Vietnam emerges as next big factory floor JUN ENDO and MOTOKAZU MATSUI, Nikkei staff writers TOKYO/YANGON -- Cost-sensitive garment businesses around the world increasingly regard Vietnam as a top choice for production, in anticipation of a trans-Pacific trade deal that would eliminate tariffs on clothes entering the U.S. A factory established in Vietnam by Hong Kong manufacturer Smart Shirts is packed with rows of tables to accommodate more than 3,000 workers. A piece of fabric is quickly transformed into a dress shirt at this site in Nam Dinh province. We made the right decision to set up a factory in Vietnam, says a production manager at Smart Shirts, which supplies clothes for a dozen well-known brands in the U.S., Japan and Europe. With a sharp rise in orders from the U.S. in recent months, output has increased to 24,000 articles of clothing a day -- a 30% jump from 2013. The main engine behind the growth is the Trans-Pacific Partnership under negotiation among the U.S. and other countries in the Asia-Pacific region. If the pact is completed, a tariff close to 20% would be removed for clothing entering the U.S., the worlds biggest apparel importer. This is why American corporations are turning to Vietnamese factories: U.S.-bound shipments of clothing are projected to reach $9.8 billion in 2014, up 30% on the year, according to the U.S. Chamber of Commerce. On land next to the Smart Shirts factory, Japanese trading house Itochu opened a spinning and textile factory this July with local partners. To take advantage of TPP benefits, a factory must use thread and fabric made in Vietnam. Labor costs here are higher than in neighboring countries, but Vietnam boasts far superior export competitiveness, says an officer in charge of Itochus fabric business in Vietnam. South Koreas Kyungbang and Chinas Texhong Textile Group have also set up huge factories. With Vietnam set to sign a free trade agreement with the European Union soon, inquiries from Europe are on the rise. While Bangladesh, Asias second-largest garment exporter, mostly makes T-shirts and other affordable items, Vietnam focuses on higher-priced clothing. Its apparel exports are forecast to top $20 billion this year, reaching nearly 80% of Bangladeshs tally. Another hot destination is Myanmar. Some 30-40 companies are awaiting government approval, says a Myanmar apparel industry insider. As many as 300 factories are said to be able to make clothes for foreign customers, and major players in South Korea and Hong Kong are considering entering the country. Myanmars garment exports jumped 30% to nearly $900 million in fiscal 2013, the highest in 12 years, and are projected to hit an all-time high this fiscal year. Insufficient infrastructure prevents mass shipment, but businesses find Myanmar attractive because of low labor costs -- a mere one-sixth of Chinese wages and just half of Vietnamese pay. Up to 40% of the apparel shipments are bound for Japan. But exports to the West are expected to grow now that U.S. giant Gap and U.K. company Marks & Spencer have decided to outsource production to Myanmar. Meanwhile, the situation for manufacturers has turned sour in Cambodia. Soon after foreign companies rushed to build factories a few years ago, workers began demanding wage hikes, prompting the government to raise the minimum monthly wage from $61 to $80 last year with plans to double the figure in 2018. Chinese and South Korean companies with factories here also have production sites elsewhere, and higher wages are prompting them to considering leaving, says the head of Cambodias garment association. Production efficiency is not improving enough to offset the wage hikes, so manufacturing in this country cannot be called low-cost, admits the deputy manager of Marubenis Phnom Penh office. Wages, trade deals, infrastructure and other competitive factors change quickly. You never know which country will offer the most advantageous conditions in five years, points out a representative of Japanese nonprofit group Asian Apparel Production Network. asia.nikkei/Business/Trends/Vietnam-emerges-as-next-big-factory-floor
Posted on: Mon, 24 Nov 2014 04:55:41 +0000
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