Vietnam textile industry to lose up to US$473 million on Covid-19
Companies in the industry could lay off 30% of their employees in April and 50% in May due to the lack of orders.
Vietnam’s textile industry could lose up to VND11 trillion (US$473 million) in case the Covid-19 pandemic ends in May and the economy starts its recovery in June, according to Vietnam National Textile and Garment Group (Vinatex).
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Companies in the sector could lay off 30% of their employees in April and 50% in May due to the lack of orders. For Vinatex, the loss could be around VND1 trillion (US$43 million).
Vinatex’s estimation came after growing number of order delays or cancellations from buyers in the US and EU for Vietnam’s textile and garment products. As of present, both markets account for 70% of the industry’s exports.
Board Chairman of Hung Yen Garment Corporation (Hugaco) Nguyen Xan Duong said the company is under huge pressure to pay back bank loans as its revenue is estimated to decline 20% in the first quarter.
“We are scaling down operations to minimize expenses and pay wages for workers,” Duong added.
As Vietnam’s economy has further integrated into global supply chains, its industrial production is facing severe consequences due to the disruption of the movement of goods under the Covid-19 pandemic.
The impact is significant as the markets of China, South Korea and Japan, which are struggling with the pandemic, make up 50% of the industry’s exports and 30% of imports.
Based on the average production capacity, over 60% of local industrial firms import 35 – 45% of their respective input materials. For example, 65 – 70% of input materials of Vietnam's leading textile manufacturer Garment 10 Corporation are imported from China.
At present, the company could only maintain operation until the end of March, and by April, many workers could lose their jobs.
Firms in the textile-garment industry have been actively searching for new sources of materials, however, no one could replace China completely, especially in terms of price and quick delivery.
Higher input prices would eventually lead to a decline in the industry’s competitiveness and lower growth rates.
Director of the Industry Department under the Ministry of Industry and Trade Truong Thanh Hoai said importers from the US and the EU are seeking to delay delivery in March and suspend orders in April and May. This situation would cause more difficulties to garment-textile firms and which could have heavy social impacts as the industry employs over two million workers.
In 2019, Vietnam recorded a trade surplus of nearly US$26.6 billion with the EU, with major contribution from textile and garment, footwear, agricultural products and machinery, among others.
Vietnam also exported textile and garment products worth nearly US$15 billion to the US last year, the figure stood at nearly US$2.3 billion during the first two months of 2020 despite impacts of Covid19, according to statistics from the General Statistics Office.
