Vu Duc Giang, Chair of the Vietnam Textile and Apparel Association (VITAS)

Could you tell us about textile and garment production and exports in the first quarter of 2023?

Textile and garment enterprises have encountered many difficulties caused by increased interest rates, differences in exchange rates, and large proportions of imported raw materials. The number of orders continued to decrease due to falling global purchasing power, which dropped 25-27 percent in the first quarter of 2023. Purchasers nowadays only put in small, short-term orders with a few hundred products.

Enterprises that manufacture products for specific orders are facing a greater pressure than FOB (free on board) businesses because they cannot take the initiative in market and input material approach. The latest forecasts show that the global demand for textile and garment products in 2023 will decrease by about five percent or almost US$700 billion compared to 2022, which will affect Vietnam's textile and garment exports. Vietnam exported textile and garment worth US$4.55 billion in the first two months of 2023, 19.6 percent less than the same period last year.

The textile and garment industry is entering a new cotton harvest crop with increased output but decreased sales, bringing down the cotton price to US$2.1-2.3 per kilo in the first quarter of this year. Both yarn demand and sales have dropped, while large yarn inventories have increased costs, deterring working capital circulation.

When will the textile and garment industry recover?

Many factors can help Vietnam reach the textile and garment export target of US$47 billion this year. European and American markets are expected to recover from the end of the second quarter. The textile and garment industry’s growth will be supported by domestic source of raw materials. Domestic materials currently account for 49 percent of the sector’s materials, and the percentage is expected to increase to 55 percent by 2025.

Free trade agreements (FTAs) that Vietnam has joined, including the EU-Vietnam Free Trade Agreement (EVFTA), will contribute to the textile and garment industry’s growth in 2023. Taxes on many Vietnamese exports to the EU have been zeroed since this year.

Improved domestic raw material supply has helped Vietnam fulfill its FTA commitments

Vietnam exports yarn, fabric and auxiliary materials and also imports similar goods. Why is it?

Vietnamese textile and garment producers mainly make products according to orders of foreign partners, while the import of raw materials and accessories is based on the actual needs of importers and/or foreign brands.

Over the past 10 years, improved domestic raw material supply has helped Vietnam fulfill its FTA commitments. Vietnam currently has seven suit fabric factories and six high-quality khaki and denim factories, and is capable of making auxiliary materials and accessories like zippers and interlining.

Importers impose increasingly stricter quality requirements, including those related to product sustainability. What recommendations do you have for the textile and garment industry to meet those requirements and maintain sustainable export growth?

Textile and garment producers are facing many challenges. Large importers, including the US and the EU, impose new standards on imports, only accepting recyclable, sustainable textile and garment imports whose production has the lowest level of emissions.

Vietnam National Textile and Garment Group (Vinatex) and other domestic textile and garment enterprises are shifting to green production, including the use of organic materials to meet importers’ requirements and demand. Currently, 30-35 percent of fibers are produced from organic cotton. Material factories are equipped with solar power to meet the minimum 20 percent standard of green energy. The movement of the domestic textile and garment industry in the global supply chain is important for Vietnam’s success and position in the global market.