Exporting vietnamese textiles and clothing to ASEAN market in the context of AEC

ABSTRACT:

At the end of 2015, ASEAN Economic Community (AEC) was officially established. This is a significant opportunity for the trade development between Vietnam and ASEAN member states. Export activities from Vietnam to the countries will be continuously promoted. The research analyzes the situation of exporting Textiles and Clothing from Vietnam to ASEAN member states in the period 2012-2015 (before AEC) and 2016 - 2017 (after AEC) to assess the change due to AEC. Then its achievements and limitations will be generally evaluated, which requires feasible solutions from state authorities, associations and exporters in the context of AEC to promote exportation of Textiles and Clothing to ASEAN market.

Keywords: Export, textiles and clothing, Vietnam, ASEAN, AEC.

1. Introduction

In the past years, the Textiles and Clothing industry has played an important role in export activities, bringing about a stable source of foreign currency for Vietnam, contributing to create jobs for laborers. In 2016, with exporting value of up to 28.5 billion USD, Vietnamese Textiles and Clothing industry has contributed over 16.2% of total exporting turnover of the country.

The establishment of AEC at the end of 2015 is a major milestone in the regional economic integration agenda, offering opportunities in form of a huge market of US $2.6 trillion. Therefore, the opportunity for Vietnam's Textiles and Clothing sector after joining AEC based on a stable basis. When AEC is implemented, most of the imported goods within AEC will be applied tax rate of 0%, especially Textile and Clothing products. The cut down on tax will be a big advantage to enhance the competitiveness of Vietnamese Textiles and Clothing industry. At the same time, the import of machinery and are not subject to tax, which will create favorable conditions for enterprises to invest in technology in order to lower production costs, increase product quality and increase the competitiveness of exported products.

Through analyzing the current situation of exporting Vietnamese Textiles and Clothing to ASEAN member states in the period 2012 - 2015 (before AEC) and 2016 - 2017 (after AEC), the research evaluates fundamental achievements and limitations, which is basis for performance of feasible solutions from state authorities, associations and exporters. Based on the methodology of dialectic and historical materialism, the author uses a combination of methods of analysis, synthesis, statistics, description and comparison to clarify the study object.

2. Current situation of exporting Vietnamese Textiles and Clothing to ASEAN member states in the period 2012 - 2015

2.1. Exporting turnover

Table 1 shows that there is an increasing trend in total exports turnover of Vietnamese Textiles and Clothing to ASEAN from 2012 to 2015. The turnover increase from USD 346.44 million in 2012 to almost double in 2015, peaked at USD 612.2 million. In general, the period 2012 - 2015, Vietnamese Textiles and Clothing exports to the ASEAN has a sustainable growth rate of 16.06% per year. In 2015, total exporting turnover reached the highest point with growth rate of 34.85% compared to in 2014. Meanwhile, in the period 2012 - 2015, Textiles and Clothing exports to main export markets like US and EU achieved the average growth rate of 10,6% and 9.8% which are calculated from the statistics of the General Statistics Office, lower than the export growth rate to ASEAN. Therefore, with the sustainable growth rate in recent years, Vietnamese Textiles and Clothing exports to ASEAN have strong potential to grow in both quantity and market share in the future.

Table 2 shows that, from 2012 to 2015, Cambodia was the leading importer of Vietnamese Textiles and Clothing sector with the exporting turnover to this market increased from USD 107.7 million in 2012 to almost double at USD 204.2 million in 2015, with the average growth rate of 18.7%. Following Cambodia, Indonesia became the second biggest importer of Vietnamese Textiles and Clothing sector with the exporting turnover to this market increased from USD 76.7 million in 2012 to USD 131.6 million in 2015. However, among ASEAN members, Laos was the most modest importer with the average growth rate of only 3% in the same period.

2.2. Expectations for Vietnamese Textiles and Clothing in the context of AEC

With over 622 million people and total GDP of about USD 3,000 billion, AEC is expected by Vietnamese enterprises to open up a large, potential market for Vietnamese goods, especially Textiles and Clothing products. Moreover, joining AEC, most of the goods imported within the block will be subject to a tax rate of 0% if the goods are in compliance with AEC regulations. In particular, in order to enjoy preferential tariffs, Textiles and Clothing products must satisfy the RVC of 40% or the special rules for Textiles which are listed in the in Annex 3 “PRODUCT SPECIAL RULES” of ATIGA or in annexes IIA and IIB of the Circular No. 22/2016/TT-BCT issued by Vietnam Minister of Industry and Trade. In addition, there are more specific regulations for Textiles and Garment products which are listed on the Annex III: CRITERIA FOR BASIC TRANSFORMATION OF TEXTILE AND GARMENTS of the Circular No. 22/2016/TT-BCT. If Vietnamese Textiles and Clothing products can satisfy the regulations and enjoy tax rate of 0%, it will be a big advantage to improve the competitiveness of Vietnamese Textiles and Clothing industry. With flexible rules of origin, products which achieve RVC of 40% will be considered as ASEAN products and will enjoy preferential treatment when exported to countries which have signed trade agreements with ASEAN like Australia, New Zealand, Korea, Japan, China. Thus, Vietnam Textiles and Clothing product has a great opportunity to expand its market beyond the 622 million people market of AEC.

At the same time, the import of machinery within the bloc is also subjected to tax rate of 0% so it will create conditions for enterprises to invest in production technology. The Vietnamese textile industry is striving to maintain its export position by applying modern technology, using high-level automatic assembly lines… in order to reduce production costs, increase product quality and the competitiveness of products so that they can meet the increasing demands of customers in the region and on the world. Therefore, with the preferential tax rate of 0%, small and medium textiles and garment enterprises in Vietnam will have the opportunity to import modern equipment and machinery to improve their production capacity and compete with big or FDI enterprises.

3. Current situation of exporting Vietnamese Textiles and Clothing to ASEAN member states from 2016 to early 2017

3.1. Exporting turnover

Table 3 shows that total exporting turnover in 2016 reached USD 705.6 million, increasing 15.25% compared to 2015. In general, the growth rate of Textiles and Clothing increased higher in ASEAN market than the total growth rate of the industry, which was only 4.4% in 2016. According to the latest statistics from Vietnamese General Statistics Office, Vietnamese Textiles and clothing exporting turnover to AEC member states in the first two months of 2017 achieved USD 106.4 million, increasing 18.2% compared to the last same period. This is a good signal for the Vietnamese Textiles and Clothing Industry in general which is trying to find new orientation to develop the industry.

However, before AEC is officially implemented, Vietnamese Textiles and Clothing to AEC member states in 2015 achieved the highest growth rate of 34.85% within the period 2012 - 2015, as can be seen from the Table 1 above. In 2016, the figure dropped to only 15.26% although there was an increase in exporting turnover, showing a slowdown in growth of Vietnamese Textiles and Clothing exports to the ASEAN market. One of the difficulties of the industry may come from the Government policy of keeping the exchange rate of VND stable compared to other foreign currencies, making Vietnamese goods more expensive than other suppliers, which led to competition of Vietnamese goods decreased compared to other countries. On the other hand, in the past, cheap labor was one of the competitive advantages of Vietnam's textile and Clothing. Now, this advantage is gradually disappearing as the base salary and the minimum wage have been adjusted by the government since 2016. Therefore, domestic enterprises have to decrease the price to keep the traditional orders from Cambodia, Bangladesh... who have lower wages.

Fortunately, at the beginning of 2017, the Textiles and Clothing exports has become more positive with impressive figures in terms of exporting turnover and growth. In particular, on January and February of 2017, according to VITAS, the Vietnamese Textiles and Clothing exporting turnover achieved USD 106.4 million, increasing 18.2% compared to 2016. This shows that Vietnam textiles and Clothing sector has made a good start in 2017, determining to reach the USD 30 billion export target at the end of this year.

Table 4 shows that, in 2016, Cambodia was still the biggest importer of Vietnamese Textiles and Clothing products with the exporting turnover of USD 243.6 million, increasing 19.32% compared to 2015. And on the first two months of 2017, Cambodia continues to lead the market of importing Vietnamese Textiles and Clothing with exporting turnover reached USD 43.2 million, increasing 36.6% compared to the last same period.

Following Cambodia, Indonesia is also an important importers of Vietnamese Textiles and Clothing with the exporting turnover reached USD 113.5 million in 2016. However, in 2016, there was a decrease of Textiles and Clothing exports to Indonesia market by 13.74% while the exporting turnover to this market in 2015 reached USD 131.6 million, according to VITAS. Fortunately, on the first two months of 2017, exports to Indonesia had sign of recovery when achieving the good growth rate of 10.5% compared to the last same period.

Especially, in 2016, Vietnamese Textile and Clothing import market which had the highest growth rate was Thailand, increasing by 53.88% compared to 2015. Meanwhile, in the period from 2012 to 2015, the average growth rate of Textiles exports to this market only reached 6.5 %, as can be seen from the Table 2 above. In general, in the first two months of 2017, Textiles and Clothing exporting turnover to ASEAN market continued to increase with the total grow rate of 18.2%.

3.2. Exporting price

Table 5 shows that there is an increase in both export quantity and exporting value of jackets and shirts to AEC in 2016. In particular, the exporting turnover of jackets achieved USD 19.7 million, increasing 5.94% in value compared to 2015. The number of jackets exported to AEC also reached 2,181 units, achieving admirable growth rate of 35.5% in quantity over the last same period. On the other hand, Shirts was also an effective export item in 2016 of Vietnamese Textiles and Clothing with the exporting turnover achieved USD 15,7 million, increasing 27.46% in value. In addition, the quantity of exported shirts to AEC reached 2,340 units, achieving a growth rate of 27.46% over the last same period.

In general, in 2016, the Vietnamese Textiles and clothing exporting turnover and quantity both increased in value and volume compared to 2015. However, the unit price of some main products are in trend of decreasing due to the fierce competition with Cambodia, Bangladesh... who have lower wages. Therefore, Vietnamese Textiles enterprises had to decreased the unit price to keep the traditional orders. This may explain that the exporting turnover of Vietnamese Textiles and clothing exports to AEC did not increase significantly despite being eligible for preferential treatment from AEC commitments.

4. Overall evaluation

4.1. Achievements

Firstly, by early 2017, Vietnam has reduced 93% tariff lines to 0%, retaining only 7% of tariff lines by 2018. And Textiles and Clothing is one among seven sectors given priority for economic integration. Therefore, this tariff removal roadmap has great impact on trade turnover between Vietnam and other countries in the region. On export, ASEAN is now the third largest market of Vietnamese enterprises after the United States and the European Union, with major commodities including rice, crude oil, textiles, footwear, seafood and coffee, rubber, computers and electronic products, steel and iron...

Secondly, in 2016, Vietnams Textiles and Clothing exporting turnover to ASEAN market reached USD $705.6 million with the growth rate of 15.26% compared to only 4.4% the textiles and clothing industry total growth rate. Statistics from the General Department of Customs show that, regarding Vietnam's exports to ASEAN, the average growth rate over the last time reached 17.1%, bringing the exporting turnover from nearly $ 1 billion in 1995 to USD 18.3 billion in 2015 (an increase of 18 times).

Thirdly, in 2016 many Vietnamese Textiles and Clothing enterprises have invested and expanded their production in the direction of applying modern technology, using highly automated production lines which are high synchronism, less labor and fuel consumption, reduce the amount of waste output ... With the solution, the competitiveness has been gradually raised, laying the foundation for stable growth and sustainable development. Furthermore, Vietnamese textiles enterprises are also moving towards the purchase of raw materials and sell the finished products, shifting production from processing method to FOB and OBM in order to increase the added value and competitiveness of Vietnamese Textiles and clothing products.

Fifthly, according to the International Labor Organization (ILO), Vietnam is the country with the lowest rate of violation of the minimum wage regulations within seven garment exporters in AEC. This means, of the 100 workers in the textile and clothing sector, only 6.6 people were paid below the minimum wage. In contrast, the Philippines is the top country with the percentage of employees receiving wages lower than the minimum level (53.3%). Cambodia and Indonesia are also on the list of countries where the percentage of employers violates the minimum wage regulations, when about a quarter of workers receive less than the regulated minimum wage.

4.2. Limitations

Firstly, according to the General Statistics Office, in the period of 2006 - 2010, exporting turnover to ASEAN of Vietnam reached an average growth rate of 12.5% per year. In the period from 2011 to 2015, the average growth rate reached 12%/ year, but in 2016 (after AEC), average growth rate decreased to 4.8% with estimated turnover was only 17.4 billion USD. This decline was evident in both the agricultural and the industrial sectors. Moreover, Vietnamese Textiles and Clothing was expected to benefit as the export tax rate would be reduced to 0% after joining AEC. Contrary to expectations, after more than a year joining the "common roof" of AEC, Vietnam's Textiles and Clothing exports are worse than expected. In particular, Vietnamese Textiles and Clothing exporting turnover to AEC in 2016 only reached USD 705.6 million, increased only 15.26% compared to 2015.

Secondly, after a year of joining AEC, Vietnamese Textiles and Clothing enterprises have not taken advantage of 0% export tax rate to expand the market outside the traditional markets. Otherwise, Textiles enterprises have only been able to penetrate the three countries of Laos, Cambodia and Myanmar while they were not strong and prepared enough to penetrate potential markets with higher requirements such as Singapore, Thailand,... In fact, many of the commitments of AEC have been implemented for a long time in Vietnam on goods, services, investment, labor… However, according to a recent VCCI survey, almost 94% of businesses know about AEC, but only 16% know clearly about AEC commitments. Meanwhile, domestic enterprises are not well prepared to learn and exploit information, leading to the number of enterprises can take advantage of opportunities from AEC. This shows that the lack of accurate and comprehensive information on AEC is one of the biggest barriers prevent Vietnamese enterprises from taking advantage of these commitments.

Thirdly, Vietnamese Textile and Clothing sector is heavily reliant on imported raw materials, most of which are from countries outside AEC such as China, Korea. Therefore, we cannot take good use of the 0% tax rate within AEC commitments on imported materials. The total import turnover on raw materials of Vietnamese Textiles and clothing achieved USD 16.97 billion, increasing compared to 2015 and accounting for almost 60% of the Textiles exporting turnover. According to the latest statistics of VITAS, imported raw materials of Textile and Clothing in the first two months of 2017 were estimated at USD 419 million, increasing 5.65% over the same period of 2016. In February 2017, imported raw materials of Textiles and Clothing in Vietnam were estimated at USD 219 million, up 9.55% over the previous month and up 83.61% over the same period of 2016.

Fourthly, the increase in the average salary is a good signal to improve the living standards of the workers but there are also potential risks. In 2016, Vietnam's Textiles and Clothing exports was struggling as orders dropped sharply and moved to lower cost countries. In particular, Vietnamese Textiles and Clothing orders from partners was robbed by Myanmar, Laos, Bangladesh... who have lower labor costs. This is poor situation of the Textiles and Clothing industry when the orders are no longer in Vietnam and moving to other countries.

5. Conclusion

In conclusion, the research analyzes the situation of exporting Vietnamese Textiles and Clothing to ASEAN in the period 2012 - 2015 (before AEC) and 2016 - 2017 (after AEC). The result shows some changes due to the implementation of AEC. Beside achievements, there are also some fundamental limitations. Although more time is needed to demonstrate how AEC affects Vietnamese Textiles and Clothing Industry, it is first of all necessity for the state authorities, associations and enterprises to find the answer to the negative results of Vietnamese Textiles and Clothing exports to ASEAN market.

REFERENCES:

English

1. ASEAN Organization, ASEAN Trade in Goods Agreement

2. ASEAN Organization, ASEAN Economic Community Chartbook, 2016.

3. ASEAN Organization, ASEAN Economic Community Blueprint, 2016.

4. Dissemination Seminar on AEC, ASEAN Rules of origin, 2015.

5. WTO Center, ASEAN Trade in goods agreement (ATIGA), http://wtocenter.vn/other-agreement/asean-trade-goods-agreement-atiga.

Vietnamese

6. Bộ Công Thương, http://www.moit.gov.vn, Chính sách mới phát triển công nghiệp hỗ trợ, http://www.moit.gov.vn/vn/tin-tuc/6539/chinh-sach-moi-phat-trien-cong-nghiep-ho-tro.aspx

7. Hiệp hội Dệt may Việt Nam, http://www.vietnamtextile.org.vn/, Thị trường và kim ngạch xuất khẩu hàng dệt may của Việt Nam năm 2016, http://www.vietnamtextile.org.vn/thi-truong-va-kim-ngach-xuat-khau-hang-det-may-cua-viet-nam-nam-2016_p1_1-1_2-1_3-633_4-1970_9-2_11-10_12-3_13-256.html.

8. Tập đoàn Dệt may Việt Nam, http://www.vinatex.com/, AEC và chiến lược bước chậm của doanh nghiệp Việt, http://www.vinatex.com/Portal/Detail.aspx?Organization=vinatex&MenuID=72&ContentID=14105.

9. Tập đoàn Dệt may Việt Nam, http://www.vinatex.com/, Cộng đồng Kinh tế ASEAN 2025: Cơ hội và thách thức mới đối với Việt Nam, http://www.vinatex.com/Portal/Detail.aspx?Organization=vinatex&MenuID=70&ContentID=13743.

XUẤT KHẨU HÀNG DỆT MAY VIỆT NAM SANG

THỊ TRƯỜNG ASEAN TRONG BỐI CẢNH HỘI NHẬP AEC

● TS. NGUYỄN TIẾN HOÀNG

Trưởng Bộ môn Nghiệp vụ, Trường Đại học Ngoại thương - Cơ sở II, TP. Hồ Chí Minh

TÓM TẮT:

Cuối năm 2016, Cộng đồng Kinh tế ASEAN (viết tắt là AEC) chính thức được thành lập. Đây được xem là cơ hội quan trọng cho sự phát triển quan hệ thương mại giữa Việt Nam và các nước thành viên ASEAN. Theo đó, hoạt động xuất khẩu hàng hóa từ Việt Nam sang thị trường này sẽ tiếp tục phát triển. Nghiên cứu này phân tích tình hình xuất khẩu mặt hàng dệt may của Việt Nam sang thị trường ASEAN giai đoạn 2012 - 2015 (trước AEC) và giai đoạn 2016 - 2017 (sau khi AEC được hình thành), để đánh giá sự thay đổi do tác động của AEC, từ đó rút ra các thành tựu và hạn chế của hoạt động này. Đây là cơ sở để triển khai một hệ thống giải pháp khả thi từ phía cơ quan nhà nước, hiệp hội ngành hàng và doanh nghiệp xuất khẩu trong bối cảnh hội nhập AEC, nhằm đẩy mạnh xuất khẩu mặt hàng dệt may sang thị trường ASEAN.

Từ khóa: Xuất khẩu, dệt may, Việt Nam, ASEAN, AEC.