Navigating through small and fragmented orders

Mr. Cao Huu Hieu, General Director of the Vietnam National Textile and Garment Group (Vinatex), reported that in the first six months of 2023, the revenue of enterprises within the system had fallen by 18-20% compared to the same period in the previous year. The garment sector, in particular, faced a scenario where orders were minimal and highly fragmented. Numerous large textile enterprises, employing thousands of workers, were compelled to adapt by accepting smaller orders ranging from 500 to 1,000 jackets, with sewing prices dropping to record lows. Additionally, customers began imposing stricter requirements.

At the seminar "Economic growth solutions for the end of 2023 - beginning of 2024," held in early November 2023, Ms. Nguyen Thi Tuyet Mai, Deputy Secretary General of the Vietnam Textile and Apparel Association (VITAS), emphasized, “The textile industry is currently facing unprecedentedly severe challenges.” The industry, which experienced robust growth in previous years (with the exception of 2020, due to Covid-19), saw a significant export turnover of 44.4 billion USD in 2022. This performance positioned it as one of Vietnam's largest export sectors and the third-largest globally in textile exports. However, a noticeable decline in orders began to emerge towards the end of 2022. By 2023, the industry was hit hard by a reduction in international clothing market consumption, increased costs of raw materials, and a heavy reliance on imported fabrics.

Another challenge confronting the textile industry is the global shift toward sustainable development. This shift has led to stringent commitments regarding environmental and labor standards, necessitating substantial investment from enterprises, despite order values not increasing correspondingly. In terms of environmental concerns, the demands of consumer markets and brands are pushing enterprises towards digital and green transformations, which in turn are escalating production costs.

The downturn in exports was not limited to the textile industry. For instance, in 2023, the export value of wood and wood products fell to 13.5 billion USD, a 15.9% decrease from 2022. Within this category, the export value of wood products alone dropped by 16.7% compared to the previous year.

The Import-Export Department of the Ministry of Industry and Trade noted that although there were signs of recovery in the wood industry towards the end of 2023, various market challenges persisted. These included complex and prolonged international conflicts impacting business operations, increasingly stringent regulations from major export markets on product legality and sustainability, disruptions in shipping due to conflicts in the Red Sea, and a rise in sea freight rates with additional surcharges. These factors significantly affected wood industry enterprises, casting uncertainties on the export prospects of wood and wood products for 2024.

According to the Ministry of Industry and Trade, in 2023, the total export turnover of the processed industrial goods group was estimated at 301.05 billion USD, a 5.7% decrease compared to the same period in 2022. Of the seven items in this group with an export turnover exceeding 10 billion USD, five experienced declines compared to the previous year.

The Ministry further analyzed that all industries faced export market challenges due to a global decrease in demand, particularly for non-essential consumer goods. As a result, export turnover to most major markets declined. However, the rate of decrease gradually narrowed, and the impact varied across different industries.

The beginning of the year saw a widespread "thirst" for orders across various industries. Nonetheless, enterprises are hopeful for a market rebound in 2024.

In the context of slow global economic growth and reduced global demand, Vietnam's export activities continue to face challenges, though the decline is becoming less steep. From a 12% decrease in the first half of 2023, the reduction narrowed to about 4.6% for the entire year. Amidst declining exports to major markets, export activities excelled in market diversification, with export turnover to countries in Africa, Eastern Europe, Northern Europe, and West Asia increasing.

The decrease in exports from the domestic economic sector (an estimated decrease of 0.9%) was significantly lower than that of the foreign-invested sector (including crude oil) (an estimated decrease of 5.9%), and lower than the overall decrease in the country's export turnover.

Source:Custom News