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VER 10-2008 Nguyen Ngoc Son


									Nguyen Ngoc Son                                                                                             To
Develop Vietnamese Textile - Garment…

    To Develop Vietnamese
      Textile - Garment
     Supporting Industry
                                                                               Nguyen Ngoc Son*

   With the development goal of the Vietnamese textile-
     industry from now to 2020, namely, to increase val-
                                                                                     ue-added and
     competitiveness, to integrate into the regional and
                                                     world economy, to gradually
         escape from the subcontract plight, and to retain
                                                                         its role as a key,
 cutting-edge export contributing to the national eco-
                                                            nomic growth, the issue
   of prime importance to tackle is to develop the sup-
                                                                          porting industry.

T       extile-garment industry is
        one of the industries
        which play an ever more
important role to Vietnamese so-
                                     maintained a double-digit growth
                                     rate, contributing 8% of GDP and
                                     become one of the key export sec-
                                     tors of Vietnam, and accounting
                                                                          for over 16% of the total export
                                                                          turnover of the whole country..
                                                                             However, despite its high
                                                                          growth rates in several years past,
cio-economic development. So
far, the industry has constantly
                                                                          * PhD, National Economics University.

 nam                    No10 (170), 2008                                                                     19

To Develop Vietnamese Textile - Garment…                                                              Nguyen
Ngoc Son

Vietnamese textile-garment in-        supporting industry                   ics…manufacturing industries”(2).
dustry is still stumbling against         1.1 Perceptions of supporting         + In the United States, sup-
numerous problems which call for      industry in the world                 porting industry is interpreted as
a solution, such as low-quality           Although the perception of        “the industries which supply the
growth and imbalance between          “supporting industry” is widely       necessary       materials      and
the two spheres of textile and        referred to in many countries in      processes to turn out products
garment. At present, the industry     the world, there exists no com-       before they are put on the mar-
is highly dependent on the import     mon perception for all. Differing     ket”(3).
of materials and additives, syn-      perceptions of supporting indus-          Supporting industry can be
thetic fiber and yarn, and ma-        try are found in differing coun-      understood in a broad or narrow
chines and equipment, as the          tries, depending on the purpose of    sense, depending on users. Each
home textile-garment supporting       research and utilization.             perception will define a corres-
industry can meet but a small part        + In Japan, the terminology of    ponding scope for supporting in-
of the requirement. In fact, it is    supporting industry first appeared    dustry. Diagram 1 illustrates the
the weakness of the supporting        in the mid-1980s in the Program       perceptions of supporting indus-
industry which makes it impossi-      of Asian Supporting Industry De-      try and their corresponding
ble for the Vietnamese textile-       velopment. It is defined as “the      scopes in a broad and narrow
garment industry to participate       industries which supply various       sense. The nucleus perception
proactively in the global value       necessary things such as raw ma-      shows the narrowest scope –scope
chain of the industry. Instead, the   terials, components and capital       I- , which defines supporting in-
Vietnamese textile-garment in-        goods for the assembly indus-         dustry as the industry supplying
dustry can merely act as a product    try”(1).                              intermediary goods, facilities and
subcontractor for other countries,        + In Thailand, supporting in-     machines used to turn out these
which affects the competitiveness     dustry is seen as “an industry        intermediary goods. Of the other
of Vietnamese textile-garment         which produces components             two broader scopes, one defines
goods on the world market.            which are used in the final as-       supporting industry as the indus-
    1. Perception of supporting       sembly processes of the automo-       try supplying intermediary goods,
industry and textile-garment          bile,      machine,       electron-   facilities and machines to turnout

  Diagram 1.                          Scopes of Supporting Industry

                                                Final Product
                                           Complete and Incomplete

                     Intermediary Goods
                                                                     Production Services
            A             Components                A
             r                                      r                       -   Logistics            A
             e                                      e                       -   Storage
                                                                            -   Distribution
             a                                      a                                                e
                                                                            -   Insurance
            III          Capital Goods              I                                                a
                        Tools, Machines

                                                               No10 (170) 2008           Economic Re-

                        Steel, Chemicals                                              view

     Source: Kenichi Ohno, To build supporting industry in Vietnam, 2007, Vietnam Development Forum.
 Nguyen Ngoc Son                                                                                        To
 Develop Vietnamese Textile - Garment…

 these intermediary goods and           pings, brandings…by the deeply ception of the narrowest sense is
 such services as logistics, ware-      specialized technologies for the appropriate for mobilizing vari-
 houses, distribution and insurance     industries which turn out products ous resources for the development
 –scope II-, and the other defines      of various types such as tools, of supporting industry.
 supporting industry as the indus-      means of production, or consumer       1.3. Perception of supporting
 try supplying all the material in-     goods.                              industry for the textile-garment
 puts, namely intermediary goods,           Thus, the system of supporting sector
 capital goods and the materials to     industry is a network of produc-       Textile-garment is the industry
 turn out those capital goods –         ers (products) and production which responds to the demand for
 scope III (Kenichi Ohno, 2007, p.      technologies which are capable of consumer products covering
 38).                                   a horizontal integration, of sup- clothing, beddings, and other
     1.2 Perception of supporting       plying materials, components and household linen such as curtains,
 industry in Vietnam                    accessories for the assembly and coverings, towels… Besides, tex-
     In Vietnam, the assimilation of    manufacture of final products(4). tile-garment products are also
 supporting industry perception         This perception is the same as the used in other economic sectors
                                           Supporting prod-                 Textile-garment in-
                                        above-mentioned one of the nar- such as technical cloth for road          S
 comes rather late. At present,                    ucts                              dustry
 supporting industry is interpreted     row sense. In the present context lining, dyke construction, auto
                                        of Fertilizers, in-                                   Production of
                                            Vietnam, with resources con- interior lining, refining materials,
 as the basic production branches                                      Cotton produc-                            Pe
                                                                                             synthetic fiber
 of the principal industry. It starts          secticides
                                        straints, undeveloped industrial tion
                                                                            anti-leaking materials… yarn
 from the production of materials       foundation, and pressure from          To turn out a final textile-
 to the manufacture of accessories,     international integration and garment product, a certain pro-
 components, additives, wrap-           competition, the choice of a per-

 Diagram 2.      Processes of production and completion of textile-garment products

  Metal and non-metal                                                        Mechanical manufacturing
                                             Yarn Spinning
  accessories                                                                 and automatic operation

  Metal and non-metal                                                        Mechanical manufacturing
                                              Weaving Raw
  accessories                                                                 and automatic operation

  Assorted dyes and sup-                                                     Mechanical manufacturing
                                              Dyeing and
  porting chemicals                                                          and automatic operation

  Supporting chemicals                                                       Mechanical manufacturing
                                                                             and automatic operation
   nam                    No10 (170), 2008                                                               21

Review tailoring aids
 Assorted                                                                    Mechanical manufacturing
                                           Cutting and Sew-
                                                                             and automatic operation
To Develop Vietnamese Textile - Garment…                                                               Nguyen
Ngoc Son

duction process must be adhered        ing, embroidering, tasselling…),     ucts from materials which are
to (see Diagram 2). In each spe-       cotton sheets, assorted buttons,     nearly 100% imported. Some oth-
cific stage of the textile-garment     nails, and brandings, mex and        er petrochemical projects for
value chain, there need to be dif-     sponge (woven, non-woven, with       PES, PP, PS, LAB…yarn have
fering supporting products and         glue or without glue…), assorted     been planned, but are still in the
industries:                            zips and bands.                      negotiation phase, while the con-
    - In the stage of yarn making         + Group of wrapping aids,         sumer demand for petrochemical
and cloth weaving:                     which include materials and          products are constantly on the
    +A group of mechanical             wraps used in the process of         rise. By 2009 when the Dung
equipments such as yarn ma-            packing and product final touch-     Quat Refinery starts operation, its
chines, transmission axes, frames,     ing such as PE and PP wraps,         polypropylene products can meet
transport vehicles…                    garment brands, cardboard paper,     but about 20% of the national
   +A group of non-mechanical          desiccants, plastic clips…           demand.
details such as stretching loops,          + Group of gadgets and acces-        The imported output of syn-
rubber covers, paper and plastic       sories needed for the tailoring      thetic yarn amounts to an annual
pipes…                                 equipment and process.               average of 143,000 tons, mainly
                                           2. Actual development of         polyester, which can be used easi-
    +A group of chemical prod-
                                       textile-garment supporting in-       ly in several ways, is in high
ucts such as gluing, humidifying,
                                       dustry in Vietnam                    commercial demand, and comes
starching substances, electrostat-
                                                                            up to some 109,000 tons per year.
ics, wax…                                  2.1. Synthetic fibre and yarn
                                                                            Fiber of various kinds has to be
    - In the stage of dyeing, print-   producing industry
                                                                            imported too in great quantities,
ing, and final touching:                   The total output of yarn of
                                                                            such as polyester fiber which is
    + Dyeing substances, mainly        Vietnam reaches no more than
                                                                            imported to the tune of about
organic chemicals and some inor-       170,000 tons per year, of which
                                                                            40,000 tons per year.
ganic chemicals.                       roughly brushed cotton yarn and
                                                                               Thus, so long as the petro-
    + Additives, which are used to     OE accounts for 40%, Pe/Co
                                                                            chemical industry has not devel-
upgrade the quality of products or     36%, well brushed yarn 22% and
                                       other kinds of yarn 2%. This vo-     oped, synthetic fiber and yarn
to give materials the properties                                            needed for the textile-garment
differing from their original prop-    lume can meet but a very small
                                       portion of the demand of the tex-    industry has to be nearly 100%
erties.                                                                     imported for now. This is a great
                                       tile-garment industry. Remarka-
    + Basic chemicals.                                                      disadvantage to enhancing value
                                       bly, Vietnam has so far not been
    + Biological products                                                   added and the competitiveness of
                                       able to produce synthethic fibre
    - In the stage of garment and      and yarn of any kind from petro-     Vietnamese textile-garment prod-
fashion:                               chemical products. Vietnamese        ucts on the market.
    + Group of garment aids,           petrochemical industry is still in     2.2. Vietnamese textile - gar-
which are the details combining        its early phase of development,      ment mechanical industry
with the main cloth materials to       concentrating       mainly      in
turn out apparels: thread (for sew-    processing petrochemical prod-

22                                                             No10 (170) 2008         Economic Re-

Nguyen Ngoc Son                                                                                                 To
Develop Vietnamese Textile - Garment…

Table 1.                 Dyes Which Are Used In Textile Industry In Vietnam

              Dyes                         Usage                                  Producers

 Activated dye                   For cotton                 Switzerland,        Germany,      China,    Taiwan,

 Alizarin                        For cotton                 Germany,         Switzerland,     Russia,    Japan,

 Direct dye                      For cotton                 USA, Germany, Switzerland, Japan, Eng-
                                                            land, Russia

 Sulphoncyanin                   For cotton, visco          China, Japan, Germany, England, Russia

 AZO                             For cotton                 China, Japan, India

 Developing dye                  For polyester              China,      Switzerland,        Poland,     Germany,

 ACID                            For wool, nylon            England, Japan, Germany, India
 PIGMENT                               cal Company,
                light industry is anPrinting, dyeing and the ThuDuc        In general, the textile-garment
                                                           Germany, Japan, Poland, Czech, Hungary
impotent supporting productive Textile-Garment              Mechanical  mechanical companies has not
   Source: Vietnam Chemicals Corporation
force, which is to meet the de- Company.                                been able to operate in full de-
mand for spare parts and the re-          In recent times, despite the signed capacity, because of their
novation of facilities in various considerable efforts of these mismatched, outdated production
industrial factories of the light units, their production value per lines, degraded quality of facili-
industry. At present, besides the year stood at about 9 million USD ties, poor variety of goods, and
mechanical workshops of the only, that is equivalent to nearly poor competitiveness of products.
companies belonging to the Viet- 4,000 tons of spare parts. The Besides, considering market me-

Table 2.                     Vietnamese Production of Additives In 2005

                Demand               Output                     Cost             Supply Ratio         Import
                (ton/year)           (ton/year)                                  (%)                  Ratio
                                                         Bil.          USD

 Additives           7,062.5            353.125         17.66     1,117,484            5.00             95.00

   Source: Department of Mechanics, Chemicals and Metallurgy, Ministry of Industry and Trade.
nam Textile-Garment Corpora-          mechanical workshops in these            chanism, the mechanical compa-
tion, which are in charge of re-      factories handle mainly simple           nies have not made proper in-
pairing and replacing spare parts     spare parts, in small volumes, and       vestment and their marketing
and components, there are 4 spe-      conduct irregular repairs and            work and sale promotion contain
cialized mechanical enterprises in    maintenance work for technologi-         many defects, leading to insuffi-
the service of the textile-garment    cal facilities. As for sophisticated     cient outlets for their products.
industry, namely the HungYen          spare parts and in great volumes,           2.3. Chemical industry in the
Textile-Garment        Mechanical     and for particular components,           service of dyeing, flower printing
Company, the GiaLam Garment           the specialized mechanical facto-        and completion
Mechanical Company, the Nam-          ries will do the job.                       2.3.1. Assorted dyes
Dinh Textile-Garment Mechani-

 nam                     No10 (170), 2008                                                                       23

To Develop Vietnamese Textile - Garment…                                                                  Nguyen
Ngoc Son

    In the Vietnamese textile in-      supply, just about 5% of demand.       some other industries. Sodium is
dustry now, products from cotton       Those produced by Vietnam in-          the principal chemical for the
still account for the highest ratio    clude assorted Anginat starches        production of paper, textile, and
(48%), and then come products          originated from sea plants, and        detergents.
from synthetic fiber such as po-       some common detergents of low              For their important role to the
lyester (25%), nylon (9%), acrylic     value.                                 national economy, in recent years,
(7%), and other kinds of fiber.            According to statistical data,     the Vietnamese Government has
These products are highly diverse      some 95% of additives have to be       made investment to develop some
in pattern and colour. In this re-     imported at present. These are         groups of product of the chemical
spect, the dyeing technology and       products of high value, which are      industry. Thus, basic chemicals
dyeing substances play a consi-        produced by China, South Korea,        have met, to a large extent, the
derable part. However, in Viet-        India, Taiwan and EU countries.        demand of the textile-garment
nam now, the dye producing in-         As demand is constantly on the         industry (see Table 3).
dustry in the service of textile-      rise and they are not able to pro-         Of the three groups of chemi-
garment has not developed;             duce by themselves, some Viet-         cals and dyes supplied to the tex-
hence, 100% of dye has to be im-       namese private enterprises have        tile-garment industry, the group
ported. In 2005, some 3,275 tons       imported high-content additives        of basic chemicals has the highest
of dye of various kinds had to be      for processing and consumption         ratio of domestication (about 80%
imported (at the cost of 419.25        in the local market.                   on average). In terms of value,
billion VND or 31.1 million                2.3.3. Basic chemicals             these account for 15-20% of the
USD)(5). Dyes are imported main-                                              demand of the textile sector. De-
                                           Vietnamese chemical industry
ly from Japan, Switzerland, Ger-                                              spite their certain achievements,
                                       has recorded a high growth rate of
many, Russia, Czech, South Ko-                                                Vietnamese basic chemicals still
                                       15-20%, accounting for about 8%
rea, Taiwan, and China (see Table                                             contain some restraints impeding
                                       of the total production value of
1).                                                                           its extensive use in the textile sec-
                                       the entire industrial sector. The
      2.3.2. Additives                 group of basic chemicals is a          tor.
    Additives which are used in        highly diverse field, which in-            First, the quality of Vietnam-
the textile-garment industry are       cludes the chemicals used as ma-       ese chemicals is low, while the
highly diverse. But Vietnam is         terials inputs to produce other        textile sector must use the chemi-
able to produce very little for        chemicals and for a direct use in      cals of high purity. For instance,
   Table 3. Output of Some Principal Chemical Products Used in Textile-Garment Industry

           Products           Output         Satisfaction of local            Usage in dyeing completion
                             ton/year              demand (%)

  1   Urea       ferti-      800,000                    50                  Additives to dyeing

  2   Sulphuric     ac-      286,800                    70                  Creating environment for dye-
      id                                                                    ing and waste water treatment

  3   Phosphoric              18,700                    80                  Water supply treatment

  4     Sodium     100%       59,097                  70-80

  5   Clohydric     ac-       36,200                                        Creating environment for dye-
      id                                                                    ing

  6   Natri silicat           40,500                                        Cloth purging
                                                               No10 (170) 2008           Economic Re-
  7   Alum                    22.100                                        Water supply treatment
  8   Detergent              151,958                    100                 Cloth and garment washing

  9   Detergent              116,829                    100                 Cloth and garment washing
Nguyen Ngoc Son                                                                                         To
Develop Vietnamese Textile - Garment…

the kitchen salt (NaCl) to be used        With obsolete facilities, out-      2.4.1 Enterprises producing
must attain 97-99% purity, while
the salt in Vietnam, despite its       Table 4. Production of Chemicals and Dyes in Vietnam Now
great quantity, contains many im-
purities and cannot be used. So-       Substances      Domestic              Costs             Demand satis-

dium (NaOH) produced by the                             Output                                  faction (%)

VietTri Chemicals Factory or                           ton/year
                                                                     Bil.         USD          Local   Import
DongNai Chemicals Factory is in                                      VND
liquefied form with a strength of      Dyes                0.000      0.00              0.00    0.00   100.00
30-40 Be; thus it is difficult for
transportation and reservation,        Additives         353.125     17.66   1,117,484.20       5.00   95.00

and not preferred for use.             Basic chem-     1,989.375     29.84   1,888,647.15      15.00   85.00
    Second, the prices of Viet-        icals
namese basic chemicals are high-       Total           2,342.500     47.50   3,006,131.35
er than those of imported ones by
                                       dated technologies (from 1960s), garment supporting materials
5-10%.                                     Source: Vietnam Chemicals Corporation.
                                       retarded renovation, and mis- split by products
    Vietnamese chemical industry       match, Vietnamese chemicals            Sewing thread: Sewing thread
came into being very early and         industry in the service of the tex- producing enterprises are found
uses mainly the technologies and       tile-garment sector is not yet able mainly in the South and the
facilities from the former Soviet      to produce the products of high North. In the North, there are two
Union and China in the 1960s;          technology. All the dyes for the enterprises, i.e. the PhongPhu
hence, the quality of products is      textile-garment industry have to Coats Tootal Joint Venture with
poor, cost high, efficiency of ma-     be imported; the ratio of additives its designed capacity of 1,500
terials and energy use low, and        and basic chemicals produced in tons/year, and the Hanoi Thread
causes environmental pollution.        the country for textile-garment Factory with its designed capacity
    At present, Vietnam has 1,947      meets but 5-15% of demand, and of 500 tons/year. In the South,
chemicals producing enterprises,       nearly all of them are products of there are also only two, i.e. the
including 88 SOEs, or 4.52%, and       low value.                          PhongPhu Coats Tootal Joint
1,773 non-state enterprises, that is       2.4. Production of garment Venture in HoChiMinh city with
over 95%. Thus, we can see the         supporting materials                its designed capacity of 2,000
textile and dyeing-flower print-
                                           At present, in the garment in- tons/year, and the Toolong Com-
ing-completion sectors use large
                                       dustry of Vietnam, subcontracted pany (Taiwan) with its designed
quantities of chemicals and dyes
                                       production remains the prevalent capacity of 200 tons/year.
with rich variety, and almost all
                                       form, with the participation of        Cotton sheets: There are now
these chemicals and dyes must be
                                       some 90% of enterprises. The 5 cotton sheet producing enter-
produced with high technologies
requiring the development of sev-      main reasons are as follows: prises in the whole country with a
eral industries. This is the very      Vietnam is not able to ensure the total designed capacity of 32 mil-
difficulty confronted by the           supply of principal materials; the lion yards/year.
                                       industry which produces support-       Mex (bolstering material):
chemicals producing industry in
                                       ing materials for the garment sec-  There are only two mex produc-
recent times. Table 4 shows the
capability of the chemicals and        tor is still too small, failing to ing enterprises in the South with a
dyes industries to meet the do-        catch up with the acceleration of total designed capacity of 17 mil-
mestic demand of the textile-          the sector’s production and mar- lion yards/year. They are the
                                       ket changes.                        Vietnam Industrial Ltd. Company
garment industry in recent years:
                                                                           ISA (100% South Korean capital)

  nam                    No10 (170), 2008                                                                25

To Develop Vietnamese Textile - Garment…                                                                    Nguyen
Ngoc Son

with its designed capital of 12       zips (100% Japanese capital) with         other small-sized companies in
million yards/year, and the Viet-     its designed capacity of 35 mil-          HoChiMinh city with a designed
Phat Joint Venture (between the       lion m/year.                              capacity of about 10 million piec-
VietTien Garment Company and              Woven brands: In the North,           es each per year.
a Taiwanese company) with its         there is the TrieuKhuc-Hanoi en-             Wrappings: In the North, there
designed capacity of 5 million        terprise and an enterprise of Gar-        are the Hanoi Wrapping Enter-
   Plastic buttons: Enterprises       Table 5. Output of Vietnamese Garment Supporting Products
producing plastic buttons are con-
centrated mainly in the South,                Items                Unit           Designed      Present out-
such as the VietThuan Joint-                                                      capacity           put
Venture Company (between the            1.        Sewing      Ton/year              3,500           3,000
VietTien Garment Company and            thread
the Taiwanese Mootsung Compa-
                                        2.        Cotton     Mil.                     33              33
ny) with its designed capacity of
                                        sheet                yard/year
152 million pieces/year, the Dai-
Do Company (100% Japanese               3.      Non-woven    Mil.                     12              10
capital) with its designed capacity     mex                  yard/year
of 200 million pieces/year, the         4.       Plastic     Mil.                    752             650
LyMinh Company (100% Taiwa-             button               pcs/year
nese capital), the private Tua-
                                        5. Zip               Mil.         me-         65              60
nHien Company with its designed
capacity of about 100 million
                              ment 10 Company with a de- prise and some cardboard produc-
pieces/year, and some other      6. Brand            Mil.                       120             100
                              signed capacity of about 10 mil- ing enterprises belonging to Gar-
small-sized companies. In the                        pcs/year
                              lion pieces each per year. In the ment 10 Company, DucGiang
North, there is only the Tien-   7.       Elastic
                              South, there are theMil.                me-        25
                                                         following Garment Company… Besides,     22
Phong-Haiphong Plastic Button    band                ter/year
                              enterprises: HCMC Legamex there are some companies produc-
Company with an outdated pro-
                              Company with a designed capaci- ing nylon bags, plastic clips and
duction line; hence, its products Source: Vinatex.
                              ty of 30 million pieces/year, an hoops in adequate quantities for
are used mainly for labour-
                              enterprise of HCMC Garment the garment sector. In the South,
protection clothes.
                              Company with a designed capaci- there are several wrapping enter-
   Zips: There are two companies
                              ty of 20 million pieces/year, an prises and cardboard box enter-
in Vietnam; one in NhaTrang   enterprise of HCMC ThanhCong prises. Plastic companies produc-
with its designed capacity of 30
                              Garment Company with a design ing nylon bags, plastic clips,
million m/year, and the other in
                              capacity of 15 million piec- loops, and nylon collar bands for
BienHoa city producing YKK    es/year, and enterrises of some shirts in HoChiMinh city and Bi-
                                                                          enHoa city have supplied suffi-
Diagram 3: Structure of Enterprises Producing Garment Sup- cient quantities for the garment
porting Materials                                                         sector.
                                                                              Enterprises producing other
                                                                          supporting materials: In the
                                                                          South, particularly in HoChiMinh
                                                                          city, quite a large number of en-
                                                 100% foreign capital
                                                 Joint venture
                                                                          terprises are producing other
                                                 State                    garment supporting materials,

26      68%
                                                               No10 (170) 2008              Economic Re-


   Source: Author’s compilation from reports of Ministry of Industry
and Trade.
Nguyen Ngoc Son                                                                                            To
Develop Vietnamese Textile - Garment…

such as NhaTrang Textile Com-          capital or joint-venture ones ac-        With the above-mentioned
pany for elastic bands, VietHung       count for a very small ratio. En-    network of enterprises, the sup-
Ltd Company and Saigon Textile-        terprises in this field include      porting materials produced in the
Garment Company for lace               mainly SOEs or private ones          country have partly met the de-
strings, NamPhat Ltd Company           (mostly of small size and craft      mand of the industrial garment
(100% Taiwanese capital) for co-       villages).                           sector (see Table 6).
loured threads… In early 2000, in          - Enterprises with 100% for-         Table 6 shows that the ability
the TanTao industrial park, a          eign capital are those of large      of the domestic producers to meet
South Korean enterprise made           scale, complex technology and        the demand of the garment indus-
investment to produce assorted         big investment, which are mainly     try for supporting materials is
garment ropes. Some plastic en-        from Japan, Taiwan, and South        very small. As for the items
terprises are producing stoppers       Korea. Almost all the products       which can be produced in the
for jackets.                           from these enterprises meet the      country, the supply capacity at-
    Although in recent years, the      requirements on quality, and         tains merely 15-38%, and for
Government has given attention         some of them can be exported. At     elastic band, the figure is only
to develop textile-garment sup-        present, there are only 6 enter-     4%. As for other items such as
porting materials, the network of      prises with 100% foreign capital     woven band, stick band, and wo-
producers is still very thin and       (accounting for about 5%) operat-    ven mex…, domestic enterprises
unevenly deployed, and produc-         ing in Vietnam, of which a Tai-      are not able to produce yet.
tion remains on a small scale.         wan invested enterprise exports          3. Overall assessment of the
Hence, the output of garment           its products back to Taiwan.         development of textile-garment
supporting materials produced             - Joint ventures with foreign     supporting industry
locally is much limited.               partners are mainly those between        3.1. Some obtained results
    We can see all the enterprises     textile-garment enterprises and          In recent times, together with
producing garment supporting           foreign companies so as to ensure    the vigorous development of the
products do not operate at full        supplies of materials and support-   textile-garment industry, the tex-
designed capacity. The products        ing products to meet the domestic    tile-garment supporting industry
Vietnam is capable to produce are      production requirements. There       has also made certain achieve-
simple ones with low value (sew-       have so far been only 5 joint-       ments.
ing thread, plastic buttons); as for   venture enterprises with foreign         Despite its small size, Viet-
the products of high technology,       countries to produce sewing          namese textile-garment support-
only a very small quantity is pro-     thread, cotton sheets, and plastic   ing industry has somewhat laid an
duced (such as non-woven mex,          buttons.                             initial important foundation for its
zips). This has, to a large extent,       - Private enterprises producing   development. Particularly in the
restrained the ability of the gar-     supporting materials are often of    mechanical sector, in addition to
ment supporting materials indus-       small size; and their products are   the mechanical workshops of the
try to meet the domestic consum-       simple items of no high technolo-    textile-garment companies, there
er demand.                             gy, small quantities, and are easy   are 4 textile-garment specialized
    2.4.2. Enterprises producing       to change patterns as required.      mechanical companies which
garment supporting materials           This sector accounts for the big-    serve as the nucleus for future
split by owners                        gest ratio (68%) among the enter-    development; or in the synthetic
                                       prises which produce garment         fiber producing industry, although
    In the garment supporting ma-
                                       supporting materials.                we are not yet able to produce by
terials producing industry, the
enterprises with 100% foreign                                               ourselves, we have had projects

  nam                    No10 (170), 2008                                                                   27

To Develop Vietnamese Textile - Garment…                                                                Nguyen
Ngoc Son

which are in the early stage of         foreign suppliers in the coming      port large quantities of supporting
execution…These are the prelim-         years.                               materials, including nearly 80%
inary necessary steps towards the           Besides, the textile-garment     of materials and additives, 100%
development of the Vietnamese           supporting industry has prelimi-     of synthetic fiber and yarn, 100%
textile-garment supporting indus-       narily induced FDI investors’ at-    of dyes, and 60-70% of machines
try in the forthcoming future.          tention, particularly with respect   and equipment. This has consi-

Table 6.                  Domestic Supplies of Garment Supporting Materials

  Supporting mate-               Unit         Demand    Production     Demand Satisfaction          Import
           rials                                                                  %

 1.   Plastic      but-   Mil. pcs/year       3215.15       765                   24                 2450.15

 2. Non-woven mex         Mil.          me-     31.61        12                   38                   19.61

 3. Woven mex             Mil.          me-     30.02         0                   0                    30.02

 4. Brands                Milepost/year        822.15       120                   15                  702.15

 5. Elastic band          Mil.          me-    590.46        25                   4                   565.46

 6. Stick band            Mil.          me-     42.16         0                   0                    42.16
    In recent times, Vietnamese to the production of supporting              derably lowered the competitive-
textile-garment supporting indus- me-
  7. Woven band            Mil.         materials in the service of gar-
                                                81.51          0             ness 0 Vietnamese exports and
                                                                                    of                  81.51
try has played a part inter/year ment exports. So far, there have
                            meeting                                          restrained the proactivity of tex-
the demand in the country, con- been 11 foreign investors operat-            tile-garment enterprises’ produc-
  8. Zips                  Mil.        me-     222.88          65                  29                  157.88
tributing to reducing the de- ing in this industry, comprising 5             tion, resulting in a very high ratio
pendence of the textile-garment joint-stock companies and 6 enter-           of supporting materials import
    Source: foreign suppliers and prises with 100% foreign capital.
industry on Institute of Industrial Strategy and Policy Research, 2005.      costs to the export value of Viet-
getting more proactive in produc-          3.2. Defects and restraints       namese textile-garment industry.
tion and export. In several years          Besides the obtained achieve-         Second, the textile-garment
past, although it has not been giv- ments, the textile-garment sup-          supporting industry has not ma-
en adequate attention, the textile- porting industry still contains          naged to set up such high-tech
garment supporting industry, by several defects and restraints.              production branches as precise
its own efforts, has met about             First, the textile-garment sup-   mechanics, petrochemical and
20% of the demand for garment porting industry is still too small;           dye industries…Besides, almost
supporting materials, 10-15% of its enterprises are few in number            all the existing enterprises have
the demand for chemicals and and production is scattered and of              not achieved their full operational
dyes, and 20% of the demand for small scale. Its products can meet           efficiency and tapped their full
machines and equipment. These only a small part of the domestic              designed capacity. This is really a
are the important premises to demand (while China and India                  paradox when machines and
achieve the goal of increasing the can satisfy up to 70-80% of their         equipment are lacking and the
domestication ratio and gradually demand). Thus, Vietnamese tex-             domestic demand is great.
escaping from the dependence on tile-garment industry has to im-

28                                                                No10 (170) 2008       Economic Re-

Nguyen Ngoc Son                                                                                             To
Develop Vietnamese Textile - Garment…

    Another restraint is that the       fail to meet the ever higher re-      try. The Government should give
products of the textile-garment         quirements on quantity and quali-     assistance by effective policies on
supporting industry from domes-         ty of products for textile-garment    technological transfer, protection
tic producers have a very poor          enterprises.                          of copy right, intellectual proper-
competitiveness, for they fail to           Fourth, at present, several in-   ty… together with other preferen-
meet the stringent requirements         vestment projects in this field are   tial policies such as reduction of
on quality, delivery time, and          still stalling at the negotiation     minimum investment requirement
their prices are even higher than       stage without advancing to the        so as to induce investment from
the imported products of the same       execution stage yet.                  foreign medium and small-sized
kind. Moreover, the domestic                                                  enterprises (experience of Thail-
                                           Fifth, the state has not adopted
products turned out are mainly in                                             and) or preferential investment
                                        preferential policies to encourage
small quantities and incomplete                                               taxation including tax exemption
                                        private and foreign investors to
sets or just components in semi-                                              for 5 years and imposition of cor-
                                        develop the textile-garment sup-
finished products of low value.                                               porate tax at 15-30% of turnover
                                        porting industry.
Therefore, most of the textile-                                               (experience of Malaysia).
                                           4. Measures to develop textile-
garment supporting products still                                                4.2. Intensifying enterprise
                                        garment supporting industry
depend on foreign countries.                                                  linkage
                                           4.1. To encourage the in-
   3.3. Causes of the restraints                                                  Production-business linkage is
                                        ducement of foreign investment
    Following are the main causes                                             formed between FDI enterprises
                                        for the development of textile-
to the restraints of the Vietnamese                                           and domestic ones, sizable enter-
                                        garment supporting industry
textile-garment supporting indus-                                             prises and small ones, and sup-
                                           The ASEAN forerunners have         porting materials suppliers and
try in recent times:
                                        induced selective foreign invest-     production enterprises. Taking
   First, almost all Vietnamese         ments so as to direct FDI into sup-   part in the linkage, enterprises
industrial enterprises are not fully    porting industry. They have taken     may share development re-
aware of the important role of the      several preferential measures con-    sources, receive assistance to
supporting industry. In Vietnam,        cerning taxation, and established     production, and minimize costs…
the perception of supporting in-        free trade zones in order to imple-   Hence, to develop enterprise lin-
dustry has just been learned of for     ment an export-oriented strategy.     kage is seen as an important
a few years now. Hence, no ade-
                                            The inducement of foreign in-     measure taken by numerous coun-
quate attention has been paid to
                                        vestment for the development of       tries to promote the supporting
developing the industry.
                                        the textile-garment supporting        industry. In Japan, South Korea
    Second, as the production of        industry is of great significance.    and Taiwan, linkage is developed
supporting products in general,         On the one hand, it contributes to    between small producers and siz-
and textile-garment supporting          expanding the scale of the textile-   able enterprises, and in Thailand
products in particular requires a       garment supporting industry, that     and Malaysia, efforts are made to
big investment capital while prof-      is, to increase the capacity to       step up linkage between domestic
its are not high, it does not attract   supply domestic supporting prod-      suppliers and foreign companies.
investors to this field.                ucts for the textile-garment sec-     As for Vietnam, various forms of
    Third, as machines and              tor, and on the other, more impor-    linkage should be adopted to de-
equipment of the domestic facto-        tantly, to acquire advanced tech-     velop the textile-garment support-
ries, particularly the mechanical       nologies and high managerial          ing industry.
and chemical factories, are out-        skills for the development of the
dated without renovation, they          textile-garment supporting indus-

  nam                     No10 (170), 2008                                                                   29

To Develop Vietnamese Textile - Garment…                                                                  Nguyen
Ngoc Son

    As regards enterprise linkage,     supporting industry, Vietnam               Market is the important factor
line associations, governmental        should focus on the following           for the development of the textile-
and non-governmental organiza-         issues:                                 garment supporting industry. The
tions exert a great influence.             + To enhance the quality of         goal of developing the textile-
Thus, to organize a successful         education and job training so as to     garment supporting industry till
business linkage, it is necessary,     attain, at least, the regional plane.   2020 is significant only when out-
first of all, to consolidate and en-      + To expand the form of on-          let for the industry is ensured.
hance the operational role of these    the-spot training, linking training     Hence, appropriate measures
associations and organizations.        with labour employment.                 should be taken to this effect.
    The Vietnamese Government             + To encourage sizable enter-            From now to 2015, Vietnam-
should only play the role of a cat-    prises and FDI enterprises to con-      ese textile-garment supporting
alyst so as to facilitate and pro-     duct training of workforce for          industry is not able to acquire ex-
mote enterprise linkage, specifi-      themselves and other enterprises.       port market; thus, it should focus
cally the Government will pro-             + To enter linkage with units,      on the domestic market and, at
mote linkage through technical         colleges and junior colleges with-      the same time, prepare the neces-
assistance, managerial consultan-      in and without the country so as        sary premises for export in the
cy, and financial assistance. In       to launch training courses for          following period. To do this, the
such context, sizable enterprises,     specialized engineers and tech-         following principal measures
FDI enterprises or producers will      nical workers to complement the         should be taken:
play the role as a nucleus of lin-     existing workforce. Both enter-            - For enterprises: They should
kage and take part in linkage to       prises and schools should encour-       have a firm grasp of and settle
receive the said preferences and       age students to enlist in the facul-    effectively the requirements of
assistance, while small enterpris-     ties concerning the textile-            the market.
es, domestic enterprises, and sup-     garment supporting industry.               + A notable feature is that
porting enterprises will play the         + Training centers should            supporting industry enterprises in
role as satellites in the linkage      draw programs of cooperation            general and textile-garment sup-
system with a view to enhancing        with foreign countries to train         porting industry of Vietnam in
their production efficiency, ma-       engineers and skilled workers,          particular are little known by pro-
nagerial skill, and ensuring their     particularly those engaged in the       duction and assembly enterprises
outlets.                               petrochemical, mechanical and           (especially foreign ones); rela-
   4.3. To develop human re-           chemical industries.                    tions between textile-garment
sources for textile-garment sup-           + Another glaring weakness of       supporting products suppliers and
porting industry                       textile-garment supporting mate-        domestic textile-garment enter-
   Supporting industries often re-     rials producers is their ability to     prises are scarce. Therefore, to
quire high labour quality. Hence,      access market and consumers, part-      step up domestic consumption,
job training and managerial skill      ly because of their restraints as re-   textile-garment supporting indus-
improvement are of important           gards marketing and sale skills.        try enterprises should start from
significance and constitute the        Hence, it is necessary to organize      the factors concerning trade pro-
motive force to develop the sup-       training courses in this respect.       motion, specifically as follows:
porting industry. To acquire a            4.4. To develop the market for          • To set up marketing centers
workforce which is capable of          textile-garment supporting in-          to propagate enterprise profiles,
meeting the requirements of the        dustry                                  create favourable conditions for

30                                                               No10 (170) 2008          Economic Re-

Nguyen Ngoc Son                                                                                              To
Develop Vietnamese Textile - Garment…

market search and contacts with        age these to use more of the               First of all, we may continue
customers and, at the same time,       products of local origin.               to use the machines and equip-
act as the bridge connecting en-           + To give assistance as regards     ment which are still operational.
terprises of various economic          the initial budget for the estab-       For in the coming years, we can-
components.                            lishment and operation of some          not replace them all with ad-
    • To establish a system of in-     web sites on textile-garment sup-       vanced ones for lack of invest-
formation and data base on enter-      porting industry to help promote        ment capital. Besides, the training
prises, which serves as the founda-    development investment and in-          of personnel to assimilate new
tion for introducing and finding       formation supply.                       technologies and to use equip-
customers, and horizontal linkages.       + To help establish linkages         ment efficiently takes time. Of
   • To intensify relations to in-     between enterprises of various          course, the introduction of new
crease partners, to entertain close    economic components, particular-        technologies and equipment is
links with some sizable consum-        ly between FDI enterprises and          indispensable, but this will be
ers by establishing relations in       domestic suppliers.                     done step by step in tandem with
expositions of textile-garment            + To protect the domestic            the liquidation of old technologies
supporting products or in market-      market through measures to curb         and equipment.
ing centers, and to make full use      trade frauds, fake goods, and              In addition, we should speed
of personal relationships.             smuggled goods.                         up investment and the application
   + Another highly important             4.5. To heighten technologi-         of new technologies in production
requirement to textile-garment         cal level                               work in order to meet the re-
supporting product suppliers is            Just like other industries, tech-   quirements of market. To do this,
that they should ensure accurate       nological level has a direct impact     some following measures should
goods delivery pace and time for       on productivity, quality and de-        be taken:
textile-garment enterprises. For       velopment of the textile-garment
delays and wrong delivery time                                                    + To adopt a more reasonable
                                       supporting industry. In fact, the
will affect the production work                                                financial mechanism and to offer
                                       technological level of the Viet-
and fulfillment of big orders of                                               a more satisfactory reward to
                                       namese textile-garment support-
textile-garment enterprises.                                                   those who are able to handle
                                       ing industry is now low and ma-
   - For the state, ministries and                                             technologies to good effects. To
                                       nagerial capability poor; hence, it
sectors concerned                                                              adopt a good mechanism for an
                                       is not able to turn out products of
    + To create favourable condi-                                              objective assessment of the value
                                       high quality such as dyes, syn-
tions for and strongly encourage                                               of scientific research works and
                                       thetic fiber and yarn, sophisti-
                                                                               transferred technologies and their
domestic textile-garment enterpris-    cated machines and equipment…
es to use local supporting products,                                           approval.
                                       Therefore, to accelerate the de-
while restraining the use of admin-    velopment of the textile-garment           + To give financial help for
istrative measures to regulate the     supporting industry, much atten-        the purchase of copyrights in
domestic market capacity.              tion should be given to technolo-       view of the development of me-
   + To apply preferential taxes       gical renovation so as to enhance       dium and small-sized enterprises.
on the domestic supporting prod-       production capacity and to turn            + To offer special preferences
ucts in the service of export gar-     out new products of high quality        to FDI enterprises which have
ment enterprises so as to encour-      at competitive prices.                  technological transfer projects
                                                                               and commitment to develop some

  nam                    No10 (170), 2008                                                                     31

To Develop Vietnamese Textile - Garment…                                                                Nguyen
Ngoc Son

domestic enterprises engaged in       seen as the biggest restraint to the   garment supporting industry is
developing supporting industry.       development of Vietnamese tex-         the way for Vietnam to enhance
To encourage the transfer of ad-      tile-garment industry now.             the competitiveness of its prod-
vanced technologies to Vietnam            As an industry which is consi-     ucts on the world market and to
for production.                       dered the foundation for the de-       increase the value of Vietnamese
   + To build a system of product     velopment of the textile-garment       exports under the conditions of
quality standards compatible with     industry, the textile-garment sup-     WTO integration♦
world standards as the foundation     porting industry is still too small.      Note
for technological development         An undeveloped petrochemical              1. According to Association of
and renovation orientation…           technology, outdated textile-          Japanese Overseas Enterprises,
   + To encourage organizations       garment mechanics, and scat-           1994: 19.
to provide and to give informa-       tered, small garment supporting
                                                                                2. According to Rattan, 1999: 2.
tion on technologies so as to help    materials production have all con-
                                                                                3. Ichikawa, K. 2005:1.
enterprises update in this respect,   tributed to a failure to meet the
                                      requirements. Hence, almost all           4. Institute of Industrial Strat-
select and work out technological                                            egy and Policy Research, 2005.
                                      the materials and supporting ma-
renovation plans in conformity
                                      terials, machines and equipment            5. Department of Mechanics,
with the enterprise conditions and
                                      in the service of the textile-         Metallurgy and Chemicals, Min-
market requirements.
                                      garment industry have to be im-        istry of Industry and Trade.
   5. Conclusion
                                      ported, which inadvertently turns
    Vietnamese      textile-garment   the Vietnamese textile-garment            References
industry has an important place       industry into a subcontracted unit
and role in the national economy.                                               1. Japanese Overseas Enter-
                                      for foreign countries. The lack of
In 2007, that is one year after                                              prises Association (1994): Re-
                                      domestic inputs makes the Viet-
WTO accession, its export turno-                                             search on supporting industry,
                                      namese textile-garment industry
ver reached 7.78 billion USD.                                                Tokyo.
                                      much dependent on imports and
The result of its strong develop-     unable to have a proactive pro-           2. Ichikawa, K. (2005): Build-
ment in recent years is indicated     duction process, while its compe-      ing and strengthening supporting
through the efforts for develop-      titiveness is poor and value added     industries in Vietnam: A survey
ment of individual enterprises as     low.                                   report. Hanoi, JETRO.
well as the entire industry as re-       By the experience of several           3. Kenichi Ohio (2007): Build-
gards production value growth         forerunners, the development of        ing supporting industries in Viet-
and export value growth. Howev-       supporting industry is of great        nam, T.1, Vietnam Development
er, if we assess the Vietnamese       significance to the development        Forum.
textile-garment industry merely       of the textile-garment industry.           4. Nguyen Ngoc Son (2007):
by value-added index and some         Therefore, to continue to develop      Vietnam in the global value chain
other basic indexes of sect oral      a sustainable and efficient textile-   of the textile-garment industry. De-
economic efficiency, we may as-       garment industry of Vietnam, it is     veloped Economy review, No. 123.
sert the industry still contains      necessary to take early appropri-         5. Rattan, E. (1999): The role
several defects to be overcome, of    ate measures for the development       of small and medium supporting
which the weakness of the textile-    of the textile-garment supporting      industries in Japan and Thailand.
garment supporting industry is        industry. To develop the textile-      IDE APEC Research Center,

32                                                             No10 (170) 2008          Economic Re-

Nguyen Ngoc Son                              To
Develop Vietnamese Textile - Garment…

Working Paper series 1998/1999,
    6. Institute of Industrial Strat-
egy and Policy Research, Minis-
try of Industry and Trade (2005):
Overall planning for supporting
industry development till 2010,
vision till 2020.

  nam                     No10 (170), 2008   33


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