Golden time for Vietnamese apparel sector switch to green production

July 27, 2023 - 09:02
The green transition has been increasingly implemented by businesses in Việt Nam for the past five years. Although the implementation progress is still relatively slow, with the inevitable motivation to improve the industry's advantages, it is the best time for domestic enterprises to focus on accelerating transformation.


A garment and textile production line at Dony Garment Company Ltd in HCM City. The garment and textile industry will work towards efficient use of resources and waste reduction. — VNA/VNS Photo Hồng Đạt

HÀ NỘI — The shift towards green textile and garment production chains is necessary for local firms to achieve sustainable development goals and counter the gradual loss of Việt Nam's cost advantage. It is a golden time for the sector to switch to sustainability, experts said.

Việt Nam's textile and garment industry will continue to face difficulties in the coming months due to the decreasing orders from markets like the US and EU, according to Việt Nam Textile and Apparel Association (VITAS).

Statistics from VITAS showed that in the first half of the year, the industry’s export turnover was estimated at US$18.6 billion, down 17.6 per cent over the same period last year. Meanwhile, the import turnover also reduced by 20.5 per cent to $10.7 billion in the first six months of the year.

VITAS forecasts that production and export of textiles and garments will gradually improve, but difficulties will continue until the end of 2023 as many businesses have not yet had enough orders for the third and fourth quarters.

As such, the garment and textile sector set an export turnover target of $40 billion this year.

According to information from the Mercantile Exchange of Việt Nam (MXV), since the end of 2022 cotton prices have been quite stable, mainly struggling within a small range of $1,800 to 1,900 per tonne. The cotton prices traded on the Intercontinental Exchange (ICE) as of July 18 at $1,847 per tonne, down nearly 1.5 times from the price of nearly $2,700 per tonne recorded last August.

Cotton prices are stable at low levels stemming from both supply and demand of the market. On the supply side, cotton production gradually recovered after the effects of drought in the main cotton-growing region of the US in mid-2022. Meanwhile, the recovery in demand for cotton was lower than expected due to global economic headwinds.

In particular, China, the world's largest cotton importer, is still showing a slow recovery after removing its zero-COVID policy, making cotton imports less positive.

Phạm Quang Anh, Director of the Việt Nam Commodity News Centre said that the world economy still faces many challenges, especially the slow recovery of China which has continued to be a major obstacle to increase demand for cotton products. Therefore, cotton prices could maintain a pullback trend in the near future.

Stable cotton prices are a good thing for big cotton importing countries like Việt Nam. But the problem is that the price dropped sharply and showed no signs of recovery, making local textile and garment enterprises that had purchased goods before not able to react.

The price difference makes the cost of producing textiles and garments in the country high compared to elsewhere which is not heavily dependent on input materials, hindering Vietnamese firms in receiving orders.

Cao Hữu Hiếu, General Director of Việt Nam National Textile and Garment Group (Vinatex) said difficulties have been seen from the third quarter of 2022 due to low consumer demand, the deeply dropped price because of decreasing cotton prices - the main raw material of the yarn industry.

When China officially reopened, the domestic yarn industry also found it difficult to compete on price. Therefore, the entire yarn industry suffered losses and production inventories were high. In addition, the unit price dropped sharply, many manufacturing units have reduced processing prices by up to 50 per cent.

The difficulties have not been only due to the price of raw materials, but also from intrinsic production factors.

In the past, the often mentioned advantage of Việt Nam's textile and garment industry to compete with big rivals such as Bangladesh and India was abundant and cheap labour. With this advantage, the industry became a key export sector of Việt Nam when contributing more than 10 per cent to the annual export turnover.

However, in the past few years, along with the development of the labour market, cheap labour in Việt Nam has no longer been an advantage.

Anh said salary increases in the textile and garment sector is a good sign for workers' lives, as well as showing the industry's capacity. But labour costs are not as cheap as before, which would partly limit Việt Nam's competitiveness.

However, on the positive side, this is the driving force for the industry to improve production technology and product quality. It requires Việt Nam's textile and garment industry to switch to more diversified competitive advantages to quickly return to the textile and garment supply race, not only focusing on cheap labour as before.

Switch to sustainability

To overcome these difficulties, many businesses had to be flexible in their production. They are willing to do small orders, complexity and higher requirements. However, it is still important to transform ourselves for more sustainable development.

Vũ Đức Giang, chairman of VITAS said “greening” in garment and textile production could help businesses meet the requirements of importers from Europe, along with sustainable business development. This is no longer a future-oriented story, but in recent years, many domestic textile and garment enterprises have been conscious and transformed to fulfill this requirement.

He said the textile industry would work towards efficient use of resources and waste reduction, removal of substances and elimination of microfibre generation; transform the way clothing is designed, sold and used so that natural emissions could be reduced; radically improve recyclability by design modification, recovery and remanufacturing towards the use of renewable fuels.

In fact, the "green" transition has been implemented by many businesses in Việt Nam for the past five years. Although the implementation progress is still relatively slow, with the inevitable motivation to improve the industry's advantages, it is the best time for domestic enterprises to focus on accelerating transformation, he added.

He said converting production to match market demand is inevitable. To achieve the goal, Vietnamese businesses need to focus on forecasting the world cotton price situation to have reasonable price strategies, and increase stability and sustainability for the multi-billion-dollar export industry. — VNS