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Coordination among sectors and industrial groups is a key measure to help garment, footwear and wood furniture businesses improve their chain value and competitiveness in both domestic and foreign markets.

According to the United Nations Industrial Development Organization (UNIDO)’s Competitive Industrial Performance (CIP) report in 2011, Vietnam’s CIP dropped from 72nd in 2005 to 58th in 2008/2009 among 118 countries and territories. Its trade and production growth of 20-21 percent was still much higher than elsewhere in the world.

For instance, Vietnam’s exports of manufactured goods reached US$36.4 billion in 2009, double the 2005 figure of US$17.5 billion and nearly 6 times higher than the 2006 figure of US$6.7 billion.

However, Vietnam’s share of the world market has remained modest compared to its neighbouring country, China while there is strong competition from other countries in the region.

The Vietnam Leather and Footwear Association (Lefaso) says it exports 91 percent of its products to the EU, US and Japan. Vietnam is placed second and third among footwear exporters to the EU and US markets, respectively, despite fierce competition from China, India, Bangladesh and Indonesia.

Lefaso’s Vice Chairman, Diep Thanh Kiet, says the average monthly labour cost in Vietnam is about US$180-250 per person, higher than in India (US$150-180), Bangladesh (US$80-120) and Indonesia (US$120-150) but lower than in China (US$250-300). In addition, Vietnam has to import half of raw materials for production but China has an abundant source available.

The footwear sector also finds itself in a bind as the advantages of cheap labour cost and design expertise no longer have a magic touch. So does the garment sector that has to import around 80-95 percent of raw materials for production.

In the case of wood furniture makers the shortage of skilled workers, professional designers and raw materials makes their products more expensive and less competitive than those made in China.

For example, the production cost of a wood chair is US$19.6 in Vietnam but only US$12.67 in China, not to say the Chinese design is more attractive.

UNIDO’s representative in Vietnam, Patrick J.Gilabert, says this is mainly due to the lack of skilled workers to improve the design and quality of products.  However, these problems cannot be solved overnight.

The bottom line is that businesses need to join efforts and coordinate with foreign partners to sharpen their competitive edge in both domestic and international markets.

Patrick says Vietnam has bright prospect for long-term investment with estimated growth of 6.4 percent in 2010-2050 as many foreign investors are keen to expand business in the country.

Source: VOV