TEXTILE, FOOTWEAR COMPANIES CONFIDENT THEY CAN COPE WITH THIS COVID-19 WAVE TOO

Armed with experience from coping with the first wave of the COVID-19 epidemic, many textile and footwear enterprises are quietly confident they can alter their plans as required and find new markets to cope with the second.

The situation is worsening, according to most companies in the two sectors as the epidemic returns to Việt Nam and continues to rage in many countries around the world.

Lê Tiến Trường, general director of the Việt Nam National Textile and Garment Group, said that in the first six months of the year, though affected a great deal by the COVID-19 pandemic, his company sustained its operations and cash flows thanks to its decision to produce face masks and personal protective equipment (PPE).

 But the situation would be very different in the second half since the demand for those products is shrinking rapidly, he said.

The fact that many manufacturers switched to producing PPE has seen supply shoot past demand, he added.

Since the global outbreak began in April, many Vietnamese garment and textile businesses have been told by their US and EU partners that they would temporarily stop taking delivery of goods.

Phạm Xuân Hồng, chairman of the HCM City Association of Garment Textile Embroidery and Knitting, said this was because governments in the US and EU have declared a state of emergency and tightened border controls due to the rapid spread of COVID-19.

“They have asked Vietnamese businesses to suspend delivery, including of those en route, until borders are reopened.”

He said the US and EU are two important textile export markets for the country, while half of all exports from HCM City go to the US and 15-18 per cent to the EU.

“Partners in these markets have announced the suspension of deliveries, meaning the market for textiles and garments has narrowed by nearly two-thirds.”

Trường said developing the domestic market is the most feasible way to survive the pandemic.

Though the domestic market accounts for only 10 per cent of the industry’s capacity and cannot fully mitigate the unemployment problem, it is still a solution, he said.

Support from the Government in the form of access to cheap credit and deferred tax payment is also imperative, he said.

Phan Thị Thanh Xuân, general secretary of the Việt Nam Leather, Footwear and Handbag Association (LEFASO), too said though the domestic market is very small, developing it would be a key solution amid the difficulties in exporting.

"The domestic market cannot replace the US and European markets, but for the moment it is good if producers can sell products somewhere.”

Nguyễn Văn Miêng, general director of the Nam Định Textile and Garment Corporation, said companies have restructured their markets to sustain jobs. In the past, his company produced 1,100 tonnes of yarn and exported 65 per cent of it, but has now cut it to 45 per cent.

It produces around 1.2 million metres of fabric per month, but this is likely to decrease to 23,000-300,000 metres in the last two quarters of the year, he said.

The company is seeking to expand its market for new products in the north and taking advantage of dyed fabrics to sell finished products and supply to garment companies, he said.

It also wants to strengthen the yarn - weaving - dyeing links so that all companies in the chain could benefit, he added.

Wait for EVFTA

The EU-Việt Nam Free Trade Agreement (EVFTA) that took effect on August 1 will reduce import taxes on Việt Nam's garment exports by more than 70 percentage points.

Vietnamese footwear and textile and apparel enterprises will benefit significantly from the EVFTA because of the tariff cuts, according to Bảo Việt Securities Joint Stock Company.

With most other countries that export textile and garments to the EU not having a trade deal with the bloc, the EVFTA would open a great opportunity for Việt Nam’s footwear, textile and garment exports if companies enterprises meet origin requirements, it added.

Source: VNS