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Vietnam garment exports hit hard by labor shortage, disrupted supply chains, and swelled freight fares

Vietnam textile and garment industry has been hit hard by the fourth and most extreme wave of COVID-19 from July to September with labor shortages, disrupted supply chains, and swelled freight fares imposing many textile and apparel companies to shut down or operate at partial capacity.

Figure 1: Employees of a garment firm in the southern province of Long An work before the locality imposes social distancing. Courtesy: VnExpress/Quynh Tran

According to a government figure, Vietnam has over 6,000 clothing and textile factories employing about three million people.

While around one million RMG workers, or one-third of the total number employed, have quit their jobs or are staying away from work with or without pay, VITAS projected.

On top of it, workers making a departure to their hometowns – intensifying labor shortage.

Due to this most of the textile factories face labor shortages and hindrance in supply chains which is leading to failing in export orders said the Vietnam Textile & Apparel Association (VITAS).

VITAS projected that some one million workers in the sector, or one-third of the total number employed, have quit their jobs or are staying away from work with or without pay, VITAS.

Figure 2: Vietnam textile and garment industry scenario.

On top of it, brands and retailers are shifting their orders to other countries due to supply chain glitches. Nike and Adidas suppliers stopped operations in Vietnam earlier this year. Nike has cut its fiscal 2022 sales expectations and cautioned of holiday delays, while Lululemon is moving production out of Vietnam.

While VITAS stressed that factories in the south have implemented the stay-at-work and commute-to-work models, but only managed to get 10-30% of their workers.

Besides, logistics costs – which is some 9% of production costs of Vietnamese garment and textiles – have gone up steeply.

Making it tough for factories to maintain production and ensure timely delivery of goods.

As a result, in September, Vietnam’s garment and textile exports declined by 9% to $3 billion month-on-month. The figure for the year-to-date was $29 billion.

For the month of October, the Vietnam’s government predicted that the country’s garment exports will fall short by $5 billion – achieving $34 billion of textiles exports, shy of the targeted $39 billion.

VITAS has three dissimilar export scenarios subject on how the COVID situation turn out: it believes shipments of $33.5-34 billion this year if the pandemic lingers until early December, $36-36.5 billion if until November and $37.5-38 billion if it is reduced by October.

Truong Van Cam, Vice Chairman, Vitas said, “It is very difficult for the sector to realize the export target of $39 billion set for this year.”

While the government painted a grim picture and said in a statement that the last three months of this year will be an extremely difficult time for Vietnam’s textile and garment industry.

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