Last update 7/9/2012 8:16:00 AM (GMT+7)

The industries that “stretch out on the deathbed”:
Part 1: Lacking orders became an obsession for garment companies

VietNamNet Bridge – After the prosperous year 2011, when garment companies were all very busy with big orders, they are now experiencing dark days with the serious thirst for jobs.

According to the Ministry of Industry and Trade, the world’s economy still has not recovered from difficulties, while consumers still continue cutting down their expenses. Vietnam exported 4412 million dollars worth of products in the first four months of 2012, an increase of 14 percent over the same period of the last year.

Difficulties come from all sides

In general, by the end of May, the garment companies specializing in making products for Asian and East European markets have received enough orders until the end of the third quarter of the year. However, orders have come in dribs and drabs since the beginning of the year.

The garment companies making products for domestic consumption have also bogged down in big difficulties. The representative of a garment company in Hung Yen province said that it does seasonal works.

The company has to import materials in advance in order to get ready to implement any sudden orders. Therefore, it usually lacks capital for the imports. It also has to pay workers monthly, even in the low production season, just in case it receives orders.

When asked why the company does not think of doing the outsourcing for the “big guys” who have many orders, he said that small companies should not put high expectations on this, because the orders are not stable.

Pham Hung, Public Relation Director of the Vietnam Textile and Apparel Association (Vitas), said that the labor cost has caused a headache to garment companies. The higher minimum wage policy would take effect from October 2012, which makes the burden on enterprises heavier.

In general, the pay to workers amounts to 65 percent of the total production costs. This has made the big enterprises with thousands of workers worried stiff.

Waiting for support packages

Textile and garment companies all say they expect the support from the State. However, they keep indifferent to the five solution packages to rescue businesses announced by the Ministry of Finance.

A businessman said that the decision to reduce the corporate income tax rate and allow late tax payment has no meaning for them, who do not make profits and automatically do not have to pay tax.

Duong Thi Ngoc Dung, Deputy General Director of the Vietnam Textile and Garment Group (Vinatex), frankly said that the ministry’s support packages do not bring substantial support to garment companies, who have been moving heaven and earth to seek orders.

Meanwhile, the ministry has not suggested the measures which were once applied in 2009, though they were very helpful. Dung said the decision on cutting the land leasing fee by 50 percent would help garment companies reduce the input costs. However, the reduction has been only applied to trade and service companies, not to production enterprises.

The director of a garment company said that it’s nearly impossible for enterprises to borrow money from banks at this moment. Therefore, it would be better to help enterprises overcome difficulties by setting up a mechanism that allows businesses more easily access bank loans.

At the recent working session with Vinatas, the Ministry of Industry and Trade urged garment companies to apply the measures to ease the reliance on outsourcing orders and increase the percentage of exports under the mode of FOB and ODM. However, this proves to be not an easy task which can be fulfilled overnight.

Source: DDDN
Part 2: Steel manufacturers dragging out miserable existence