Situation of Textile and Garment Production and Business in Vietnam in Recent Years.

The textile and garment industry began exporting its products to the Comecon countries in 1976. At first, Vietnam exported to the former Soviet Union through processing contracts. Through this activity, Vietnam imported cotton from the former Soviet Union and then re-exported the finished products. In 1979, Vietnam expanded this activity to Hungary, Czechoslovakia, and East Germany.

In the mid-1980s, the Vietnamese economy fell into a state of imbalance. Domestic production was in crisis and inefficient, businesses were continuously making losses, and most of the planned targets could not be achieved. As a result, inflation increased rapidly (up to 775% in 1986). The financial system was not only weak but also heavily dependent on foreign aid. Domestic revenue sources in the state budget accounted for only 60-70% of the budget. The rest was provided from external sources. The budget deficit was very high.

In such a stagnant economy, Vietnam's textile and garment industry cannot avoid the related consequences. Production is stagnant, many textile and garment enterprises fall into bankruptcy, or operate ineffectively. The currency depreciates, enterprises find it difficult to import raw materials to process export products. Therefore, during this period of mainly processing for export, Vietnam's textile and garment export turnover grows very little, if not to say negative growth.

However, there were also some businesses during this period that found solutions to cope with that tragic situation. Typical examples were Phong Phu Textile Factory and Thanh Cong Textile Factory. They knew how to combine with raw material production enterprises, invest in cotton cultivation to have raw materials for production during this period. This model helped businesses both solve the problem of raw materials for production and prevent the bankruptcy of raw material factories during this period.

It can be said that the period 1979-1986 was an extremely difficult period for the Vietnamese economy in general and the Vietnamese textile industry in particular. That required a complete reform of the economy and the resolution of the 6th Party Congress in 1986 was the opening for this reform.

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2.1.2 From 1986 to before the collapse of the Soviet Union (1991).

Since 1987, Vietnam has abandoned the bureaucratic centralized economy and subsidy regime. After a number of programs to stabilize the macro economy and successfully liberalize the market in the period of 1988-1991, Vietnam has achieved many advances in economic development, the budget deficit has decreased, inflation has been stopped and continues to decrease. The flow of foreign investment into Vietnam has increased, and the international labor shift from developed countries to developing countries has created the best conditions for the textile and garment industry to develop and participate more in the world market.

Along with expanding international relations, the industry has proactively sought new markets such as the EU, Korea, Japan, etc.

During the period 1987-1990, the textile industry developed very strongly. Garment companies were established everywhere, attracting hundreds of thousands of workers and contributing significantly to the state budget. This was possible because we signed a contract with the Soviet Union to process a very large quantity of textiles for a long time from 1986 (called the 19/5 contract), according to which the Soviet Union provided all raw materials and designs, and Vietnam would carry out production and deliver finished clothes.

2.1.3 Since the collapse of the Soviet Union (1991) until now:

After the collapse of the Soviet Union (1991), the Vietnamese textile and garment industry suffered a severe crisis in both production and the supply of raw materials and equipment. It can be said that the period of 1991-1992 was the most difficult period of the textile and garment industry. Many companies had to reduce production or face dissolution. In this situation, the textile and garment industry had to deal with huge challenges such as: how to develop the textile and garment industry to catch up with the world and thereby find opportunities to bring Vietnamese textiles and garments to potential markets such as the US, EU, Japan, making Vietnam a powerful country on par with friends around the world? To meet that urgent need, the Vietnamese government signed extremely important agreements, which had a great impact on the development of the textile and garment industry.

greatly affect the Vietnamese economy as well as the textile industry in particular. These important agreements are:

- 1992: Vietnam signed a textile trade agreement with the EU.

- 1994: The US lifted the embargo on Vietnam.

- 1995: The US normalized and established diplomatic relations with Vietnam.

- August 1995: Vietnam joined ASEAN.

- On April 29, 1995, the Prime Minister issued Decision No. 253/TTg allowing the establishment of Vietnam Textile and Garment Corporation on the basis of combining the Union of Garment Production and Import-Export Enterprises and Vietnam Textile Corporation to create a combined strength.

, creating momentum and force to promote garment production and business development.

- July 13, 2000: The Vietnam-US trade agreement was signed, creating favorable conditions for our textile products to penetrate the US market, a large market with great potential and promises high profits.

- January 1, 2005: EU and Canada remove textile quotas for Vietnam.

Furthermore, significant changes have also occurred in the world’s textile production. The development of the textile industry has been an important initial step in the industrialization process of many countries. Over time, with the factors of labor and capital costs, the textile production industry has shifted from the US, UK, and Japan to countries with lower labor costs.

This phenomenon has created a wave of success in Asia in the last two decades. These countries, typically China, have replaced the newly industrialized countries (NICS) to become the world's main textile and garment exporters. Vietnam is also honored to be in this group.

In 2004, Vietnam's textile and garment industry achieved an export value of 4.319 billion USD out of a total import-export turnover of 7.1 billion USD, accounting for 16.6% of the country's total export value 2 .

The successful reform of Vietnam's economy and the international labor shift from developed countries to developing countries have created the best conditions for Vietnam's textile and garment industry to develop and participate more in the world.

2 Statistics of Vietnam Textile and Apparel Association

world market. This industry has achieved many significant successes. The export value has recently risen to become the second largest export industry after the oil and gas industry, with an average annual growth rate of about 25% (2001-2004). Furthermore, the industry also provides jobs for more than 2 million workers (80% of whom are women), accounting for 22.7% of the country's industrial workforce.

In short, in the fluctuations of the world economic situation and the transformation of the Vietnamese economy, the Vietnamese textile and garment industry has gone through many difficulties to gradually integrate with the region and the world, contributing to promoting the development of the Vietnamese economy and improving people's lives.

2.2 The situation of textile and garment production and trading in Vietnam in recent years.

2.2.1 Production situation.

In recent years, the growth rate of the textile industry has been relatively high, but still low compared to the total output of the industry. Despite the high growth rate, the Vietnamese textile industry has not yet met domestic demand. 50% of raw materials for the garment industry and 80% of cotton still have to be imported. Vietnam can only produce 3,400 tons of cotton yarn per year, meeting only 5% of domestic demand. Synthetic fibers and whole fibers must be imported, cotton fibers for the production of knitwear must be imported in large quantities. Moreover, 100% of materials for dyeing and about 80% of chemicals still have to be imported 3 .

a. Knitted products.

Knitted products are very diverse and have been widely consumed. Vietnam's knitting industry uses circular looms. Therefore, the main products are Polo shirts, T-shirts, made of cotton yarn, PE/CO yarn.

Along with the development of domestic and international market demand, Vietnam still has to import many products that domestic manufacturers cannot produce. Exported knitted products made of PE yarn account for 75-80% of total export products but the price is low, averaging from 2.5-3.5 USD/1 product. High quality products with a price of 10 USD for a moderate product and

3 “Investing 16 trillion VND to accelerate the textile and garment industry”, Vietnam Economic Times, June 2008, pages 3-4.

20USD4 for a high-end product, we can only meet a very small part. These products are mainly made from high-quality cotton, smooth and anti-fraying. High costs and low prices have pushed previously popular products such as sleeveless shirts without collars and lace collar shirts to a state of being unable to continue production. If there is no technological improvement, Vietnam's export products will soon fall into the same situation.

b. Garment products.

Vietnamese garment products are rich, diverse and fashionable. Besides, they are suitable for traditional and international costumes. As the economy develops and living conditions improve, the demand for clothing is also richer and more diverse. Currently, the garment products being produced in Vietnam are: underwear for women and men; home products: pajamas, pillowcases, blanket covers, etc.; sportswear: tight shirts, jeans, etc.; daily wear products: shirts, pants, skirts, etc.; fashion items; special products: military uniforms, labor protection products, etc. The garment industry in Vietnam has made a big shift, from simple products to fashionable products, keeping up with the development of the world fashion industry. However, Vietnamese enterprises still lack specialized equipment and skilled workers, so the quality is still poor compared to other countries.

2.2.2 Business situation.

* Domestic textile market.

With over 80 million people and a consumption demand of 9-10 m of fabric per person per year, the domestic market has been attracting textile and garment enterprises to return. Many companies that previously focused on exports have now focused more on the domestic market and achieved significant success.

Over the past 10 years, the domestic textile market has been gradually expanded, with sustainable development, thereby increasing domestic revenue. Up to now, the Vinatex Mart supermarket system of the textile group, after 8 years of operation, has affirmed its leading role in the garment distribution system in the domestic market, becoming a bridge for product consumption for textile enterprises of all economic sectors. After many years of persistently implementing the investment strategy

4 “Vietnam's textile industry faces many challenges”, Business Forum newspaper, September 2003, pages 10-11.

Developing the network, up to now Vinatex Mart has a system of 60 supermarkets in 20 provinces and cities nationwide. In this supermarket system, the products sold are all domestically produced, consuming popular products for a wide range of customers. This is the backbone distribution system, contributing to spreading to the domestic market. The revenue of the supermarket system reaches more than 1,000 billion VND/year 5. The main reason for this significant increase in revenue is that Vietnamese garments have won the trust of consumers because the goods sold are all high quality with designs and sizes suitable for Vietnamese people. Prices are also competitive with Chinese textiles of the same type. Moreover, Vietnamese customers always give domestic manufacturers respect, encouragement, and motivation by directly supporting and purchasing products to help develop production. In supermarkets, the variety of goods has helped buyers have more choices and thereby also helped small and medium enterprises with weak potential that do not have the conditions to open stores. This is also a support for textile enterprises in the face of increasing competitive pressure in the domestic market.

Along with the Vinatex Mart supermarket system, leading enterprises of the Vietnam textile and garment group such as Viet Tien, May 10, Phuong Dong... also invested in building a chain of stores to distribute products manufactured by the enterprises with quality ranging from good to high-end to serve high-income customers.

Leading the way in expanding the domestic market is Viet Tien Garment Corporation with a system of 2,000 distribution stores, domestic revenue in 2008 reached 500 billion VND. Viet Tien is implementing a strategy to develop the domestic market with a growth rate of up to 40% 6 , launching a series of new products, especially high-end fashion items such as Viettien, Vee-Sendy, T-Tup, Sciaro, Manhattan, ready-made garments for students and workers under the brand Vie-Laross. In addition, the enterprise is

5 http://www.nhandan.org.vn/tinbai/?top=38&sub=56&article=146588

6 http://www.xuctienbinhthuan.vn/Default.aspx?tabid=116&ctl

Continue to expand and develop distribution channels, bringing products to 48 shopping centers.

Enterprises such as May 10, Nha Be, Duc Giang have sales revenue of approximately 50-100 billion VND. The total domestic revenue of the entire distribution system of the Vietnam Textile and Garment Group, including Vinatex Mart and self-consumed production enterprises, is about 2,500 billion VND per year, with an annual growth rate of 10-15%/year7 , this is a figure that affirms the rise to dominate the domestic textile and garment market. The leaders of the textile and garment group also affirmed that expanding the domestic market is a long-term direction for sustainable growth.

However, depending on each enterprise, there are different domestic market shares. Large textile enterprises operate better and have a high domestic market share, while for small enterprises, this task is quite difficult for them. Therefore, Vietnamese textile products up to now only account for about 30% of the domestic market share. This is a sad number in the homeland. Therefore, promoting the expansion of the domestic market, creating a solid backyard for Vietnamese textile enterprises to return when textiles have difficulty in consuming products abroad is the most urgent and necessary task in the current context.

* Foreign markets

If we consider the business aspect in foreign markets of the Vietnamese textile industry, it is true that in this field, the Vietnamese textile industry has not really done well. We have only penetrated foreign markets through export, but mainly through processing export (accounting for about 70%) - products made by ourselves but labeled with other manufacturers' labels. After exporting, the advertising and consumption of the products is up to the importer. Thus, the Vietnamese textile industry has only completed half of its business journey in foreign markets.

7 http://www.nhandan.org.vn/tinbai/?top=38&sub=56&article=146588

Vietnam's textile and garment export turnover in recent years has been quite high, in 2003 it was only 3.6 billion USD but by 2008 it was 9.1 billion USD, ranking first in the country's export turnover. The textile and garment industry has succeeded in expanding its market to Western Europe, Asia and America. The garment industry has become an important export industry, surpassing the textile industry. Although textile exports have also developed, so far the proportion of this industry still accounts for a very small part of the total export turnover of the entire textile and garment industry.

However, Vietnam's textile and garment exports are mainly through processing, so although the quantity is large, the value of the goods is not high. And the consequence of this form of export is that the brand of the Vietnamese textile and garment industry is little known. Therefore, it is difficult for Vietnamese enterprises to open a sales system abroad when the people of that country do not know who they are, whether the products they sell are good or not, and whether the quality is guaranteed. And if we join the retail systems of the world's leading retailers, we are almost unable to do it, or if we do, Vietnamese textile and garment products are labeled with another name of a famous supplier.

In general, to trade textile products in foreign markets, we need to invest more, especially in promoting Vietnamese textile brands and product quality must meet the demanding requirements of consumers in developed countries.

II. TEXTILE EXPORT.

1. Concept.

1.1. Export.

Export, in international trade theory, is the sale of goods and services to foreign countries; in the calculation of the international balance of payments according to IFM, it is the sale of goods to foreign countries.

(According to Article 28, Section 1, Chapter 2 of the 2005 Vietnam Commercial Law), exporting goods is the act of taking goods out of the territory of Vietnam or bringing them

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