Vietnamese enterprises are dependent on imported materials
“Vietnam’s fabric production, including weaving and dyeing, is weak, thus creating a ‘bottleneck’ in the industry,” he said.
In 2017, Vietnam had to import 6.5 billion meters of fabric out of total 9.5 billion of fabric needed. Except for foreign invested enterprises (FIEs) which own entire supply chains, only several Vietnamese companies have dyeing workshops. However, the workshops are small and produce products of medium quality.
As for the footwear industry, Nguyen Duc Thuan, chair of the Vietnam Leather, Shoes & Handbags, said many Vietnamese enterprises making synthetic, high-end leatherette, metal accessories and sewing thread to provide to shoemakers.
However, the production capacity of the enterprises in supporting industries remains weak, so their products are less competitive in price than the Chinese.
The electronics industry is facing the same problem. It exports a big volume of products each year, but has to import input materials which amount to 77 percent of product value.
The pharmaceutical industry has to import 85-90 percent of materials. As for the plastics industry, input imports account for 70-80 percent of production costs.
Nguyen Thi Lac Huyen, chair of the Vietnam Paint and Printing Ink Association, said the biggest challenge for the enterprises in the industry is the price fluctuation of imports.
According to GSO, the value of input materials in textile & garment industry accounts for 67.1 percent. The figures are 78.9 percent in smartphones and 47 percent in footwear manufacturing.
Tuan said Vietnam needs to have a strategy to develop textile & garment supporting industries with focus on dyeing and fabric production.
The country aims to satisfy 45 percent of fabric demand by 2020 and 65 percent by 2025. In order to do that, it needs more specialized IZs.
However, the development of supporting industries cannot be done overnight. Pham Manh Thang, director of a consultancy firm on productivity and quality management solutions, said there are too many problems that Vietnamese enterprises have to cope with.
“Orders are getting smaller, but with high requirements on diversification,” he said. “Previously, you could receive an order for 30,000-40,000 pairs of shoes, but now, an order is just for several thousand of products.”