Textile Industry Faces Crisis

The spiraling cost of importing essential raw materials, mainly due to surging global oil prices, threatens to derail the competitiveness of Vietnam's second-largest export earner, textiles and garments.

With 80 per cent of the industry's inputs including synthetic fibre and FO oil depending on imports, businesses estimate the cost of manufacturing clothing could be 20 per cent higher for Vietnamese firms.

The Ministry of Trade's Information Centre reported prices of synthetic fibre, the main input in the textile and garment sector, and heavily dependent on the petroleum industry, to be heading upwards, from US$1.12 to US$1.15 a kilo, and up more than 20 per cent over the end of last year.

According to the general director of the Phuoc Long Textile Company, Le Trung Hai, a doubling in the price of FO oil, to VND3,400 (US$0.22) per litre, has added VND510 million to his company's monthly bill. He also pointed out that the jump in petrol prices has meant higher freight charges.

Textile and garment firms that had signed contracts before global prices began their upward journey are reportedly hardest hit.

While producers in other countries too confront the same problems, Vietnam's 80 per cent dependence on imports has placed its firms in particular difficulty. Mainland China, the world's leading textile exporter, Indonesia and Taiwan are all self-sufficient in fibre.

Nevertheless, most local firms have held their prices in the face of the relentless rise. While some have raised prices by 5 per cent, others fear they may have to follow soon if input costs do not show signs of reversal.

To remain competitive, the textile and garment industry is doing all it can to cut costs through increasing labour productivity and localisation rates.