The current apparel situation in Vietnam has changed remarkably to the opposite extreme compared to the year 2000. Decreases in orders received for exports to both Japan and the EU have become conspicuous, and apparel manufacturing charges have also been softening.

Orders for exports to Japan decreased because more Japanese firms have come to concentrate their production bases on China for the purpose of establishing SCM (Supply Chain Management) in addition to the devastated Japanese domestic market. Orders from Europe are taken by East Europe and those from Japan by China because of the geographic convenience that the respective area and country are closer to the export destinations.

Apparel exports by Vietnam in 2000 increased to US$1,900 million, up 8.7%. Apparel exports to the EU reached US$ 700 million, up 16% and those to Japan US$600 million, up 45%.

Regarding exports to Japan, prices sharply fell and the unit price decreased by 13% on average. As for exports to other markets, those to the USA increased to US$60 million, up 70%. In contrast, those to the following countries decreased. Taiwan, US$ 235 million (down 2%); Russia, US$40 million (down 56%); and Singapore, US$26 million (down 45%). Of the total apparel export value, apparel exports by VINATEX (Vietnam National Textile and Garment Corporation) in 2000 increased by 13.5% to US$546 million.

In the year 2000, competition between Japanese and European buyers resulted in difficulties to secure apparel manufacturing space in contrast, as orders have decreased, even space demand for firms has also decreased recently. The apparel-manufacturing space for March-June 2001 is considerably free. As a result, apparel-manufacturing charges have fallen by 10-20%. Apparel factories are voicing their concern that charges might fall further.

It was said that apparel manufacturers in Vietnam work carefully and the quality is good. However, the quality of Chinese-made products has been improving remarkably. At the same time, Vietnam has been slow in implementing political and economic reforms, and many buyers have been disappointed in the bureaucracy. This is also considered a major cause of sluggish apparel exports for Vietnam.

Another factor is the fall of retail prices in the Japanese domestic market. The weakening of the Japanese yen after March 2001 should have been advantageous for Vietnam because of a simultaneous weakening of the Vietnamese dong compared to the Chinese yuan, which has been fluctuating in a close link with the US dollar. However, orders placed with Vietnam are decreasing rather than increasing.

The manufacture of cotton pants made of commodity twill costs US$ 6.00/unit in Vietnam, but only US$5.10-5.50 in China. In other words, compared to manufacturing costs in Shanghai and Qingdao, manufacturing costs in Vietnam are higher by US$1.00-1.50 on an FOB basis. Still, the difference has shrunk due to the advancing weakening of the dong.

Previously, the difference used to be about US$2. But manufacturers received orders despite the difference of US$2.00 as buyers judged that the quality of Vietnamese apparel was better. Now, although the cost difference has shrunken to about US$1, this difference of one dollar is preventing Vietnam from getting orders. (Source - JTN)