Vietnam’s textile and garment sector is facing huge difficulties caused by the global situation and domestic interest and exchange rate policies, with the fiber industry likely to disappear in the near future without bank support, said Le Tien Truong, chairman of Vietnam's largest garment maker Vinatex.
Speaking at a Thursday conference on monetary policy management to facilitate production and business in 2024 chaired by Prime Minister Pham Minh Chinh, he said Vinatex accounts for 5% and 8% of the entire textile and garment industry's workforce and export turnover, respectively.
“However, Vinatex and the textile and garment export industry are facing many difficulties from both interest rate and exchange rate policies,” he noted.
In 2022-2023, the world’s top five textile and garment exporters, including China, Vietnam, India, Bangladesh and Turkey, all tried to stimulate exports by sharply weakening the value of their currencies.
While Turkey had its currency devalued by 50%, Bangladesh 21%, and China 11%, the Vietnamese dong, the local currency, decreased by only 5% in value in the past two years, according to Truong.
"In terms of exchange rate, Vietnam's textile and garment products were about 15% more expensive than others in the top five," he said, explaining this was also one of the reasons why Vietnam’s textile and garment exports declined 10% in the period, the sharpest fall among the five countries in the industry.
Regarding interest rate and credit policies, the Vinatex chairman commented that lending interest rates in other countries are at about 3.5%, while in Vietnam, Vinatex is borrowing money at a rate of 7-9%.
The interest Vinatex paid to banks in 2023 increased by 10% compared to 2022, while the total outstanding debt decreased by 11%, Truong cited his company’s consolidated financial statement, saying it meant the capital cost was more expensive.
Suffering fiber industry
The fiber industry is losing on a global scale, not just in Vietnam. In 2024, fiber producers are facing enormous obstacles in accessing capital as most banks have cut credit quotas or require collateral which is equal to the value of the loan.
According to the Vinatex chairman, while other countries such as China and Bangladesh maintain strong support policies for the fiber industry, Vietnam has not.
“Vietnam will lose its fiber industry without support from banks, the government, and relevant ministries and agencies,” he stressed.
Warning about the risks facing the industry, Truong said the value of new investment assets in the fiber industry is about $6 billion while the remaining value is about $3 billion, but it has to pay banks about $300 million in interest each year. With fewer bank loans, fiber firms have to narrow production, causing uncertainty in the long term as they have no money to repay debts.
Besides, the fiber industry spends about $1 billion paying salaries for 150,000 workers, and $500 million on electricity bills a year, he added.
"We need to continue supporting fiber businesses in 2024 to help them maintain production," Truong stressed.