In recent years, Vietnam has developed rapidly, and there are even rumors that Vietnam will become a new world factory.

In fact, Vietnam's development has stalled this year.The garment and textile exports, which were previously proud of, have now become obstacles to Vietnam's economic development.

 

Vietnam's garment industry stuck

 

From the beginning of the rise of the textile and garment industry to follow the textile and garment industry, has been closeMr. Ruan Gaoffang, the production manager of Yue An Garment Company for 30 years, said that he has never felt the industry as difficult as it is now.

 

For 30 years, Nguyen Gaufang's company has still been using the materials specified by the ordering partners, including fabrics, glue and buttons, otherwise the goods produced will be rejected.

 

In fact, Vietnamese textile mills are required to purchase raw materials from Chinese manufacturers, which is a unilateral requirement from Europe and the United States. Many Chinese raw material manufacturers are only European and American brands,That is to say, European and American businesses make the most money, while China and Vietnam only make a fraction.

 

With respect to the textile industry, the three main modes of garment manufacturing are CMT (Cut, Make, Trim), which involves simple machining of the supplier's input.

 

FOB (Free On Board), in which manufacturers purchase their own materials and then process them according to actual conditions. Customers design and deliver products, ODM (original design manufacturer), manufacturers also design products.

At present, many textile companies in Vietnam still follow the first method, that is, they have been using the materials specified by the ordering partners, including fabrics, glue and buttons, otherwise the goods produced will be rejected.

 

 

In addition, accordingAn in-depth study of Vietnam's textile and garment industry released by FPTS Securities shows that this approach only brings an average profit margin of 1-3% per unit processing price, which is the lowest in the entire value chain.

 

But Vietnam is not the only company facing this situation: Vietnam's garment exports are about65% are CMT orders, 30% are FOB, and only 5% are ODM.

 

Working in a fashion company from the perspective of a foreign partnerMs. Huang Ling, a five-year factory manager, explains that global brands almost never give manufacturing companies the freedom to choose raw material suppliers.

 

She explained that in addition to quality and cost requirements, brands usually ensure that raw material suppliers are environmentally and socially responsible to avoid scandals.

 

If manufacturers are allowed to source their own materials, then the brand will need to hire an independent audit firm to vet its suppliers.The process can take at least a few months, while production schedules are tight and often require planning a year in advance.

 

Because can't get ridCMT model, Vietnam has been in trouble since mid -2022, with small orders and pressure to maintain low prices leading to lower profits.

 

In addition, low cash flows make expansion or movement up the industry value chain impossible. Vietnam's garment industry has seen little growth over the past decade, although exports from the sector have grown steadily.

 

Textile and clothing exports drop sharply

 

At present, Vietnamese garment enterprises have lost their home and have Nguyen Thi Xun Thuy, an expert with 20 years of experience in supporting industrial research, concluded that these industries cover a range of industries that provide raw materials and components for manufacturing.

 

 

Unfortunately, Vietnam used to have a complete supply chain for the garment industry, which meant it had the capability for the entire process from producing fibers and fabrics to sewing garments.

 

But economic integration is driving the industry towardCMT model to take full advantage of the country's biggest advantage, which is cheap labor.

 

Previously, according to 《Tuoi Tre reported that Garmex Saigon, one of the largest textile companies in Saigon, Vietnam, used to employ nearly 4000 workers, but now there are only 37 people left because it has not received any orders for several months!

 

AsOn September 30, 2023, Garmex Saigon had just 37 employees, more than 1,900 fewer than at the end of 2022 and more than 3,700 fewer than at the end of 2021.

 

to this,Explaining the business results, Ms. Nguyen Minh Hang, General Manager of Garmex Saigon, said that the company had no orders and its revenue in the third quarter of 2023 came from services.

 

Recently, the order receiving situation has become very bad. In the third quarter of this year, there were not even any orders. Only other service businesses still had a small amount of revenue and fell into four consecutive seasons of losses.

 

Vietnam, the world's second-largest garment exporter, is likely to see a decline in textile and apparel exports this year compared to the previous year.8% to 10%.

 

Meanwhile, according to Data and Events, the General Directorate of Statistics of Vietnam,FromSince the fourth quarter of 2022, Vietnam's textile exports have faced many difficulties, and the export volume has continued to decline. From January to September this year, the export volume was 25.51 billion billion US dollars, a year-on-year decrease of 12.1 percent.

 

Among them, exports to the United States11.33 billion U.S. dollars, down 18.3 percent; exports to the EU 2.86 billion U.S. dollars, down 13.1 percent; and exports to ASEAN 1.54 billion U.S. dollars, down 10.5 percent.

Annual exports are expected to be$40 billion, down 9-10% YoY.

 

 

According to the report, the main reasons for the decline in Vietnam's textile exports are the global economic downturn, the demand in traditional markets such as the United States, the European Union, and Japan has shrunk, and orders have decreased.

 

The second is that customers in the United States and Europe transfer orders to Central America, Africa and other places with more advantageous geographical locations and cheaper labor to reduce transportation and labor costs.

 

Third, some markets such as the European Union have put forward green environmental protection requirements for imported textiles, and have harsh requirements on product quality and raw material sources, which increase export resistance.

 

In addition, the EU is considering the introduction of an extended producer responsibility regime for textiles. Once the system comes into effect, it will bring severe challenges to Vietnam's textile exports.

 

Faced with a complex market environment, the Vietnam Textile and Garment Association believes that Vietnam's textile export difficulties will continueEarly 2024.

 

A senior official of the Vietnam Textile Industry Association said that textile and clothing exports this year may drop 40-$41 billion, while it will reach $44 billion in 2022.

 

beginning to show signs of recovery in the second half of the year,The decline in textile and clothing exports in the first nine months of 2022 was 13.5 per cent lower than the 17 per cent decline in the first half of the year. VITAS officials expect that next year's textile and clothing exports may be better than this year.

 

High inflation has led to tighter spending by consumers in Vietnam's largest export markets-the United States, the European Union, Japan and South Korea-leading to a decline in exports from the sector.

Due to the lack of orders, many export-oriented clothing factories have either reduced the scale of production or closed completely.