In the first seven months of this year, textile and garment exports from Vietnam fell 12% to US$16.2bn

In the first seven months of this year, textile and garment exports from Vietnam fell 12% to US$16.2bn

Vietnam clothing industry insiders say they are optimistic that the country's apparel supply chain will emerge strengthened from the Covid-19 crisis in 2021. 

This is despite an ongoing shortage of orders during 2020, only partly mitigated by switching production to make face masks.

Helen Bui, CEO at KNA Apparel Sourcing and Manufacturing, a Ho Chi Minh City-based manufacturer, trader and exporter of garments made from knitted and woven fabrics, predicts demand should recover next year and the Vietnamese clothing industry will be well placed to snap up additional orders. 

"One helpful factor will be the EU Vietnam FTA [free trade agreement], which took effect in August, as it will give us the highest advantage for the EU market," she told just-style.

Pandemic resilience

Christoph Peters, general director Illies Vietnam, a Germany-based trader of industrial machinery and technologies that supplies textile equipment to Vietnam, stresses that the Southeast Asian outsourcing country kept textile and garment manufacturers open during its Covid-19 lockdown.

He argues that Vietnam's logistics sector has also stayed operating, displaying more resilience than those of many other Asian countries.

Indeed, Illies Vietnam expects to achieve flat sales growth this year from 2019 as opposed to a contraction, indicating continued investment in the country's clothing and textile sector.

"An international buyer who places an order now in Vietnam can be assured that it will be fulfilled, unlike in Bangladesh, Pakistan or India, where the general impression is that production and logistics could break down any time amid a persistently precarious epidemical picture and inadequate policy response," Peters told just-style.

"I think the moment that western economies rebound from recession, the Vietnamese apparel supply chain will be ready to serve the rebound in demand, further leaving behind all regional competitors but China and Taiwan, which also managed the pandemic relatively well," he adds.

Indeed, Vietnam's Covid-19 record has been impressive, with official figures indicating the third-best record worldwide regarding cases per million people, at just 11, according to watchdog Worldometers.info.

Leisure and loungewear

Simon Reed, a Ho Chi Minh City-based specialist in apparel management, sourcing and manufacturing, says Vietnamese leisurewear and loungewear producers have been performing well compared to companies serving fashion chains, due to consumers staying at home. 

He adds that orders from European supermarket chains and online retailers are now increasing relatively quickly.

"The general feeling is that it will take time to return to any normality, and there will be casualties on the way, including agents and trading companies, as there will be a greater shift to consolidate supply and go direct. 

"Factories that are still prepared to offer their customers a line of credit will benefit," he adds. And in the longer term, there will be "a greater shift [of clothing orders] out of China that will benefit in the long term." 

In the meantime, 2020 has still been rough for Vietnam's clothing sector, with a note from the Vietnam ministry of industry and trade flagging that many textile and garment enterprises have few orders for the remainder of 2020, especially for high-value products such as jackets and high-end shirts.

In the first seven months of the year, textile-garment exports from Vietnam dropped by more than 12% from January-July 2019 to US$16.2bn, it says.

"It is still very difficult right now, and we have been trying to weather the drop in demand from export markets with a shift to reusable masks, but we think next year will surely be better," says Bui. Reed adds that a dearth of orders during the last five to six months has led to Vietnam factories shedding staff, even if they have stayed open.

Vietnam is the European Union's second-largest trading partner within the Association of Southeast Asian Nations, and the EU-Vietnam free trade agreement is expected to substantially expand Vietnam's textile and apparel exports to this market. Not only will the EU's import duties on textile and apparel from Vietnam be eliminated through a phaseout period, but a garment made in Vietnam that contains fabrics made in South Korea or other ASEAN countries with which the EU has a free trade agreement in force will still qualify for duty-free treatment under the agreement.