PRIVATE SECTOR DISCUSSIONS Number 7 VIETNAM’S GARMENT INDUSTRY: Public Disclosure Authorized Moving Up the Value Chain Prepared by: Hassan Oteifa - Former Manager of the International Finance Corporation's Textile Department Dietmar Stiel - SECO Consulting, Germany Public Disclosure Authorized Roger Fielding - Geoffrey Willis & Associates, UK Peter Davies - Fielden-Cegos, UK Hanoi University of Technology - Vietnam (HUT) Vietnam Chamber of Commerce and Industry (VCCI) And by: Public Disclosure Authorized MPDF Staff Public Disclosure Authorized January 1999 (Revised in March 2000) i TABLE OF CONTENTS ABBREVIATIONS AND ACRONYMS.....................................................................................v PREFACE .................................................................................................................................vi INTRODUCTION ....................................................................................................................vii I. AN OVERVIEW: Past Success and Future Challenges...........................................................1 A. Introduction........................................................................................................................ 1 B. Mission Objectives and Field Work ...................................................................................... 3 C. Mission’s Findings .............................................................................................................. 3 D. Review of the Vietnamese Garment Market.......................................................................... 4 1. Local Markets.................................................................................................................. 4 2. Export Markets................................................................................................................ 5 3. Private Sector Weaknesses ............................................................................................... 6 II. MARKETING .......................................................................................................................7 A. Introduction........................................................................................................................ 7 1. Background..................................................................................................................... 7 2. Objectives ....................................................................................................................... 7 B. Analysis of the Vietnamese Garment Sector.......................................................................... 8 1. Local Markets.................................................................................................................. 8 2. Export Markets.............................................................................................................. 10 C. A Firm-level View ............................................................................................................ 15 1. Overview....................................................................................................................... 15 2. Management.................................................................................................................. 18 3. Marketing...................................................................................................................... 20 4. Strengths and Weaknesses .............................................................................................. 21 III. TRAINING.........................................................................................................................24 A. Introduction...................................................................................................................... 24 B. Methodology..................................................................................................................... 24 C. Findings............................................................................................................................ 25 1. Firm-level Findings ....................................................................................................... 25 2. Visits to Ministries ......................................................................................................... 27 3. Visits to Service Providers.............................................................................................. 27 D. Summing Up..................................................................................................................... 27 E. Recommendations__________________________________________________________29 1. Introduction …………………………………………………………………………………………….29 2. Productivity ………………………………………………………………………………….30 3. Profile of the Training ……………………………………………………………………….30 ii 4. Training Components ………………………………………………………………………..31 IV. OPERATIONS...................................................................................................................41 A. Introduction...................................................................................................................... 41 B. Purpose of survey.............................................................................................................. 41 C. Observations ..................................................................................................................... 41 D. Conclusions ...................................................................................................................... 42 V. PROFILES OF SERVICE PROVIDERS FOR GARMENT FIRMS ...................................44 A. Training and Education Services........................................................................................ 44 B. Marketing Services............................................................................................................ 60 C. Production-Related Services .............................................................................................. 69 D. Design Services ................................................................................................................ 74 E. Information Services.......................................................................................................... 80 F. Advocacy Services ............................................................................................................ 85 G. Financial Services ............................................................................................................. 90 H. Research Services ............................................................................................................. 92 I. Procurement Services ......................................................................................................... 98 J. Investment Consulting Services .........................................................................................112 K. Conclusions .....................................................................................................................115 ANNEX 1: SWOT ANALYSIS OF VIETNAMESE GARMENT INDUSTRY...................... 117 ANNEX 2: AN OVERVIEW OF THE KEY PROBLEMS FACING PRIVATE GARMENT MANUFACTURERS: Fishbone Diagrams ............................................................................. 118 Diagram 1: Inefficient Production Organisation...........................................................118 Diagram 2: Inadequate Business Management Skills ...................................................119 Diagram 3: Difficulty Establishing Links with Buyers .................................................120 Diagram 4: Low Productivity of Labor Force..............................................................121 Diagram 5: Quality Problems .....................................................................................122 ANNEX 3: Statistical Overview of the Garment Industry....................................................... 123 Table 1: Number of Garment Production Units in Vietnam ..........................................123 Table 2: Average Employment at Garment Production Units in Vietnam ......................125 Table 3: Median Employment At Garment Production Units in Vietnam.......................127 Table 4: Number of Garment Exporters in Vietnam.....................................................127 Table 5: Volume and Value of Imported Fabrics and Exported Garments in Vietnam ....129 Table 6: Garment Export Value by Country ................................................................130 Table 7: Percentage of Garment Export Value by Countries – Destinations ...................132 Table 8: Export Value of Garment by Type of Production Unit, Vietnam......................134 Table 9: Export of Garment and Textile Products to EU by Country.............................136 iii ANNEX 4: Comparison between FOB and CMT Business ..................................................... 137 ANNEX 5: List of Private Sector Garment Co. with more than 100 workers ......................... 138 iv ABBREVIATIONS AND ACRONYMS AFTA Asian Free Trade Area CAD Computer-Aided Design CAM Computer-Aided Manufacturing CM Cut-Make CMT Cut-Make-Trim EU European Union FOB Free on Board FADIN Vietnamese Fashion Design Institute HCMC Ho Chi Minh City HUT Hanoi University of Technology IFC International Finance Corporation JV Joint Venture MFA Multi-Fiber Agreement MFN Most Favored Nation Status (“normal” trade