Dhaka, Bangladesh
Vietnam may surpass Bangladesh

RMG export

Vietnam may surpass Bangladesh

News Desk Vietnam may surpass Bangladesh in export of RMG in the international market as China has started investing heavily in the ASEAN country. Until 2018, Bangladesh was the second largest exporter of ready-made garments in the international market after China. Vietnam exported RMGs to the international market valued at 2930 crore US dollars during January-September period of the current calendar year while Bangladesh's exports to the international market hit 2,610 crore US dollars, according to sources. China now is the third-biggest FDI investor to Vietnam, climbing up from fifth in 2018. China's direct investment in Vietnam has surged more than 60 per cent this year. Vietnam is one of the favored options as the country has witnessed pledges of foreign direct investment from China surge 134 per cent from January to July. Increasing production costs in China has pushed manufacturers to relocate their factories to Southeast Asia countries which have lower costs. Vietnam is also seen as a country with a better labor supply. Another reason for the Chinese shift to Vietnam is the trade dispute with the US. Manufacturers considering moving out of China are mainly producers engaged in low-end sectors in manufacturing, including textiles and garments, consumer discretionary and electronics packaging and assembly. But high-end industries, such as electronics and machinery, are also showing signs of relocating to Vietnam. Vietnam is not the only one. The trade war is also benefiting countries like Cambodia, Myanmar and Bangladesh. The massive outflow of production from China is going to them. While outerwear is moving into Myanmar and Vietnam, sportswear and bottoms are moving into Cambodia. Some Chinese garment makers want to set up factories under joint venture in Bangladesh as they see the country as a competitive destination to relocate plants amid raging US-China trade war and the rising cost in the world's second largest economy. Chinese textile and garment industry owners have invested heavily in neighbouring Vietnam and Cambodia in the last two decades, but now they are focusing to shift their factories to Myanmar and Bangladesh. The reasons for the change in focus include a lack of skilled workforce in Chinese textile and garment industry, rising cost of production, shifting industrial base to industries such as IT and over-investment in Vietnam and Cambodia where labour costs are lower. "Now they are trying to shift the sunset industries to Myanmar and Bangladesh," said Faisal Samad, vice-president of the Bangladesh Garment Manufacturers and Exporters Association. The sunset industry refers to an industry that has existed for a long time and that is less successful and making less profit than previously. According to economic experts, the garment and textile industry of Vietnam will advance further in global market thanks to several existing advantages such as skilled laborers with sophisticated technique. Many economic experts at the global textile and apparel supply chain conference held the first time in Ho Chi Minh City said that Vietnam will be an attractive destination for foreign garment and textile companies this year so the country must be cautious and selective about this capital source so as to avoid being applied trade protectionism measures by import markets. Vietnam's garment, textile industry expected to lure much foreign investment this year Vietnam needs foreign direct investments in fiber, dyeing and raw fabric. Analyzing the potential of garment and textile industry of Vietnam, Mr. Vu Duc Giang, chairman of the Vietnam Textile and Apparel Association (VITAS), said that there are 7,000 enterprises in the industry, providing jobs for 3 million workers across the country. The industry maintained unceasing growth from 12 percent in 2010 to 16 percent in 2018. Vietnam's garment and textile exports exceeded US$36 billion last year and was expected to top $40 billion this year. Globally, the country has been showing a great impact on garment and textile supply chain for being the world's second largest textile and apparel exporter. Many Vietnamese clothing brands including Phong Phu, Viet Tien and An Phuoc have gained positions in global market. According to economic experts, the garment and textile industry of Vietnam will advance further in global market thanks to several existing advantages such as skilled laborers with sophisticated technique. Especially, with recently-signed free trade agreements, import tariffs will be gradually removed for Vietnamese garment and textile products. As for domestic market, Vietnam will also be an appealing destination for foreign investors in textile and apparel sectors, especially Chinese firms. Mr. Le Tien Truong, CEO of the Vietnam National Textile and Garment Group, said that China holds the position as a main producer of textile raw materials and is the largest garment and textile exporter in the world. However, garment and textile export turnover of China posted negative growth with export turnover to the US and the EU market was minus 0.37 percent and minus 2.13 percent respectively. This was caused by trade barriers used by many countries on garment and textile products imported from China. Meanwhile, garment and textile exports of Vietnam grew robustly, especially at the US and the EU market, soaring 7.57 percent and 8.97 percent in tandem. This will urge Chinese garment and textile companies to shift investments to Vietnam in order to take advantage of the benefits and market gap that free trade agreements brought to Vietnam. It is estimated that Vietnam will receive an investment wave of up to $7 billion from garment and textile companies in China, $2.1 billion from South Korea, $1.6 billion from Taiwan and $0.75 billion from Japan. Foreign direct investment attraction is necessary but economic experts also warned that Vietnam should calculate to make use of investments. First, the country needs to choose firms investing in high technology and foreign firms investing in segments that the country's supply chain lacks of. According to Mr. Le Tien Truong, Vietnam's supply chain lacks of manufacturers for fiber, dyeing and raw fabric. However, in order to increase investment effectiveness in Vietnam, foreign firms should actually cooperate with their local partners in sharing and transferring production technology instead of a pure cooperation between buyer and seller. Many enterprises even invested in the last stage, comprising of assembly and packing, only to take advantage of the Vietnamese origin to receive preferential treatment when exporting. Mr. Nguyen Phuong Dong, deputy director of the Department of Industry and Trade of Ho Chi Minh City, said that the city has been speeding up the progress of investment and construction of fashion design center. At the same time, the department will strengthen connection with firms in neighboring provinces and raw materials producers to help garment and textile companies in the city to complete the supply chain to promote export turnover this year. In addition, a specialized industrial zone should be built to give support to the demand to invest and develop of firms. As for Vietnamese garment and textile companies, they should refuse flatly cooperation with a nature of commercial transaction only because it will negatively affect development of the industry as well as export market share in the world.

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