Textile and Garment Businesses Face Challenges in 2024

DNHN - Despite some positive signs in key export markets such as the US and Europe, the textile and garment industry is expected to face difficulties in 2024 due to low prices, geopolitical risks, and persistent inflation.

The current challenges in the textile and garment industry are a continuation of those faced in 2023, a year marked by difficult export market conditions. Businesses have been under pressure and faced significant challenges due to the global economic downturn, the lingering effects of the COVID-19 pandemic, and high inventory levels resulting from weakened demand, leading to job cuts and reduced working hours.

According to KinhteSaigon Online, at the 2023 Vietnam Textile and Apparel Association (VITAS) year-end conference, Mr Truong Van Cam, Vice Chairman and General Secretary of VITAS set a target of increasing the industry’s total export turnover in 2024 to $44 billion, representing a 9.2% increase compared to 2023 and nearly equivalent to the industry’s highest export turnover achieved in 2022 ($44.4 billion).

Mr. Cam stated that the economic situation in Vietnam’s major textile and garment import markets, such as the US and the EU, is showing signs of recovery, which increases the likelihood of improved demand for textile and garment products compared to last year. Additionally, the lending interest rate in Vietnam has decreased significantly, reducing the burden of interest expenses on businesses.

“The government’s current policies to support businesses may be extended in 2024. In particular, the approved Strategy for the Development of Vietnam’s Textile, Garment, and Footwear Industry to 2030, with a Vision to 2035, will be a significant advantage,” Mr. Cam acknowledged.

Meanwhile, Mr. Vu Duc Giang, Chairman of VITAS, believes that the domestic textile and garment industry is generally continuing its recovery trend. The decline in export value narrowed in the second half of 2023, and the market is expected to “warm up” in 2024.

The domestic textile and garment industry also has advantages over competing countries. These include 16 Free Trade Agreements (FTA) that are currently in effect and 3 other FTAs that are in the negotiation process and will soon come into force.

“Based on an analysis and forecast of the domestic and international situation, VITAS has set a target for the industry to achieve an export turnover of $44 billion in 2024,” Mr Giang expressed his expectations.

However, analysts and businesses believe that achieving this export turnover target will not be without its challenges. The global economy remains volatile and highly uncertain. Export orders are expected to continue to decline, with a trend towards smaller quantities, faster delivery times, supply chain risks, and high input costs.

Additionally, the risk of debt repayment, interest rate risk, exchange rate depreciation, the rapid trend towards digital transformation, and circular business models are issues that the textile and garment industry will face in the coming period.

It is noteworthy that the textile and garment industry also faces a series of challenges from “technical barriers” imposed by importing countries and fashion brands. These include the application of the EPR (Extended Producer Responsibility) and CBAM (Carbon Border Adjustment Mechanism) mechanisms, as well as the “sustainable fashion” strategy replacing “fast fashion,” the EU’s OECD supply chain due diligence directive, and Germany’s supply chain due diligence law.

The Chairman of VITAS also noted that in 2024, textile and garment businesses will face challenges as more and more major textile and garment import markets introduce new mandatory regulations. Notably, these regulations relate to the assessment of human rights and environmental impacts in the supply chain, eco-design requirements, recycled products, and the treatment of textile waste.

T.H