BIDV commits US$2 billion to restructure textile industry

Manufacturers in the industry remain largely non-competitive in the global market place, relegated to performing work considered menial low level outsourcing with low added value and scant profits, they said.

In order to prepare for the onset of free trade agreements (FTAs) in the offing domestic firms in the industry working in concert with the government need to take the initiative to resolve problems plaguing it.

“The use of outdated technology, shortage of funds for investment, and weak management capacities are the most significant challenges facing companies in the industry,” said National Garment and Textile Group (Vinatex) Chairman Tran Quang Nghi.

Elaborating on the use of outdated technology General Director Truong Thi Thanh Ha of the Dong Xuan Knitting Company underscored the point that domestic clothing and textile companies have not kept pace with the latest technologies.

“In fact far too many companies in the industry are still using old dilapidated machinery and equipment purchased decades ago,” Ha underscored.

In view of the upcoming challenges arising from the trade deals, the Vietnam government should ease the financial burden by easing the tax burden and land rentals, he said.

Ha posited this move would allow the companies to use these monies to fund new modernized state-of-the-art machinery and equipment.

Additionally, Phan Chi Dung of the Ministry of Industry and Trade (MoIT) said many domestic companies depend extensively on imported raw materials, which along with low productivity will make it extremely difficult for them to take full advantage of FTAs.

Dung said despite the high growth rates seen over recent years – the added value in the clothing industry is still far too limited. Further, there are only a few companies fully integrated that can manufacture their own yarn, and knit, dye and finish in their own factories

“In addition, local companies have not yet developed their own markets and products,” he stressed.

Chairman Tran Bac Ha of the Bank for Investment and Development of Vietnam (BIDV), in turn postulated that once the FTAs are in place Vietnam would have access to a wider market, and investors would prefer to gradually shift their manufacturing base to the Vietnam.

Bac Ha presupposed this would only happen if businesses restructure and enhance their competitiveness.

“BIDV has committed to providing loans of up to US$2 billion to support domestic companies in the clothing and textile industry over the next five-years.

There are roughly 5,000 businesses, most of them small, in the industry creating jobs for an estimated 2.5 million people, said Department Head Phan Chi Dung of the Light Industry Department under the Ministry of Industry and Trade.

The Vietnam government has targeted to increase the country's textile and clothing exports to US$35 billion by 2020 and further to US$60 billion by 2030 and the US$2 billion will contribute significantly to achieving these goals, Dung concluded.