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The textile and clothing sector is recovering in Vietnam

By Herve Dewintre

3 Jan 2022

Business

Photo credit: Hervé Dewintre

After an unprecedented wave of layoffs, the sector recovered rapidly in the last quarter by abandoning its "zero-covid" policy.

Vietnam, along with Cambodia, Bangladesh and more recently Burma, is a major supplier of clothing and textiles to the European Union (and the Western world in general). Its economy has been one of the best performing in 2020 (2.9 percent growth). Production has been on the rise since China, for the past decade, has wanted to move upmarket in its production. Nike, New Balance, Puma and Adidas, to name but a few, depend on this Southeast Asian country for much of their production. However, the pandemic - starting with the strict confinement of the Ho Chi Min region, with the army delivering the meals - did not spare this new workshop of the world.

A trauma for the 1.3 million migrant workers who came from the countryside and returned to their native region from July to September. The country has indeed experienced the pandemic with the Delta variant, which caused a surge in infections from last summer. The epidemic bounced back in early November. On November 29, VnExpress International, the English version of Vietnam's leading news website, sounded the alarm: "Factories may be offering higher wages and better benefits to attract workers as their end-of-year order books fill up, but they are receiving few applications amid lingering fears of Covid-19.

Same level as before the pandemic

Bloomberg reported in November that a Nike subcontractor was offering 100 dollars a month bonuses to its workers - a quarter of their salary - and a New Balance supplier was promising free transportation for those returning to Ho Chi Minh City. Phan Thi Thanh, vice president of the Vietnam Leather, Footwear and Handbag Association, recently told Reuters that many Christmas orders from foreign countries would not be fulfilled. However, Le Courrier du Vietnam now claims that the sector is recovering, especially since the government has relaxed measures to prevent and control the epidemic, abandoning its "zero Covid" policy.

Cao Huu Hiêu, general manager of Vinatex, told the Courrier du Vietnam that in October, 90 percent of the employees of the group's companies had already returned to work. At present, nearly 100 percent of the group's employees are present in their companies. "The high growth rate in the fourth quarter has enabled the textile and garment industry to achieve the export target of USD 39 billion for the whole year, an increase of almost 12 percent compared to 2020. Already, growth in the sector has returned to pre-Coronavirus levels. Exports to the EU have reached 3.7 billion dollars, up 14 percent.

The good figures are explained by strategic choices: the high profits are due in particular to the choice of factory managers to give priority to the yarn industry, which has risen from 20 to 50-55 per cent of total production. The concern remains, however, that logistics costs are still four to five times higher than before the pandemic. Other challenges include a shortage of empty containers, shipping congestion that forces companies to deliver goods by air, and fluctuations in key export markets. The sector is targeting USD 38-39 billion in export sales in the worst case scenario, USD 42.5-43.5 billion in the best case scenario.

This article was originally published on FashionUnited.FR, translated and edited to English by Kelly Press.

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