With exports to EU falling, textile makers are hurting

In 2012, orders for exports to the EU of Luc Nam Garment Factory, under Bac Giang Garment Joint Stock Company, dropped by 10 per cent compared to 2011. Nguyen Van Thien, director of the factory, said that the company had been deprived of $300,000-400,000 due to the decline in export orders from the EU market.

Vietnam’s garment export companies have longtime customers in the EU market, but they have all been hard hit by the economic crisis in the European region.

This situation lasted from early 2012 to now, and tended to decline further in recent months.

Textile and garment orders from the EU in September 2012 fell by 8 per cent against August.
Based on statistics by the Vietnam Textile and Apparel Association (VITAS), exports turnover of textile and garment to the EU in the past 10 months totalled to $2.1 billion, down 5 per cent compared to the same period in 2011. This has not only affected the completion of the export target for 2012, but also threatened enterprises over the possibility of a further decline in the number of orders in 2013.

With the US and the EU as its key export markets, TNG Investment and Trading JSC (TNG) had their export orders reduced by 12 per cent over the same period of last year. This led to a reduction of 18.2 per cent in its turnover for the first nine months of 2012.  

Nguyen Van Thoi, general director of TNG, said that compared to other companies, TNG retained a good export performance, but as the purchasing power in the EU and the US had declined sharply, the firm’s revenue was affected.

Moreover, the European economic crisis has made ​​the euro depreciate and fluctuate continuously. While Vietnam’s textile and garment products exported to the EU generated revenue in euro, most Vietnamese businesses used the dollar to pay for imported raw materials from places like mainland China, Thailand, Taiwan. The difference and loss in the exchange rates of these payments narrowed profits for many Vietnamese garment exporters.

Alice Baey, global purchasing manager of Group Casino - one of the leading worldwide retail companies, said the economic crisis in Europe had made obvious impact on the sales of textile products. “In much of the EU, retailers tend to try to sell the existing inventory and limit the amount of newly imported goods.” Baey also noted that the purchasing power in the EU had significantly lowered.

According to Thien, apart from EU customers losing interests in new orders with the Vietnamese companies, the export prices at which these firms managed to sign contracts have not improved, while domestic production costs such as electricity, water and labour have all increased.n

In this context, Luc Nam Garment Factory had restructured its export markets to make sure its export target is unaffected. The factory paid special attention to customers from  Japan, the U.S and especially Korea. Thanks to this restructuring plan, its export turnover target of between $10-11 million has been fulfilled.

Despite obvious difficulties in the EU, several textile exporters express hope that the world economy as well as the EU will stabilize in the last few months of 2012, leading to the improvement of order numbers for next year.