Vietnam’s garment makers are hoping exports to Japan will take off next month when a trade pact comes into effect, reducing the cost of Vietnamese-made goods in the East Asian country.
Under a free trade agreement signed late last year, Japan and Vietnam will cut tariffs on some 92 percent of goods and services over the next decade.
Some 7,220 varieties of Vietnamese products, including textiles, clothing and agricultural goods will attract zero import duties from October 1 under the Vietnam-Japan Economic Partnership Agreement (VJEPA).
Tariffs will also be cut on thousands of types of goods imported into Vietnam from Japan, including as auto parts, steel and electronic goods.
The trade pact prompted the Vietnam Textile and Apparel Association (VITAS) to forecast the country’s garment exports to Japan will generate US$1 billion this year, up 20 percent from last year.
More than 80 percent of domestic garment and textile makers have received enough orders to maintain production for the rest of this year, with up to 40 percent of the orders placed by Japanese clients, Sai Gon Tiep Thi (Sai Gon Marketing) newspaper reported, citing VITAS statistics.
Late last year and early this year, some garment makers were forced to lay off their workers and mothball their plants after orders slumped because of the global economic crisis.
Ho Chi Minh City-based Saigon3 Garment Joint Stock Company (GATEXIM) now expects sales to Japan to increase by 20 percent this year.
GATEXIM was the number one exporter of jeans to Japan in the first seven months of this year, out of 47 Vietnamese companies that sold similar products to Japanese buyers, according to the General Department of Vietnam Customs.
In the January-July period, the firm sent 1.82 million pairs of jeans worth US$16.7 million to Japan, generating 81 percent more income than in the same period last year.
GATEXIM General Director Pham Xuan Hong said his company had adjusted its production to cope with Japanese clients’ strict requirements on product quality.
For garments destined for the U.S., an assembly line of 50 workers is required. Eight to 10 workers are involved finishing phase and the finished garment will then be checked twice.
But for garments heading to Japan, up to 17 workers are required for the finishing phase and the finished products is checked three to four times.
“We have gotten used to meeting the strict quality requirements,” Hong said. “When we work with Japanese importers, we can not speed up our production to make large quantities of goods but the prices and orders are more stable than those from American and European clients.”
GATEXIM can sell a pair of jeans to a Japanese customer for up to $1.30 each but only for about $1.20 a pair to American clients.
Many domestic companies find it difficult to further explore the lucrative Japanese market due to strict quality standards and a lack of skilled staff.
Vietnamese-made garments currently account for about 1 percent of Japan’s total garment and textile imports, while Chinese garments make up 19 percent and Thai garments 4 percent.
“The zero percent export tariff will definitely bring more new orders for local enterprises,” said Nguyen Hong Trang, director of underwear maker Son Kim Company. “But Vietnam’s garment exports won’t see a drastic increase as it’s not easy to meet Japanese clients’ strict requirements on product quality and execution.”
Nguyen Thi Diem, director of underwear producer An Phuoc Company, has spent 15 years working with Japanese importers. Diem said the biggest obstacle for Vietnamese companies was the national shortage of skilled workers.
“A difference of only half a centimeter on a piece of underwear can ruin the whole product,” she said. “Our staff need years of training to achieve such a high level of accuracy.”
The clothing and textile sector was Vietnam’s biggest export earner in the first eight months of this year, fetching $5.9 billion, down 1.4 percent from the same period last year.
The sector has lowered its 2009 export target to $9.1 billion from the earlier target of $10 billion due to a decline in orders from foreign clients earlier this year.
