The growth of Vietnam’s textile exports currently relies on manufacturing and cheap labour

The growth of Vietnam’s textile exports currently relies on manufacturing and cheap labour

Relying on cheap labour is not enough to ensure Vietnam's garment and textile industry remains competitive, a recent seminar in Hanoi has heard, with investment in new technology key to increasing competitiveness and reducing environmental impact.

Over 150 representatives from South Korean and Vietnamese garment and textile firms participated in the fifth textile and garment seminar organised by the Korea Institute of Industrial Technology (KITECH) and the Vietnam Textile and Apparel Association (VITAS).

Truong Van Cam, vice chairman and general secretary of VITAS, told delegates that automation can help reduce the number of direct workers and links data across production equipment, thereby enabling the industry to develop in a "green and clean way," save natural resources, minimise inventory, and increase competitiveness.

"The application of 3D printing technology allows [the] creation of products that suit each user, satisfying their demand while minimising waste for manufacturers," he said. "In particular, the support of technology can improve productivity, then create a better income for employees, helping the textile industry break out [and] escape the poverty trap."

Experts, however, warned that the growth of Vietnam's textile exports still relies on manufacturing and cheap labour – and that these two factors are not sustainable. As a general rule, outsourcing production will shift to countries with cheaper labour, while Vietnam's labour costs are increasing, according to VITAS.

The industry association said an important factor is the limited application of science and technology in the textile industry. According to a survey by the Institute of Strategic and Policy Research on Industry and Trade (Ministry of Industry and Trade) published in 2018, about 20% of producers in Vietnam use high-tech equipment, especially software in product design and production management, while 70% uses medium technologies, and 10% uses low ones.

Speaking at the seminar, Eu Joong Kim, commercial counsellor at the South Korean Embassy in Vietnam, re-emphasised the point, that although the Vietnamese textile and garment industry has good foundations with many advantages, in the current technological development context simply relying on cheap labour costs is not enough: there must be new technology to support the competitiveness of businesses.

"If textile enterprises are not interested in the Fourth Industrial Revolution and craft plans to apply digital technology and automation in production and business, they are increasing their chances of being knocked out of the market," Kim said.

According to Kim, the newly signed EU-Vietnam Free Trade Agreement (EVFTA) will create opportunities for the Vietnamese textile and apparel industry. "Vietnam has the advantage from the rules of origin under the EVFTA. Accordingly, products made from materials imported from South Korea also count as Vietnamese in origin when exported to the EU. That not only brings advantages for Vietnamese textile and apparel, but also co-operation opportunities for Korean textile enterprises."

Vietnamese-South Korean trade has increased rapidly over the years. In 2018, Vietnam had a trade surplus of over US$29bn to South Korea. In the textile and apparel sector, South Korea is Vietnam's largest investor with $4.7bn, accounting for 25% of foreign investment in the industry.

Trade and political tensions between China and the US have moved many companies to consider sourcing in other areas in Southeast Asia – especially Vietnam. Two recent articles on just-style look at the challenges and offer advice on how to build good relationships with factories: