Could Vietnam's Textile Industry Make a Rebound?
The textile industry has undergone numerous challenges in 2021 due to the impacts of the Covid-19 pandemic. Experts predict that 2021 – 2023 is a decisive period for textile businesses in Vietnam: Either they will recover and gain new competitiveness or gradually disappear.
Mounting difficulties due to the pandemic
The period from the beginning of the third quarter has been a challenging time for textile businesses, according to the Vietnam Textile and Apparel Association (VITAS). In HCMC and other provinces and metropolitans in southern Vietnam, businesses have been encountering difficulties such as temporary closure or disrupted supply chain due to the Covid-19 pandemic. Most businesses in the region have managed to maintain only 10 – 30% of the onsite workers, leading to immense extra costs.
This has dealt a blow on the textile businesses’ finance and reputation.
Vietnam’s export of textile products in August 2021 reduced 15.9% compared to July, down 2.63% compared to the same period in 2020. In September, the total textile product export turnover reached US$ 3 billion down 9.2% compared to August 2021 and 10.5% compared to September 2020, respectively.
|The period from the beginning of the third quarter has been a challenging time for textile businesses in Vietnam. Photo: Baotintuc.vn|
In 2021, Vietnam aimed to achieve a growth rate of 10% in textile export to gain US$ 39 billion, according to the Ministry of Industry and Trade. However, VITAS data showed that in the first 9 months of 2021, Vietnam’s total turnover of textile product export reached only US$ 29 billion.
The Commercial Bank for Foreign Trade of Vietnam Securities Limited Company (VCBS) believes the ongoing pandemic since May 2021 was the main culprit making Vietnam less attractive compared to the period from early 2020 to March 2021.
If the pandemic is not controlled soon, the share of Vietnamese businesses in the textile market is likely to dwindle in the long term, according to VCBS.
However, VCBS also notes the government’s efforts to stabilize the socio-economy and support the textile industry to recover.
A brighter future, post-Covid
McKinsey predicts that 2021-2023 will be the recovery period, with the rearrangement of the supply chains and operation methods.
For the textile industry, VCBS believes that this period will decide whether textile businesses in Vietnam can recover and gain new competitiveness or gradually disappear.
While the prolonged Covid-19 pandemic globally may continue to leave negative impacts in the next two years, the textile industry is being offered opportunities for development from the free trade agreements which Vietnam has signed, especially the EU-Vietnam Free Trade Agreement and the Regional Comprehensive Economic Partnership.
The market share of textile products from Vietnam in the EU and U.S. continues to expand.
The rollout of Covid-19 vaccination in key markets such as the U.S. and EU has been leading to an increased consumption index. Data by Ourworldindata.org showed that the Covid-19 vaccination rates in the US and some EU countries have gone over 60%.
|The EU-Vietnam Free Trade Agreement offers opportunities for development for textile businesses in Vietnam. Photo: Reuters|
The Covid-19 pandemic has brought some changes, such as increasing demand for sports products and boosting the digitalization of the textile industry.
Various textile businesses have been investing in real estate, notably TNG Investment and Trading, the Vietnam National Textile and Garment Group, the Binh Thanh Import Export Production and Trade JSC and Damsan JSC, which have industrial park and housing projects in the handover process or waiting for approval.
With the positive outlook on the industry’s growth post-Covid, textile businesses have observed a significant increase in stock prices. For instance, TCM has recorded an increase of over 43.4%, GIL over 57.1%, TNG approximately 106%, VGT almost 110%, and MSH over 119%, respectively.
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