Garment sector starts to unravel

Export growth plunge and declining orders have attributed to Vitas Executive Committee’s recent decision to scale down the sector’s 2012 export value from $19 billion to $17-17.5 billion.

TNG Investment and Trading Joint Stock Company director Nguyen Van Thoi said lowering export target decision was based on the gloomy world economic outlook and sinking textile and garment consumption globally, in which the Eurozone’s austerity policy extension had directly affected the textile and garment sector’s export target fulfillment.

Ministry of Industry and Trade figures show that the sector’s export value hiked 14.7 per cent on-year in the first four months of 2012 hitting $4.4 billion. However, in the first five months the growth fell to a single-digit 7.7 per cent reaching $5.3 billion and in the first seven months the sector’s export growth remained in a single-digit range at 8.8 per cent which was much lower than the country’s general on-year export growth 19 per cent.  

If the export of textile, garment and fibre was counted, January-July total export value amounted to $9.2 billion, up 7.5 per cent on-year against 30 per cent jump in the same period last year.

According to Saigon Garment 3’s director Pham Xuan Hong export orders were mostly in the hands of big firms, but in decreasing amounts compared to in 2011while export prices slid 5-10 per cent.

In this context, textile and garment firms said they hope the government would assist them with value added tax reduction and exemption to fuel consumption in both domestic and export markets.

In light of Resolution 13/NQ-CP dated May 10, 2012 textile and garment firms are subject to six-month VAT payment extension. However, the sector voiced a proposal for VAT exemption from three to six months and a hike in VAT refund rate for export items from current 10 to 15 per cent.

Vitas forecast the sector’s production and export difficult period would last at least in the next three months since no signs of resuming consumption in the world market are in the horizon at this time.

In reality, Vietnam’s textile garment export to Europe had contracted in the first six months of 2012. Exports to Germany shed 9.7 per cent on-year falling to $249 million, to Turkey plunged 49 per cent to $34 million, to France slid 13.3 per cent and to Sweden down 27 per cent.

Export prices of yarns, fibres as well as textile-garment products in the first seven months also sank 21.1 per cent on-year, thus driving up firm burdens.