Benefits of the Economic Cooperation between Export-Import Enterprises of Vietnam and China

The contribution of Vietnam's garment industry to the total export turnover of the country in recent times has always been above 12% (Figure 1.8).

Despite such good results, marketing and distribution are still a weakness of Vietnamese garment export enterprises. Currently, Vietnamese enterprises hardly participate in marketing and distribution activities but transfer all goods to customers even in Vietnam as analyzed in the description of export activities above. Although the above data shows that Vietnam has somewhat positioned itself on the world garment map, in the end, customers only know it as a processing factory, not a brand. This is a difficult problem that requires enterprises to think and change this situation.

2.3. Current status of linkages between garment export enterprises in Vietnam

2.3.1. Benefits of economic linkages between garment export enterprises in Vietnam

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As presented in the above section, if we consider the value chain in a simple concept, we can see that the value chain of the garment export industry includes five links: design; production of raw materials, sewing, export and marketing and distribution. In reality, although it is not necessary to develop all stages in this value chain production system evenly, if we can create a close link between the stages under available conditions, it will have a great impact on ensuring proactiveness, improving production and business efficiency and increasing the competitiveness of Vietnamese garment products in the world market.

Strengthening the linkages of garment export enterprises with each other and with enterprises in the front and back of the chain of activities is necessary for the following reasons:

Vertical linkage

Design-sewing link

Design-sewing linkage means establishing a close relationship between the sewing department and the design department of the garment export enterprise. Accordingly, an export garment enterprise can take on the design task or have a close relationship with the design unit. This is a necessary relationship because only when garment enterprises have information about the market's fashion trends and market requirements can they hope to enhance their product design capabilities, thereby moving up and beyond the bottom of the global value chain. Without information about fashion trends and the needs of each market, Vietnamese garment export enterprises will forever be just hired manufacturers according to customer requirements.

Linking weaving and production of raw materials - sewing

This can be considered a very important link in the value chain of Vietnam's garment export industry. The textile-garment linkage is necessary for the following reasons:

Firstly, the linkage between the weaving and sewing stages can contribute to improving the quality of raw materials for garment enterprises because the textile industry can more closely follow the needs of the garment industry for raw materials. The export garment industry, although its export turnover has increased rapidly, still mainly implements the export processing method, so it needs to gradually shift to self-production and export methods to achieve higher efficiency. However, in addition to difficulties in labels and brands, stable, timely and quality-assured sources of fabric and accessories are also a major obstacle for garment enterprises.

Second, strengthening the textile-garment linkage creates conditions to reduce intermediate costs. This is even more meaningful if we consider the data on the structure of imported textiles and garments. For example, the ratio of raw fabric to garment export turnover in 2009 was 54.18% and the ratio of the value of imported textile and garment materials and accessories in 2009 was 57.92% compared to textile and garment export turnover. According to the assessment of the Vietnam Textile and Apparel Association, Vietnam's exported garment products are 10-15% more expensive than similar products in the region. One of the

The reason for this situation is that the country has not been proactive in sourcing raw materials or that domestically produced raw materials have high costs.

Third, textile and garment linkages allow to reduce the need for imported raw materials, increase the added value of the garment industry and increase the industry's contribution to the national economy. In the long term, the textile and garment linkage will bring significant benefits because the smooth information flow between textile and garment enterprises will contribute to enhancing the competitiveness of these enterprises. On the one hand, textile enterprises benefit because they sell their products. On the other hand, garment enterprises benefit because the geographical proximity and cultural similarities allow garment enterprises to consider textile enterprises as a supporting factor in satisfying their customers' needs. Only then can enterprises reduce costs, increase productivity and increase competitiveness.

Textile-garment linkages also have benefits in terms of macroeconomic management. With the current import value of nearly 60% of the garment export industry, even if we try to increase exports, the efficiency is not high. Strengthening textile-garment linkages in the current economic context also means developing the supporting industry of the garment industry to match the position of one of the 10 countries with the most garments in the world, and thus, going in the right direction with the industrial development orientation in Vietnam. Strengthening textile-garment linkages contributes to reducing import value, improving the trade deficit, which is a headache for macroeconomic managers.

Fourth, textile and garment linkages will contribute to creating conditions for a stable and proactive supply of fabrics and yarns for garment exports. In reality, the import of fabrics and yarns and accessories puts garment enterprises at a disadvantage, limiting their initiative in delivery times. Some enterprises, due to delays in importing fabrics and yarns, incur additional high costs due to having to transport goods by air to ensure delivery times. Therefore, if they are supplied with fabrics and yarns from a stable domestic source, garment enterprises will reduce risks in exporting.

Fifth, textile linkage facilitates market expansion of the textile industry.

thereby increasing scale to gain scale advantages, reduce costs, increase competitiveness of the garment industry and the textile industry, increase accumulation to continue reinvesting in new technology to meet the requirements of the garment industry.

Linking sewing - export, marketing and distribution

Linking garment-export, marketing and distribution brings the following benefits to garment export enterprises:

Firstly, the relationship between garment, marketing and distribution will help businesses increase their income in the value chain instead of depending on importers as in the current method. Access to the distribution system is an important task because it helps garment export businesses increase their income (very high) for the work related to approaching customers.

Second, the close relationship between sewing and marketing and distribution will help businesses have more opportunities to understand the market in which they supply products in terms of customer demand and the types of goods provided in this market. Understanding the demand for goods is an important information because it will help businesses be more proactive in the design stage and from there, have the opportunity to supply more orders through this understanding.

Third, the relationship between sewing and marketing and distribution helps businesses establish a stable position in supplying sewing products because the idea and belief in the existence of the market is always present.

Horizontal Linking

Besides implementing vertical linkages as mentioned above, implementing horizontal linkages: between garment exporting enterprises and garment exporting enterprises is also necessary for the following reasons:

Firstly, the connection between Vietnamese garment export enterprises, on the basis of sharing information in the field, creates opportunities for garment export enterprises to increase their strength such as: better understanding of market information, understanding of customers, suppliers, competitors, improving quality and designs provided to the market, building brands, promoting images.

Photos of Vietnam's garment manufacturing industry at international fairs and exhibitions, improving experience or skills in organization and management, etc.

Second, linking Vietnamese garment export enterprises brings business opportunities for enterprises. Previously, when the quota system still existed, horizontal linkage was an opportunity for garment export enterprises to share orders with each other.

According to Mr. Le Quoc An, Chairman of the Textile and Garment Association, for the garment industry to develop sustainably, the consensus of enterprises in the industry is important. Former Minister of Trade Truong Dinh Tuyen said that in order to develop the textile and garment industry, linkages are very important but require a synchronous and unified implementation by enterprises, not in a way that each person does it alone.

Mixed Links

It is a form of association that forms clusters such as industrial clusters. In which, garment enterprises can associate with garment enterprises and with enterprises that produce raw materials and accessories, design (to the front of the value chain) or with export and distribution organizations (to the back of the value chain).

2.3.2. Forms of economic linkage in export garment enterprises = Vietnam

Vertical linkage

Design - sewing link

Currently, this link has not been implemented closely and has not brought high efficiency to the production and business activities of fashion companies and garment export companies. The survey results of 31 enterprises in Vietnam show that all of these organizations have a design department. This department is either just a department or an independent company as in the case of Hanoi Textile and Garment Corporation. The tasks of the design department are to design live samples (samples made of fabric and other accessories), design dead samples (samples using paper and other materials), and design samples according to ideas. The design department performs the task of creating

Samples for export orders and domestic consumption.

The implementation of export processing orders brings great benefits to the development of the design department of the garment company because these companies can fully utilize the designs of export orders, using 100% of the original or making certain modifications to serve the domestic market. In the process of implementing export orders, this department also receives enthusiastic guidance from the design team of the customers who place processing orders, so the working experience after implementing export processing orders increases a lot. It should also be noted that there are some very small-scale garment processing enterprises, such as a garment factory, that can hire designers for their orders.

However, it is the link between the garment departments and the design departments in the enterprises. The link between garment enterprises and design centers is not effective. The design departments of export garment companies have relationships with external organizations or take advantage of opportunities to learn from external organizations such as the London Fashion Institute in Hanoi, but these are only small activities and often focus mainly on serving the domestic market. Garment enterprises have not yet combined with domestic and international fashion centers to propose orders to global buyers.

It is easy to see a phase difference between the two stages of design and export sewing in Vietnam because export garment enterprises are always busy working for hire, while enterprises with the task of doing fashion business do not have enough capacity to support the export sewing stage. The most ideal relationship for this link is that export garment enterprises combine with fashion companies or business centers to propose samples directly to global buyers, from which Vietnamese export garment enterprises can increase their profits by eliminating intermediaries, also known as export brokers.

Textile linking, raw material production - sewing

Textile and garment relations are expressed in many forms: textile enterprises provide raw materials for garment enterprises; garment enterprises provide raw materials for themselves with self-produced textile products; the association between textile enterprises and garment enterprises aims to ensure raw materials and consume each other's products, supporting each other.

The weakest point of our textile enterprises at present is that they are not capable of supplying fabrics for export garment enterprises in terms of quantity, type and quality. According to domestic experts, Vietnamese fabrics are much inferior to fabrics from other countries in the region, but the price is often higher. According to the surveyed enterprises, the percentage of domestic fabrics with quality that meets the requirements of the export garment industry is only about 10-15%, and most of the raw materials and accessories are imported. Therefore, although the export turnover of the domestic garment industry reached 7.697 billion USD in 2009, the actual value produced domestically only accounted for about 32.5%, the rest is imported fabrics and accessories from abroad. According to the assessment of textile enterprises and related organizations, the textile-garment relationship in Vietnam is currently low and ineffective. This result is similar to the result of a study by Foreign Trade University in 2006 (box 2.3).

Box 2.3. Results of a survey of some garment export enterprises by the research team of Foreign Trade University

The results of a 2006 survey by the Foreign Trade University on 23 garment export enterprises in Vietnam in terms of raw materials showed that the imported raw materials of garment enterprises accounted for over 50% of the total raw material sources. However, the ability of garment enterprises to meet the domestic textile industry's raw material needs is actually much lower than the above figure, especially for export garment products. According to the opinion of this research group, domestic production according to official statistics can meet less than half of the industry's textile demand, but in reality, that figure may be lowered because it does not take into account a large part of smuggled textiles.

Most textile enterprises have established relationships with domestic garment enterprises. According to this study, 80% said they have long-term relationships with garment enterprises. The remaining enterprises distribute products through wholesale or export in full. Textile and garment relationships often have problems, mainly due to the poor quality of goods.

The results of the survey of export garment enterprises show that many of them believe that domestic fabrics do not meet the requirements of garment enterprises. According to these enterprises, the quality of domestic fabrics does not meet the requirements of high-quality orders. It is worth noting that many enterprises believe that the relationship between garment and textile enterprises is currently exploited at a low level and is ineffective.

Source:  15 

The survey results of 31 garment export enterprises in Vietnam show that all of these enterprises have very good relationships with domestic textile enterprises, but these organizations also admit that domestic fabric sources are of low quality and in most cases cannot be used as export garment materials. But another very important reason is that textile enterprises cannot pass the customer's acceptance assessment as suppliers for very simple reasons such as using child labor, requiring workers to work overtime beyond the legal limit, and infrastructure that does not meet the requirements, even though customers are very eager to recognize the participation of these organizations. Even though they are willing to organize assessments at any time and are willing to accept as suppliers if they meet the requirements, textile enterprises are still not capable of passing this assessment. This shows that the management level of textile enterprises in Vietnam still has many shortcomings.

Linking sewing - export, marketing and distribution

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