Local textile sector stitched up by US quota changes

“Most of these companies have fully utilised their allocated export quotas to US for the whole year and are facing a serious lack of work in the months ahead,” department head, Nguyen Chi Tu, said late last week.
The textile sector is Vietnam’s second-biggest earner of foreign exchange after crude oil. However, the US-Vietnam textile and apparel agreement signed three months ago caps Vietnam’s exports to the US at $1.7 billion this year.
A representative of the Malaysian-invested Unitex Sweetheart company, Luu Thi Minh Hien, told Vietnam Investment Review that if her company did not receive further quotas for the last quarter, she would have no choice but to temporarily terminate the contracts of all 1,000 employees.
Meanwhile, the Singaporean Chutex company is facing difficulties not only in the layoff of its 4,000 workers but in simply staying afloat.
The company invested a huge amount of capital in modernising its production lines to conform with American standards, but company executives said capital returns seemed impossible in the current context.
Some garment enterprises in Binh Duong industrial parks were reportedly in the same boat. Director of the province’s IP management board, Tran Van Lieu, said many companies had stopped recruiting workers due to quota shortages.
“Although the Vietnam-US textile agreement came into force three months ago, many companies did not anticipate it being concluded so soon and haven’t been able to adjust their production plans,” Nguyen Chi Tu said.
“The result is that many factories have orders on hand but cannot ship them due to inadequate quotas. The delays in order dispatch not only drive the companies into financial ruin but also spoil their reputation with foreign clients.”
To solve the problem in the short term, Tu suggested the Ministry of Trade borrow more export quotas from the year ahead in order to provide immediate relief to thousands of unemployed workers and give enterprises more time in which to adjust themselves.
The Korean Garment Manufacturers’ Association in Hanoi represents more than 100 South Korean companies, and chairman Yi Dong Hwan was recently quoted in the foreign press as saying some members of the association would have to close shops in the next few months because of quota shortages.
An official from the Taiwanese Garment Manufacturers Association in Vietnam, which represents more than 80 Taiwanese companies, said the government should organise field-trips to factories to assess their real production capacity and ensure that quotas were being allocated appropriately.