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22.07.2022, 17:32

Vietnam’s Textile & Garment Industry On Track To Hit The $43B Export Target This Year

While the second half of the year remains challenging, still taking into account the COVID-19 risks, Vietnam’s textile and garment industry is on track to hit the $42-43 billion export target this year.

Vu Duc Giang, chairman of the Vietnam Textile and Apparel Association (VITAS), told local media in Hanoi on Thursday that 2022 is an important year for the industry and enterprises in the textile and garment sector are gradually recovering from the impacts of the pandemic.

Vietnam is one of the world’s largest exporters of textiles and garments. Earlier this year, Vietcetera wrote about the presence of Vietnamese textile brands on Amazon, through the efforts of VITAS. Through Amazon, Vietnamese textile brands would be able to reach over 300 million customers in 185 countries and territories.

At the height of the lockdown in Vietnam, 30-35% of the garment factories shut down and up to 90% of the supply chain in the sector was broken, according to VITAS. In the same period, VITAS’ data revealed that the export value of the textile and garment industry reached $18.7 billion in the first six months, while the target for the whole year was $39 billion.

Vietnam has approximately 6,000 garment and textile manufacturing companies employing 2.5 million people, and its top export destinations are leading consumer markets – the US, Europe, Japan, and South Korea.

According to VITAS, the prices for basic materials have soared: 19.1% for cotton, 40% for crude oil in the global market, and 67% for domestic gasoline. | Source:Shutterstock

Presently, the country’s textile and garment export value was estimated at $22.3 billion, up 17.7% on year, including $16.94 billion from garment exports (up 19.5%), $1.4 billion from fabric exports (up 20.8%), and $2.76 billion from the fiber exports (up 4.4$).

At the same time, the total import value of raw materials and accessories for textile and garments was estimated at $13.4 billion, up 9.8% on year. This means the industry had a trade surplus of $8.86 billion in the first half of this year, up 32% on year.

Although the enterprises remain positive about the recovery, according to Giang, Vietnam’s textile and garment industry still faces many risks and challenges in the second half of this year, including the fast spread of the new strain of COVID-19. Because of these threats, trade partners like mainland China, Japan, and Taiwan are still adamant about implementing strict COVID-19 policies.

This creates a significant effect on the supply chain of raw materials and accessories as well as the consumption of textile products made in Vietnam. Not to mention the high inflation in the US and Europe, as well as the conflict between Russia and Ukraine causing the prices of raw materials and fuels to rise continuously since the beginning of the year.

According to VITAS, the prices for basic materials have soared: 19.1% for cotton, 40% for crude oil in the global market, and 67% for domestic gasoline. Meanwhile, transportation has been 3x higher than the average for the past five years. All hikes considered, the cost increased by about 20-25%.

In the same press conference, Giang said the sector still faces several other disadvantages such as the exchange rate with countries being competitors, labor shortage after the pandemic, requirements for traceability of cotton, fabric, yarn, or green industry of textiles and garments from new-generation free trade agreements (FTAs).

For instance, the devaluation of the euro has a great impact on the textile and garment exports because it will increase the price of goods in the context that consumers in this market tighten spending, he added. "In general, purchasing power in the EU market will decrease, the competitiveness of textiles and garments imported from all countries to the EU market will be affected, not only textiles and garments from Vietnam.”

However, the VITAS chairman said that it is expected that textile and garment export value will reach $20-21 billion in the second half of 2022.

For Vietnam to hit that number, the textile and garment enterprises “need to quickly restructure export markets to not depend on a few markets.” Per VITAS, the sector should take advantage of technology advancements and equipment to meet requirements from importing countries, such as requirements on recycled garments of the EU market.

Vu Duc Giang (R-1), chairman of the Vietnam Textile and Apparel Association (VITAS) | Source: VITAS

Overall, “to stabilize production and achieve sustainable goals in the future, the businesses themselves need to catch up with market trends, invest in machinery and technology, and switch to green production according to the brands' requirements. They also need to build human resources, especially designers for the fashion industry.”

VITAS has been an effective bridge between State management agencies and textile and garment enterprises. The association led by Giang has successfully connected domestic enterprises with foreign-invested enterprises to form supply chains and expand export markets.