The information was announced by Mr. Cao Huu Hieu, General Director of Vietnam Textile and Garment Group at a press meeting to provide information on production and business results and the labor movement in 2023 - orientation to 2024, on the morning of January 8.
A difficult year
According to Mr. Cao Huu Hieu, the textile industry and the Vietnam Textile and Garment Group have just experienced 2023 with unprecedented difficulties. Geopolitical instability and rising inflation globally have caused a decline in global textile and garment demand; many of Vietnam's major export markets such as the US, EU, etc. have declined sharply in 2023 due to consumers tightening spending on non-essential goods, including textiles and garments. Although there were forecasts from the second half of 2022 that the difficulties would last into 2023, all forecasts quickly reversed. If not counting 2020, when the Covid-19 pandemic caused the whole world to "shut down", 2023 is the first year since the Group was established, and also the first year since the Vietnam Textile and Garment industry began exporting to the world, the export turnover of the textile and garment industry decreased by ~10%.
With the decline in total textile demand, production order prices tend to decrease sharply, on average by over 30%, and in some cases by up to 50% for large-volume items. Countries focus on competing on price to get orders. At this time, macro factors such as exchange rates, interest rates, and minimum wages will have a large weight in competition among countries. Currently, the income of the Vietnamese textile and garment industry is only lower than that of China (330 USD/month compared to 420 USD/month), but is 3 times higher than in Bangladesh, more than 2 times higher than in India, 1.8 times higher than in Cambodia, while labor costs account for over 55% of the cost price. Along with that, the VND exchange rate has been stable throughout the first 8 months of the year while the CNY has depreciated by 5%, the Bangladeshi Taka has decreased by 5.9%, and the Turkish Lira has decreased by 31%. Interest rates in Vietnam in the first 6 months of the year are about 3% higher than the average of competing countries. The combination of factors has created extremely disadvantageous factors for Vietnamese enterprises in price competition, although the productivity and quality of Vietnamese enterprises may be 10-15% higher than average.
Along with the deep price reduction, customers also require small orders and short delivery times, only about 10 - 14 days, while previously it was 40 days for CM goods, 70 days for FOB goods... creating a lot of pressure on businesses.
Find a niche market with difficult orders
In 2023, with the spirit of Resilience - Courage - Creativity - Solidarity, Vinatex has focused resources, proposed timely solutions in operations to maintain orders, be flexible in production and business, diversify products and customers... Enterprises in the system strived and steadfastly maintained production and business activities to preserve labor, maintain income, maintain position in the supply chain, retain customers and the market. To maintain orders for production and business activities, enterprises must approach very small orders, difficult techniques, less repetition, short delivery time, accept sacrifices in productivity and production organization methods compared to before when producing large products with high productivity, creating momentum for Vinatex to achieve production and business plans.
In 2023, Vinatex's consolidated revenue is estimated at VND 17,225 billion, reaching 104.4% of the plan; pre-tax profit is estimated at VND 377 billion, reaching 101.9% of the plan. In particular, the Group and its member enterprises have made efforts to ensure jobs and income for nearly 62,000 level 1 workers by reducing profits to maintain the workforce with an average income of workers estimated at VND 9.45 million/person/month, reaching 96% compared to 2022, but the number of working hours has decreased by 15% (11% higher than the average salary that workers nationwide received in 2023 (about VND 8.5 million/person).
Despite the difficult year, Vinatex still maintains internal training programs, improving the capacity of managers from middle to specialist levels, including 4 Group-level training programs: Young Talent training program, semester 2; Internal training program, courses 1, 2 in Hanoi and Ho Chi Minh City; HRM Conference... In addition, in 2023, the Group also organized 08 specialized seminars, promptly updating market information, quick forecasts on the world textile and garment situation, exporting countries, competing countries... with the participation of leading economic experts, Group leaders, leaders of functional departments and executive agencies of member units. Also in 2023, Vinatex established the Garment Production and Business Board in addition to the Yarn Production and Business Board (established in 2021) with the strategic participation of key units in the Group to support and transfer experience in production management in the Garment industry, and support each other in the face of many market fluctuations.
Vinatex has been actively implementing green commitments. In particular, focusing on using green energy and rooftop solar power at factories with more than 25 million KWH produced and used in 2023. At the same time, garment enterprises have quickly converted fossil fuel boilers to electric boilers, reducing greenhouse gas emissions into the environment... ESG standards (Environmental - environment, Social - society and Governance - corporate governance) have been actively and effectively implemented by Vinatex, focusing on implementing ESG commitments and initiatives, building competitiveness with the image of a responsible enterprise towards consumers and employees, along with focusing on green indicators, clean production, raw materials and circular products.
Stick to 5 goals in 2024
In 2024, forecasts show hopes for an improvement in the world economy, especially in the US market with signs that there may be 3 interest rate cuts of up to 0.75%, which is a driving force to boost consumption again. Competing countries face many labor problems and armed conflicts at home, while Vietnam is a safe destination, which is also an advantage for orders that are likely to return to Vietnam. The domestic macro economy continues to be stable, with GDP growth forecast to be higher than in 2023. However, domestic textile and garment enterprises also face new challenges such as a 6% increase in minimum wages from July 1, 2024, and electricity prices may continue to increase after increasing by over 7% in 2023...
Based on the lessons learned in 2023 and forecasts for 2024, Vinatex sets out 5 steadfastnesses in its 2024 message, including: Persistently aiming to participate in the supply chain with a solid position, being a priority partner of major manufacturers and distributors in the world. Persistently building within the Group a strategic goal: A destination for providing complete solutions for textiles and Green fashion. Persistently implementing commitments and initiatives on environment, society, and corporate governance (ESG). Persistently implementing continuous forecasts and providing solutions to adapt to the uncertain market. Persistently training staff to meet new market and technology requirements./.
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