The garment and textile sector has not grown as expected despite the fact that limits on exports were removed when Vietnam joined the World Trade Organisation, according to industry experts.
They said Vietnamese businesses aren’t taking advantage of opportunities to make Free on Board (FOB) goods-items that Vietnamese companies are no longer responsible for after they are loaded onto transport ships or planes.
These contracts can be more lucrative for export businesses because they do not have to insure the cargo or pay import duties when the items reach their destination.
Currently, only 20 to 30% of textile and garment exports fall into this category.
To address this issue, the sector plans to encourage businesses to shift their focus to FOB products to increase the industry’s overall production between 5 and 10% this year.
Pham Xuan Hong, general director of Sai Gon Garment and Textile said: "Only by producing FOB items can businesses survive and develop."
So far this year, the sector has recorded revenues of US$3.4bil in the first half of the year and an annual growth rate of between 20 and 30%.
While positive, the industry’s target of earning $12bil in exports by 2010 will be difficult to reach if reforms are not made and soon. Another issue that was up to 80% of raw materials were imported.
The sector plans to try and reverse this trend by building three industrial zones specifically designed to knit and dye fabrics.
"We will invest in three centres to provide materials for garment and textile companies in Hanoi, Da Nang and HCM City and move the production to surrounding areas of those centres to address the high demand for materials," said Le Quoc An, chairman of the Viet Nam Garment and Textile Association.
Businesses will likely also use Vietnam’s burgeoning fashion industry to diversify their products and create special trade marks.
To do this, they’ll need the support of skilled workers, yet another problem plaguing the sector.
Vietnamese companies typically produce items for foreign companies that outsource to Vietnam, but local businesses simply do not have the human resources or capacity to meet their quotas.
"We are not worried about lacking contracts, instead we’re having trouble employing enough workers. Investing in new technology is now even easier than finding skilled labour," said Hong.
The average salary for a tailor can be as much as VND1.5mil per month, but even that hasn’t made recruitment any easier.
People who have been hired from outside HCM City can be tough to hold onto, as well, especially after the Lunar New Year or Tet when they return to their home villages.
The Sai Gon Garment and Textile Joint-Stock Company 2 has seen its orders from American companies double recently, yet hasn’t be able to meet the deadlines because 25 of its 40 production lines are unmanned. The situation is even more serious in Quang Ngai Province.
Of its seven garment companies, four have closed because they don’t have enough employees. Not even lowering the requirements for workers has helped.
Thuyen Nguyen Co Ltd needs more than 1,000 tailors, according to a provincial labour survey.
Source: VNE
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