Vietnamese businesses have been uninterested in the spacious field of garment and textile materials because of low profit margin and long payback period, said economic expert at a conference hosted by the Vietnam Textile and Apparel Association (Vitas) recently.
|Local investors have been uninterested in garment and textile material supply because of low profit and long payback period (Photo: SGGP)|
Vietnam now has 5,028 garment and textile businesses while the number of material suppliers is only 604. This has resulted in years-long material shortage which is unlikely to improve in the next five years, they forecast.
The material deficiency has created much room for businesses to join in this field. However, mostly investors have been foreign direct investment (FDI) firms.
According to data by Vitas, FDI capital to the garment and textile industry has reached US$2 billion by the end of last year. Local businesses have lacked funds and needed assistance mechanisms to attend the supply chain.
A representative of Hoan My Company said that the company had to spend $25 billion on a zipper plant and much more to weaving machines.
On the other side, many provinces and cities have limited licensing textile and weaving projects to prevent environmental pollution although they are two indispensible phase off cloth production. This has contributed in making a number of Vietnamese products fail to meet origin rules and enjoy incentives from free trade agreements, according to the representative.
More than 60 percent of small and medium enterprises in Vietnam have investment direction in 5-10 years instead of 50 years as Japanese firms. This originates from the instability of Government policies to attract and assist investors.
Besides, current regulations have showed many problems and badly affected businesses’ investment and development strategies. Therefore material projects with payback period of 20 years or longer have not been chosen by local investors.