pandemic as well as to improve
management and production efficiency.
The Ministry of Industry and Trade (MoIT) and the Ministry of Trade,
Industry and Energy of South Korea recently signed an exchange letter on the implementation of the cumulation of origin of textile between the two
nations under the EVFTA.
The letter was inked in the framework of the 10th meeting of the VietnamSouth Korea Joint Committee on Energy, Industry and Trade Cooperation
and the 4th meeting of the joint committee on the implementation of the
Vietnam--South Korea Free Trade Agreement (VKFTA), the MoIT’s AsiaAfrica Market Department said, adding the document is significant in
helping Vietnamese firms easily access high-quality textile materials from
South Korea for production for export to the EU.
The EU needs to import more than US$250 billion worth of garment and
textile products each year. However, Vietnam accounted for only a 2 per
cent share in this potential market, according to the MoIT.
However, according to the commitments of the EVFTA, besides meeting
strict quality criteria, to enjoy preferential tariffs local businesses must
implement strict origin requirements.
Specifically, exports to the EU must use fabric produced in Vietnam or the
EU. The agreement also allows firms to use fabric from countries which have
FTAs with both Vietnam and the EU.
This issue is still a weakness for the local textile and garment industry
because most raw materials are imported from countries that have not
signed FTAs with the EU.
In this context, Vietnam negotiated with the EU countries on cumulative
rules of origin, allowing Vietnamese exporters to use fabric made by a thirdparty country that has an FTA with the EU like South Korea.
Before the EVFTA took effect, the MoIT conducted a negotiation with the
Korean Ministry of Trade, Industry and Energy to carry out the cumulative
rules under the EVFTA.
Source: The Daily Star, Bangladesh Thursday, 17 December 2020