Apparel / Textiles & Accessories

Since the outbreak of the fourth wave of new crown pneumonia, many textile and apparel companies have fallen into a "difficult" situation, and even faced the risk of bankruptcy due to forced closure or suspension of production.

This led to increased inventories and stagnant production activities. When many workers returned to their hometowns due to the impact of the new crown pneumonia epidemic, the supply of labor was also affected.

There are still many orders from the first few months of this year, and the demand for production and operation from now to the end of the year is very large. However, if localities do not lift the blockade, travel restrictions, and implement measures to promote economic development as soon as possible, the goal of this year's textile and clothing industry exports reaching 39 billion US dollars will be difficult to achieve.

Concerns about labor and raw material prices

According to a survey conducted by the Labor Relations Research Center (ERC) on companies located in areas implementing the No. 16 Directive, 65.3% of Vietnamese companies ceased operations in September, and only 34.7% were still operating. Among them, textiles, clothing and leather shoes are among the industries most seriously affected in terms of mentality, health, and economy. More than 60% of employees want to return to their hometown or have already returned to their hometown. nulltheless, most employees make sure that they will only return to their hometown in a short period of time to restore their health and consider themselves and their children's lives. 89% of employees emigrate and 96% of local employees want to continue working in the factory.

With the use of a large amount of labor, textile and apparel companies have been greatly impacted from the outbreak of the fourth wave of new crown pneumonia epidemic to the present. Bai Shenglong, vice president of No. 10 Garment Corporation, said that about 20% of the company’s employees were unable to go to work because they were trapped in a lockdown area. The store was “paralyzed” due to forced closure. Many uniform contracts were unable to travel due to inability to travel. Unfold. Despite the large volume of goods, companies have to face risks such as slow delivery and high cost of aircraft delivery, resulting in lower efficiency than expected.

However, due to the implementation of a number of flexible adaptation measures, the total revenue of the unit in the past nine months was the same as that of the same period last year. With efforts to reduce costs, it strives to achieve a year-end profit higher than last year's level. At present, No. 10 Garment Corporation has received orders at the end of the first quarter of 2022. In order to increase the export volume of goods, the company will mobilize employees to work overtime and take measures to increase productivity. At the same time, the company is always doing a good job in epidemic prevention and control. So far, more than 90% of the company's employees living in various provinces and cities have been vaccinated with the first dose, and more than 50% of the employees have been vaccinated with the second dose.

Ruan Xuan Yang, chairman of Xing'an Garment Corporation, also held the same opinion, reiterating that Xing'an is one of the provinces that do a good job in epidemic prevention and control. Therefore, no unit of the company has stopped production. Thanks to the investment in technology and modern equipment, productivity has even increased by 20% compared to before. . As a result, the company's total revenue in the first nine months has increased by about 10%, and the average employee income has reached 10 million VND/person/month (an increase of 10% over the same period).

However, the impact of the epidemic and rising costs have led to a 5% year-on-year decrease in the profit of Xing'an Garment Corporation. The company has also signed orders until the end of January 2022, and will continue to negotiate and sign orders in the next few months. The difficulty is that February is when the season changes, but some customers look forward to Vietnam's anti-epidemic methods. If the epidemic prevention work is effective, they will negotiate and sign, otherwise, they will transfer orders to other places.

When assessing the performance of the company, Gao Youxiao, general manager of the Vietnam National Textile and Apparel Group (Vinatex), said that most of the units under the group have received orders at the end of the fourth quarter of 2021, and even the first quarter of 2022. However, in the past period of time, affected by the complex and severe situation of the epidemic, clothing companies located in southern provinces and cities have fallen into a state of moderate production and shutdown. Many companies work in accordance with the "three-in-place" program to complete orders, resulting in high costs and loss of money.

In the future, the continued upward trend of feed prices will be a huge challenge for companies, especially companies that signed contracts with customers at a low price last year and then imported raw and auxiliary materials at a high price, or those who arrived slowly, would suffer huge losses. In addition, in some southern enterprises, it is estimated that about 20%-30% of employees go out of the city and return to the countryside. In the future, it will take time for employees to return to work and restore labor productivity to the level before the implementation of social isolation measures.

Take measures flexibly

Vinatex general manager Gao Youxiao also said that the group vigorously implemented a number of response measures to reduce the negative impact of the epidemic and the increase in raw material prices. For the recent supply chain interruption caused the slow arrival of raw materials or the sharp increase in the prices of raw and auxiliary materials and logistics costs, there is no other way. Production units must work closely with customers and call on customers to share the difficulties in carrying out orders and jointly find the best measures. In addition, actively discuss with suppliers to avoid excessive price increases that affect output products, improve market forecasting capabilities, and formulate raw material reserve import plans to avoid the impact of high prices. When the market recovers and production activities return to normal, companies need to formulate a variety of response plans for 2022.

On the other hand, companies need to take advantage of the new generation of free trade agreements (FTA) to increase exports. To achieve this goal, companies must invest in a complete supply chain to meet the "Start with Yarn" rules of origin in the "Comprehensive and Progressive Agreement for Trans-Pacific Partnership" (CPTPP) and the "Vietnam-EU Free Trade Agreement" ( The rule of origin of "starting with fabric" in EVFTA). The key direction of the subsequent phase is to establish the common goal of “becoming a complete supply point” and develop a comprehensive chain of enterprises including yarn, textile, finishing, auxiliary materials, clothing, auxiliary (such as logistics, training, scientific research), etc. Position in the value chain, develop product design, provide a complete set of products from the design, and consider appearing in a separate brand group.

In the nine months of 2021, Vinatex's total revenue reached 24.68 trillion VND, a year-on-year decrease of 12.4%, and its profit reached 1.14 trillion VND, a year-on-year increase of 136.9%. Recently, although the clothing and textile industries have been affected, yarn revenue and profits have also achieved impressive results. The revenue reached 5.530 trillion VND, an increase of 28% year-on-year, and the profit reached 484.72 billion VND. Many companies face financial and order difficulties, but they all strive to support employees, take care of their lives and retain them. In order to promote exports in the future, companies need to resume production as soon as possible to ensure that the signed orders are completed, and at the same time work closely with local governments to implement epidemic prevention programs to maintain production stability.

Dr. Nguyen Thi Thu Trang, director of the WTO and Integration Center of the Vietnam Chamber of Commerce and Industry, said that during the complex epidemic situation, many companies' production chains were interrupted, causing customers to cancel previously signed orders or move to another country.

This raises concerns about the export prospects of these products. However, for major textile and apparel brands, it is normal to transfer orders to areas where the epidemic is well controlled in order to meet the needs of the European and American markets during the peak shopping season at the end of the year. Therefore, if the company quickly resumes production and successfully completes the remaining orders in the next few months, there is no need to worry too much. Because in the long run, compared with many competitors, Vietnam’s textile and apparel still has certain advantages in terms of product quality, technical level, and ability to meet stringent requirements related to labor and the environment, especially as indicated in the free trade agreement. Tariff preferences.

At present, for textile, apparel and leather footwear companies, the most important thing is direct support policies, such as financial support, substantial tax reduction and exemption (such as social insurance premiums, union fees, etc.), or the timely introduction of a package of credit and interest support plans. Resume production quickly and fully. At the same time, the state needs to introduce policies to help companies effectively use existing labor resources, relax or abolish restrictions on maximum overtime hours, and help companies attract employees to pay more attention by providing on-duty meal and accommodation support, or conducting regular inspections for employees. Return to work. Establish a unified national green channel mechanism for the transportation of raw materials, goods, machinery and equipment for export production.