2016 and sprawl challenges for the textile industry

The export turnover of the textile industry in 2015 still holds second place in the total national exports. The average growth rate in the past 5 years the whole sector remained high at 16.4% CAGR.

As of mid-December 2015, the export value of textiles and garments reached USD 21.6 billion (an increase of 9% over the same period last year, lower than in the same period of 2014 was + 16%). If we include every fiber, yarns and accessories materials of all kinds, the whole industry export turnover reached US $ 25.3 billion (an increase of 9% over the same period in 2014 was up 17%).

According to his share Vu Duc Giang, Chairman of Vietnam Textile and Apparel Association, total textile exports in 2015 is expected to reach $ 27.5 billion, up 11.3% compared with 2014, but still lower than the previous plan of 28 billion dollars.

Although exports of Vietnam textiles is growing in traditional markets like the US, EU, Japan and Korea, but momentum has slowed somewhat due to input prices fell sharply causing output prices remain low and the exchange rate between the USD / VND continued to increase over the past year.

In addition to the US market still maintained the growth rate to double digits, the remaining markets are no longer as strong growth in 2014. In particular, in the last 11 months, exports of textiles and garments US market to reach US $ 9.88 billion (up 11.7%, lower than the same period in 2014 was increased by 11.85%); to the EU reached 3.09 billion (up 3.5%, lower than the same period of 2014 were up 26%); to Japan reached US $ 2.53 billion (up 6.2%, lower than the same period in 2014 was increased by 13.82%) and to South Korea reached US $ 1.98 billion (up 1.3%, lower than the same period in 2014 is 36%).

Notably, in the first 11 months of 2015, textile exports of Vietnam in the market within the TPP increased 10.8% over the same period last year and accounted for 55% of total textile exports you.

In economic times many difficulties at present, the textile industry is getting plenty of attention and appreciation on growth prospects due to the textile is one of the few sectors remain positive and stable growth nail. In 2016, the industry aims to export at $ 31 billion.

Besides, textile bearing is facing a lot of great opportunities to promote exports through free trade agreements TPP - EU - Korea - Customs Union (Russia, Belarus, Kazakhstan).

However, according to the experts at Vietcombank Securities Company (VCBS), painting textile industry outlook in 2016 exist many difficulties and challenges. Salary policy change, exchange rate pressure between countries in the region and the constraints attached to joining the FTA led some competitive advantages of the sector will also be affected.

Previously, cheap labor is one of the competitive advantages of Vietnam's garment, now, this advantage is gradually lost when the base salary and the minimum wage are the government revised up from 2016 .

Specifically, the base salary increased from 1,150,000 VND / month to 1.21 million dong / month (an increase of approximately 5%) will entail costs of social insurance paid by the employer. Similarly, the new minimum wage will be around 106.67 to 155.56 USD / month, higher than the minimum wage in some exporting countries such as Bangladesh garment opponents (67 USD / month), Myannmar (82, 96 USD / month), Mongolia ($ 96.34 / month), Pakistan (93.5 to 112.2 USD / month), Cambodia ($ 124.21 / month) ...

Besides, the exchange rate pressure caused export prices uncompetitive, tends to devalue the local currency against the US dollar of textile exporting countries are going strong.

Although the government has more flexibility to improvise in making solutions on the exchange rate, but these moves have yet fierce nature than those of its competitors. Therefore, VCBS that a shift of orders from China to Vietnam will also downward movements in 2016.

In addition, many enterprises Vietnam not meet the conditions for the tax benefit from the FTA, especially in terms of origin. Currently, 70-80% of textile raw materials is still dependent on supplies from China and other countries outside the FTA.

Yarn and fabric products domestic production is not diversified, high quality should not only use 20-25% of the production for export garment industry. Meanwhile, the two largest FTA of Vietnam and Vietnam's TPP - The EU has relatively strict rules for goods enjoying tax incentives.

Specifically, TPP requires origin "from yarn onward" and Vietnam FTA - EU requests "from fabric onwards" for the textile products export in the area of ​​commercial effect free . Therefore, although the TPP and EU markets with great potential, but in the short term, most of the textile products of Vietnam today will hardly be of benefit tariffs.

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In the long term, the question is whether the textile industry to benefit from trade taxes with large consumer markets offset by exchange rate risk and the risk cost of production is increasing or not ?

And who will ultimately benefit from the FTA, Vietnam enterprises or FDI as the textile enterprises have FDI, especially capital from China to Vietnam are continuing to invest to build plants with production technology more advanced, larger and more experienced producers.

To answer this question, will need more time to observe and evaluate separately for each enterprise in the sector.

Via: BizLIVE

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