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In recent years, although Vietnam's economy has maintained rapid growth, Vietnam's overall capacity to undertake is still relatively limited at this stage. Vietnam has always been a key area for the transfer of international textile and apparel production capacity. However, some companies cannot even grab factories in Vietnam. Vietnam's production lines are at full capacity. Some companies shout: Investing in Vietnam is not once and for all. according to our understanding,Already, many companies are considering stopping their expansion in Vietnam or even relocating from there.

So,What are the problems of textile and garment enterprises investing in Vietnam, and what changes will be shown in the future capacity layout?

Infrastructure is still backward

Increased uncertainty

In recent years, in order to pursue cheaper production costs, American sporting goods giantsNikeExpanded production in Vietnam. However, according to media reports recently, as the global environment has become more complex, the Vietnamese market is now unable to meet Nike's needs. Previously, many overseas companies, including Nike, moved their production lines to Vietnam in order to avoid risks. But for now, Vietnam's infrastructure is still backward and cannot meet the demand for rapid expansion of production capacity. The relevant person in charge of Nike said,Ports are clogged and water and electricity supplies are overwhelmed.Many enterprises import and export goods need to occupy space in advance, and the transportation efficiency is also greatly reduced due to traffic congestion.

What worries companies most is that the United States recently planned to launch a trade investigation into Vietnam, increasing the possibility of imposing tariffs on Vietnam. This uncertainty has disrupted many companies' plans to shift production capacity to Vietnam. The person in charge said,In the next three years, most overseas textile manufacturers may not continue to add factories or expand in Vietnam.

In this regard, Nike also intends to give up investing in Vietnam and invest in other Southeast Asian countries such as Indonesia or Cambodia. it is reported that,The company expects to invest US $80 million billion to build about 120 production lines in Indonesia and Cambodia to reduce its dependence on the Vietnamese market.

It is worth mentioning that,From December last year to the end of February this year, Nike's total revenue reached 9.6 billion US dollars, up 7% year on year.However, its business revenue in North America only increased by 7% year-on-year, and it is still the Chinese market that has made a greater contribution to it..At the same time, Nike's revenue in China rose 24% year-on-year to US $1.588 billion, or about 10.6 billion yuan. This is also the first time Nike's revenue in China has exceeded 100 million yuan.

that is to say,During the period of Nike's transfer of production lines, its performance in the Chinese market is still better.As a result, Nike even intends to transfer production capacity back to China and continue to expand its production capacity layout in China, because the Chinese market is too important for Nike.

Human costs rise too fast

Land rents rise significantly

Statistics show that,At present, the average monthly salary of Vietnamese workers is at least 300 US dollars. With the increase of local workers' salary increase, there is no cheap wage in Vietnam.

A person in charge of a Chinese company that produces children's clothing told reporters,At present, the proportion of the company's production in Vietnam is already very large. If it wants to build a new factory or expand the production line, it will cause certain operating pressure. The reason is that there is no cheap labor in Vietnam.. New entrants want to move into Vietnam, and the original enterprises want to expand their factories. Now both forces are rushing for jobs, which will only increase the pressure of competition. The local labor force presents an imbalance between supply and demand. At present, Vietnamese investment has overheated.

according to our understanding,Vietnam's labor law stipulates that enterprises entering Vietnam must set ladder salary, based on the minimum salary level announced by the government, and the salary level at the first level is the minimum salary plus 7%.5% increase for each additional level from the second level, and so on. In the past 10 years, the Vietnamese government has raised the minimum wage by more than 10% every year. When the minimum wage rises, the ladder salary will be raised, "which is equivalent to a 15% salary increase for all employees. This is a terrible expenditure". Not only that, but the potential cost is also a big trap, the head of the business said. For example, enterprises pay union dues on the basis of 2 per cent of total labor wages each year, increase the minimum wage plus ladder wages every year, and the scale of total wages continues to expand, with union dues rising, not including local social security costs.

As foreign investors accelerate their investment and construction in Vietnam, not only labor costs, but also land and plant rents are rising rapidly in Vietnam.. The head of an outdoor sportswear company that invested in Vietnam two years ago said that the rental prices in Vietnam's first-tier cities are not much different from those in China's first-tier cities, so the company chose a relatively remote industrial park in Vietnam. "When we came in 2017, the factory rent was 2.2 US dollars per square meter. Now the rent has risen to 2.8 US dollars, which is rising very fast." Even so, most industrial parks are generally operating at full capacity. "Vietnam has begun to appear signs of labor shortage." The person in charge said that in the selection of many new factories, the focus is on recruitment. In the past, people could be recruited by posting an advertisement, but with the increase of factories, the difficulty of recruitment is also increasing. Enterprises have to go to remote places to recruit, and the situation of rising wages will continue.

The production base is divided into parts.

Deceptive labeling has a big impact

Some industry experts have suggested that,Vietnam may become foreign trade and lose foreign trade. Although Vietnam's economy has achieved rapid development through an export-oriented model, Vietnam's foreign exchange reserves are now only US $70 billion. Vietnam's debt-to-GDP ratio has reached 63% in 2018, approaching the 65% ceiling stipulated by the country's law. Vietnam's high debt problem has become the biggest obstacle to the sustainable development of its economy and its ability to resist pressure is weak.

In order to avoid risks and not put eggs in the same basket, some textile and garment enterprises began to suspend their factory expansion plans in Vietnam, turning production into parts and transferring them to other Southeast Asian countries, hoping to respond more flexibly to the changing international trade situation by establishing multiple production bases.

For example, well-known yoga clothing companiesLulu LemonRuhong, a Taiwan supplier in China, currently has 50% of its production capacity in Vietnam and its business structure is not flexible enough. In response to changing global political and economic trends, they are actively diversifying their risks and are considering investing in India or Mexico.

AdidasandPumaBaocheng, a footwear foundry company, also increased its investment in Indonesian factories. In 2018, Baocheng produced 0.326 billion pairs of shoes, 46% of which were produced in Vietnam.In the first quarter of 2019, its share of Vietnamese production capacity fell to 43%, while Indonesia's share of production increased to 41% from 37% last year.

The person in charge of Baocheng's related business said that land prices in Vietnam are also rising, and there is no downward trend. In the long run, they believe there is little room left for business in Vietnam.

It is worth mentioning that,The Sino-US trade friction has intensified the transfer of textile and apparel production capacity to Vietnam, while at the same time there has been a growing problem of trade fraud.For example, some enterprises did not make the corresponding investment to actually transfer production, but directly marked the source of goods as Vietnam to avoid trade restrictions. The relevant person in charge of the Ministry of Trade and Industry of Vietnam said in this regard: "Deceptive labeling will seriously weaken the reputation and competitiveness of goods produced in Vietnam."