What's really impressive about Vietnam's textile sector is how it's spread its wings across 104 countries and territories. This isn't just about selling more, it's about smart diversification – selling different products to different places, writes Dr Bui Duy Tung, economics lecturer at RMIT Vietnam.
Vietnam's textile industry has its sights set on a bold target for 2024: hitting $44 billion in export revenue, a 9.2 per cent jump from last year.
This goal isn't just about bouncing back; it's a clear sign of Vietnam's strategic edge in the global textile game. But let's not sugarcoat it – there are hurdles ahead. From the unpredictability of supply chains to the rise of trade protectionism, not to mention the economic policies of major players like the U.S, the path to success is far from straightforward.
What's really impressive about Vietnam's textile sector is how it's spread its wings across 104 countries and territories. This isn't just about selling more; it's about smart diversification – selling different products to different places. This strategy is crucial, especially when you consider the risks of putting all your eggs in one basket, like relying too much on the U.S market. Sure, there's a bit of a rebound expected in exports to the U.S, but it's a reminder that variety is the spice of trade.
Vietnam's knack for forging strong trade agreements and maintaining solid international relationships is a game-changer in today's trade climate. These agreements are more than just paperwork; they're a shield against trade barriers and a boost for exports. The Vietnamese government and the Agency of Foreign Trade deserve a nod here for their role in making the most of these agreements.
With the increasing global focus on environmental sustainability, the Vietnamese textile and garment industry's commitment to green production and greenhouse gas emission reduction is commendable. This shift towards sustainable practices is not only an ethical imperative but also a competitive necessity in the face of changing consumer preferences and regulatory demands.
The VinaCapital Group report provides a positive outlook for Vietnam's textile and garment exports, particularly towards the U.S. The noted reduction in inventories of U.S clothing brands and retailers by 5-7% at the end of 2023 compared to the previous year suggests a potential increase in demand for new orders in 2024. This is an important development, given the U.S’s status as the largest importer of Vietnamese textile and apparel products.
The report's indication that apparel exporters have orders in hand which are expected to last until the end of March 2024 is a strong indicator of the industry's robustness and the confidence global buyers have in Vietnamese exports. This forward visibility into order books is critical, as it provides a tangible measure of the industry's health and its ability to sustain and grow export revenues.
As we approach 2024, Vietnam's textile and garment industry, a crucial sector of its economy, faces a confluence of challenges that could significantly shape its trajectory. Analyzing these challenges critically offers insights into the industry's adaptability, resilience, and potential for future growth.
Vietnamese textile and garment enterprises are grappling with rising input costs, including a 3% increase in energy and electricity prices and a similar rise in exchange rates since the end of the second quarter of 2023. This situation has created a complex business environment, affecting market competitiveness, financial stability, and production costs. Such cost pressures necessitate strategic responses, including exploring more efficient production methods and possibly diversifying supply chains to mitigate these increases.
The industry has observed a decline in the quantity of export orders. These orders have become more demanding, often with short-term plans and extended delivery times. This change adversely impacts production schedules and business results. In 2023, this trend has necessitated a pivot in operational strategies, pushing businesses to be more agile and responsive to market demands. The challenge lies in maintaining quality and delivery commitments while navigating the fluctuating order volumes and specifications.
There has been a notable shift in the structure of export products. Traditional items such as sweatshirts, shorts, and children’s clothing are experiencing a decline, while there is a growing demand for products like protective safety workwear, suits, medical clothes, and jeans. This shift indicates a significant change in global consumer preferences and market needs. Vietnamese textile businesses must adapt by diversifying their product lines and investing in new production capabilities to cater to these emerging segments. This change not only represents a challenge but also an opportunity to capture new markets and customer segments.
Vietnamese textile and garment enterprises face regulatory challenges, including the adoption of Extended Producer Responsibility (EPR) and the Carbon Border Adjustment Mechanism (CBAM), as well as adapting to the “sustainable fashion” strategy over “fast fashion.” This shift necessitates a thorough reassessment of production and supply chain practices to meet these new regulatory requirements and consumer preferences. Additionally, complying with the EU's OECD supply chain due diligence directive and Germany's supply chain scrutiny laws will require enhanced transparency and accountability in operations.
The trend towards using and recycling old clothes, as exemplified by France's government incentive program, represents a significant shift in consumer behaviour. This trend could lead to a decrease in demand for new clothing, impacting sales for the textile and garment industry. To adapt, Vietnamese companies must explore innovative business models, such as circular fashion, which focuses on the lifecycle of products, promoting reuse and recycling.
The Vietnamese textile and garment industry in 2024 will navigate through a landscape marked by economic, environmental, and regulatory challenges. Success in this environment will depend on the industry's ability to adapt to changing market demands, invest in sustainable practices, and embrace technological advancements. Additionally, navigating the competitive global market will require a focus on quality, innovation, and efficient supply chain management. The industry's response to these challenges will not only determine its immediate economic performance but also shape its long-term sustainability and global competitiveness.