As the future of Viet Nam? garment exports darkens, Minister of Trade Truong Dinh Tuyen sent a letter this week to enterprises to inform them about the situation and to propose solutions.
"The country? clothing export turnover in the first five months of the year has dropped dramatically, particularly in the European and US markets. The poor performance stemmed from our low competitiveness in the context of the WTO removing the quota system for its members," Tuyen stated.
With only US$1.7 billion earned in the first five months, the textile and garment industry will most likely fail to meet its annual export target of $5-5.2 billion this year. The industry? growth rates for the past few months remained modest, with an increase of only 0.2 per cent year-on-year in May.
The minister said last year, he began to warn businesses about the problem and sent letters to local exporters suggesting they form a large consortium. However, many companies did not fully understand the benefits of establishing an alliance, as these groups can help enhance the competitive edge of the exporters.
To address the problem, Tuyen said that cutting prices to raise competitiveness was an urgent and long-term requirement. "In addition, relevant State offices should create favourable conditions for exporters to get quotas [for the US market]."
"The Government has allowed companies to transfer quotas, but some firms wait for export contracts or delay raising the prices of transferred quotas. Thus, quota transfer remains stagnant," Tuyen added.
The minister said visas should be granted automatically for big producers and for companies that have direct contracts with giant US distributors. This rule could be applied to companies that make cotton trousers for men and women; synthetic trousers; cotton coats; and synthetic shirts. The quota volume for these items during the first five months has remained modest.
Firms that used less than 35 per cent of their quotas during the first five months will have their quotas temporarily withdrawn. The ministry will reallocate them if needed.
The ministry will make a final decision on this proposal in the next couple months based on feedback from enterprises. The US and EU markets account for almost 70 per cent of the country? total clothing exports. America represents 50 per cent. ?VNS
