Vietnam is hit by supply chain disruptions due to shortage of raw materials
Shortage of raw materials due to geopolitical tensions and China’s zero-elimination policy is affecting the global supply chain, also affecting Vietnam. Vietnam initially investigates seven particularly affected industries and understands how they are coping with the challenges.
Even though there are still uncertainties around the world, Vietnam’s economy has recovered at a very fast speed in the post-COVID-19 era. According to World Bank statistics, Vietnam’s GDP growth rate in 2022 is expected to grow from a low of 2.6% in 2021 (due to the impact of the epidemic) to 5.5%.
However, challenges still exist. The consumer price index (CPI) continues to rise to a seven-month high. The CPI in March reached 2.4%, an increase from the previous month. 1%.
The main reason for the price increase is the soaring production costs, which is caused by the serious shortage of raw materials in various industries. Major industries face another challenge in the wake of the coronavirus pandemic: surging costs and shortages of raw materials, a problem exacerbated by supply chain disruptions.
The following is the current situation of the textile and clothing industry and the footwear industry.
Textile and Garment Industry
Vietnam Textile and Garment Association stated that due to The country’s reopening and the implementation of multiple free trade agreements (FTAs) are quite promising for the long-term prospects of Vietnam’s textile industry. Under ideal circumstances, the country’s textile industry is expected to generate US$43.5 million in revenue for the Vietnamese economy this year.
However, its textile factories are still affected by supply chain disruptions caused by China’s border controls and soaring costs caused by the Russia-Ukraine war.
China has long been Vietnam’s main exporter of fabrics and clothing accessories; 50-55% of Vietnamese textile factories’ raw materials and textile accessories come from China. However, as China’s zero-clearance policy continues to be implemented, a lot of fabrics and clothing are accumulated at the country’s ports, which in turn forces Vietnamese garment factories to postpone production and delivery times.
As Chinese factories are forced to operate at low production capacity, Vietnamese textile manufacturers must place orders with their suppliers several months in advance to ensure normal supply of raw materials.
With the sharp rise in cotton prices, the situation has become even worse. The Vietnam Cotton and Textile Association stated that the price of cotton imported from Brazil, the United States, and India increased by 0.87%, reaching US$1,625 per ton. This has affected the earnings of Vietnamese manufacturers as it is difficult to pass on the increased costs to customers in the short term.
In addition, the U.S. government passed the “Forced Uyghur Labor Prevention Act” on June 21, 2022, prohibiting companies from importing goods, including cotton, from China’s Xinjiang region to The United States further increases the input costs of enterprises.
In order to support the textile industry, the Ministry of Industry and Trade of Vietnam stated that it will accelerate the implementation of the sustainable development strategy of the textile and footwear industry, while using cutting-edge technology to improve the two industries. productivity.
Textile mills have made efforts to diversify their suppliers to reduce their dependence on China.
Footwear Industry
Vietnam has the third largest industry in Asia and the world The fourth largest footwear manufacturing industry. In 2020, Vietnam exported as many as 1.2 billion pairs of shoes, accounting for 10% of the global footwear export market; in 2019, it only accounted for 2%.
Vietnamese footwear manufacturers mostly import raw materials from China, ranging from leather to other accessories. However, China’s current blockade policy prevents many companies from obtaining raw materials. , forced to delay delivery dates to foreign partners.
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