Increasing the efficiency of the Textile and Garment Industry of Vietnam in the context of the dependence on foreign suppliers and investors

Dao Thanh Binh,Tran Thi Bich Ngoc,Galina Anzelmovna Barysheva,Nguyen Danh Nguyen,Tran Si Lam

doi:10.15549/jeecar.v7i3.598

Abstract

The purpose of this study is determining the optimal proportions of interaction between foreign and domestic suppliers and investors in the institutional structure of the VTGI. Based on a survey of representatives of 388 VTGI enterprises, the economic efficiency of the industry's enterprises and the degree of dependence on foreign suppliers and investors are assessed. The survey was conducted in a stable market environment (April-June 2019) and in a crisis (April-June 2020). Regression models of the influence of indicators of dependence on foreign suppliers and investors on the enterprise performance indicator are constructed. By solving a system of equations (dependence functions), the optimal proportions of the structure of interaction between foreign and domestic suppliers and investors are determined quantitatively in order to maximize the economic efficiency of clothing and textile enterprises in the context of crisis manifestations in the market conditions of operation

Highlights

Vietnam is the fourth largest exporter of textiles, garments and clothing worldwide after China, the European Union and Bangladesh (Statista, 2020)
Foreign invested enterprises (FIEs) in the textile and garment manufacturing sector accounted only for nearly 25% of the total number (General Statistics Office of Vietnam, 2020), they contributed about 58-62% of the export turnover in the survey years because foreign invested enterprises (FIEs) have advantages over domestic enterprise (DEs) in advanced machinery and technology, and in stable and profitable orders transferred from parent corporations, as most of them are subsidiaries in MNC’s affiliates
Enterprises are least dependent on foreign capital, but its role is important in ensuring the efficiency of enterprises since it has a greater impact on large enterprises that provide the bulk of production and export of products

Summary

Introduction

Vietnam is the fourth largest exporter of textiles, garments and clothing worldwide after China, the European Union and Bangladesh (Statista, 2020). In 2019, more than 80 percent of FDI in the industry consisted of manufacturing fabrics and raw materials projects (General Statistics Office of Vietnam, 2020). Foreign invested enterprises (FIEs) in the textile and garment manufacturing sector accounted only for nearly 25% of the total number (General Statistics Office of Vietnam, 2020), they contributed about 58-62% of the export turnover in the survey years because FIEs have advantages over DEs in advanced machinery and technology, and in stable and profitable orders transferred from parent corporations, as most of them are subsidiaries in MNC’s affiliates. VTGI annually imported nearly 60% of fabric, 55% of yarn and 45% of its auxiliary materials for production from China, and US$ 3 billion was spent to import raw cotton from the United States accounting for over 50% of total imported cotton, as US cotton products are assessed as the best for the Vietnam’s spinning industry (Ha, 2019)

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