Garment and textile enterprises reel under blow from COVID-19 pandemic

Wednesday, 2020-08-05 14:21:53
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The production of garment products for export at Dong Tien JSC in Dong Nai province. (Photo: MINH DUC)
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NDO – Despite various measures to maintain the labour force and promote production and business activities, almost all domestic garment and textile enterprises are facing many difficulties due to sharp declines in demands in the global market caused by the COVID-19 pandemic. If the pandemic is not soon controlled and relief solutions are not accelerated, many enterprises will fall into loss or bankruptcy.

Difficulties accumulated in remaining months of the year

Deputy General Director of Garment 10 Corporation Bach Thang Long said that the corporation posted total revenue of nearly VND1.8 trillion (US$77.9 million) in the past six months, up 16% over the same period last year, but the corporation is encountering many difficulties due to a decrease of 30% in traditional products.

The increase in revenue in the first half of this year was thanks to the revenue from cloth masks but the supply for masks is now saturated and demand is no longer as high as before, Long noted.

The corporation only has enough orders until September this year while in the previous years, the corporation signed enough orders for the first months of the next year.

The reduction in orders is due to the impact of the coronavirus pandemic that prevented economies from growing while importers are monitoring market signals and considering their inventory before making new orders.

“If the pandemic is not soon restrained, enterprises will certainly encounter difficulties in the remaining months of the year because the money accumulated from the beginning of the year will “evaporate” while enterprises still have to brace themselves to maintain the labour force and wait for the recovery of the market,” Long emphasised.

Sharing the same view, Chairman of the Board of Directors of Hung Yen Garment Corporation (Hugaco) Nguyen Xuan Duong affirmed that enterprises were not much affected by the pandemic in the early months of this year because their orders were signed from the end of 2019. Several orders were suspended, resulting in delays in the export of products but luckily the increased production of masks and medical products offset the decreases. Thus, the production reduction of garment enterprises was not significant, accounting for about 5-10% of their total output.

Thus, Hugaco's revenue reached US$130 million in the first six months of this year, equal to 45% of the year’s plan. However, the company will really reel under the blow from COVID-19 in the remaining months of this year because it only has orders until the end of August and it is struggling to create jobs and generate incomes for workers.

Director of Vinatex International JSC’s Hai Phong branch, Vu Quyet Chien, said that garment and textile enterprises are currently confronting many obstacles as their products cannot be exported to the US and EU countries due to the COVID-19 pandemic. Amid the decline in the number of orders, enterprises are forced to let their employees take turns to go to work and produce moderately to maintain operations.

There are no signs of prosperity forecast by the year’s end and maybe early 2021, thus, enterprises can only maintain restrained production and wait for market signals.

If the situation is not improved soon, the loss of labour is entirely possible and about 60-70% of small and medium enterprises are at risk of going bankrupt.

Many garment enterprises only strive to create enough jobs for their employees in this year without daring to think of profits, Chien added.

Seeking the production of alternate products

The outbreak of the COVID-19 pandemic on a global scale has created huge impacts on Vietnam’s garment and textile industry due to its dependence on exports. Both the supply of raw materials and the output market are interrupted due to the social distancing orders and the closure of stores and distribution systems worldwide.

Chairman of the Vietnam Textile and Apparel Association (VITAS) Vu Duc Giang said that the coronavirus pandemic has changed people’s consumption habits, shifting to spending on essential products, resulting in 30-40% reduction in global purchasing power.

The export wave of facemasks is over while new orders have not been signed, leading to the restrained operations of enterprises and more difficulties forecast for the future, Giang noted.

General Director of the Vietnam National Textile and Garment Group (Vinatex) Le Tien Truong said that the group’s export revenue in the first half of this year fell by 20% compared to the same period last year due to the COVID-19 pandemic.

To maintain operations and labour force, the group must rearrange production to retain employees until the market recovers. In addition, the group must take advantage of all available resources, promote niche markets, and receive special orders and orders with high technical requirements.

Chairman of the Board of Directors of Hugaco Nguyen Xuan Duong said that amid tough times, enterprises should unite with each other, receive cheap orders to increase purchase volume and provide training for their employees to improve their skills.

With the declines in global purchasing power and changing consumption habits, the remaining months of this year are anticipated to be a very difficult time for enterprises, requiring them to be more dynamic and take advantage of opportunities from new generation free trade agreements.

However, the infrastructure of the Vietnam's textile and garment industry remains small with inadequate supply of raw materials, which need to be improved to make a breakthrough in exports.

Therefore, it is necessary to make planning and build concentrated and large-scale industrial parks in three regions of the country in order to call for investment in weaving and dyeing to quickly compensate for the insufficient supply.

In addition, the Government should soon issue a strategy to develop the textile and garment industry in the 2020-2040 period to create momentum in the development of enterprise in the field.

Amid the immediate difficulties, enterprises should quickly change the structure of traditional items to items that can adapt quickly to the market such as labour protection items and products serving the health sector. More chains of materials and investment in factories producing raw materials should be promoted to meet domestic and export demands.