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Export Growth An Open Question
By Le Quoc An
Chairman of the Vietnam Textile and Apparel Association (VITAS)
Thursday,  Jun 17, 2010,01:11 (GMT+7)

Export Growth An Open Question

By Le Quoc An
Chairman of the Vietnam Textile and Apparel Association (VITAS)

Vietnam's textiles and garments have made their way to most econmic powerhouses
Export of textiles and garments has increased by 78 times over the past 20 years. However, is there still room for growth in the future?

Over the past two decades, changes in the global market for textiles and garments, as well as Vietnam’s deeper global integration, have paved the way for the local apparel sector to develop. Labor shortages in Asia—particularly Taiwan, Hong Kong, Korea and Singapore—have forced these economies to gradually scale down production and invest in workshops in other countries where human resources are more abundant. Vietnam is one of these labor-rich countries.

Furthermore, its ASEAN, ASEM, APEC and WTO memberships has enabled Vietnamese products in general and textiles and garments in particular to face less discrimination in the international market. Vietnam has also signed free trade pacts and many other multilateral and bilateral economic cooperation agreements to help its textiles and garments penetrate some important markets.

The U.S. market sets an example. In 2001, Vietnam’s textile and garment export to the U.S. was only US$47 million and was not yet an important market player. However, the figure surged to US$5 billion in 2009, enabling Vietnam to become the second biggest exporter of textiles and garments. In the same year, Vietnamese exporters also secured the same status in Japan with export earnings exceeding US$1 billion. At present, Vietnam’s textiles and garments have made their way to most economic powerhouses. In 2009, Vietnam ranked eighth in the list of top textile and garment exporters, earning US$9.1 billion. This was 78 times as much as that in 1991 when the country earned US$116 million.

However, is there still room for Vietnam to boost export of textiles and garments, considering that such advantages as ample labor supply and low prices are being eroded? To answer this question, it is vital to analyze market trends both at present and in the next 10 years.

In the past 10 years, the world’s three biggest importers of textiles and garments were the U.S., the European Union (EU) and Japan, which accounted for nearly 70% of global demand. Besides, the main suppliers of textiles and garments, including North America, South America, Central America, Eastern Europe, Southern Europe and North Africa have had to slash their share of the above markets due to labor and cost constraints. In particular, Mexico’s share of the U.S.’s market for imported textiles and garments fell from 16.7% in 2000 to merely 5.37% in 2009.

The leading exporters of textiles and garments to EU, notably from Eastern Europe and North Africa, have also suffered a shrinking market share. Morocco’s proportion plunged from 5.92% in 2000 to 3.45% in 2009, and Poland’s from 4.1% to 0.98%. Turkey, the leading exporter to EU, can only maintain its market share at 14%.
In Japan, the share of such Western exporters as Italy, the U.S. and France dropped from 13.2% in 2000 to 6.1% in 2009.

In contrast, the share of Asian countries has gathered rapid pace, rising from 52.7% in 2000 to 75.11% in 2009 in the U.S., from 47.46% to 85% in EU, and from 81.71% to 91.51% in Japan. This trend indicates that Asia is the world’s leading textile and garment exporter both at present and in one or two decades.

The issue is which Asian countries will capture the biggest slice of the pie. China, India and Pakistan enjoy advantages in the labor force and material supply. Thailand and Malaysia are better at designing, marketing and ensuring the quality of their products. Bangladesh, Indonesia and Cambodia boast cheap labor. Meanwhile, Myanmar and North Korea will have the most competitive workforce in the textile and garment industry.
Over the past 10 years (2001-2009), Vietnam’s textile and garment export increased by 100 times in the U.S. (previously there had been no export due to daunting tariffs), nearly three times in EU and about two times in Japan.

Still, it is unlikely for Vietnam’s textile and garment export to the U.S. to continue soaring, unless the ASEAN-U.S. Free Trade Area or the Trans-Pacific Partnership Agreement are in place without imposing the “yarn forward” condition. There is, of course, room for growth if the sector can make optimal use of the Generalized System of Preferences (GSP) in EU and the Economic Partnership Agreement (EPA) in Japan.

Internal improvements may play a role. Productivity can rise by 30% and localization by 20% by virtue of better supporting industries. Product quality may rise, too, and so can design capabilities. In so doing, Vietnam can transform its export strategy from OEM (original equipment manufacturer) to ODM (original design manufacturer). Low added value is arguably the Achilles’ heel of Vietnam’s textile and garment industry, but it can be tackled.
Efforts to address this concern are also the highlight of the “Vietnam’s best-performing enterprises in textile-apparel and leather-shoe industries” awards given by Vitas and the Saigon Times Group over the past few years.

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