JOURNALIST: - Sir, please could you share the situation that VitaJean is facing in both the export and domestic markets today?
Mr. PHAM VAN VIET: - In the export segment, which accounts for about 95% of VitaJean market share, we have been facing many difficulties in the last few months. The first was in accessing raw materials for production. When this problem was resolved, then the output of the product was bogged down soon after the Covid-19 pandemic broke out in Japan, South Korea, Europe and the USA, causing previous orders to be suspended and no hopes of receiving new orders. At the beginning of June, we started exporting to the US market, but it was only dispatching of previous orders.
The garment industry was among those industries that were the most seriously affected, as consumers focused on savings rather than spending. In the first two quarters, we lost about 70% of our revenue. We are expecting the situation to improve from September, which is possible only if the pandemic does not return as a second wave across the US and Europe. However, if the present situation continues we may face closure or even total bankruptcy.
VitaJean is currently exporting anti-bacterial cloth masks to Europe and the US, which is giving our workers employment. We are producing 500,000 to almost 1 million masks per day, and in addition, because of adequate supply of raw materials, we can now produce more medical clothing and related products that our partners need. However, the production of masks or medical clothing only creates jobs for most garment workers in the traditional way. With the number of workers working on modern lines that we have invested in recent years, we are still producing only previous orders, and the current workload is very small.
In the domestic segment, which has a relatively modest market share, the recent pandemic has caused a loss of about 70% in revenue, due to a sharp decrease in purchasing power of consumers. We have promoted online sales with many discount programs and promotions to attract consumers. VSixty Four is currently competing with major brands such as Levi’s and Calvin Klein in the international denim segment.
Since we produce fashion products, we must understand the new psychology in a sustainable manner. We are confident we understand Vietnamese habits, behavior and trends, though after being in exports for a long time, and now turning to domestic market is a big challenge for us. Besides branding and connecting with consumers, another big challenge is overcoming counterfeiting of our products.
- Sir, will investing in 4.0 technology for production at VitaJean meet with the requirements of free trade agreements such as EVFTA?
- EVFTA is an agreement that has been applied in many industries for several years, including in textiles and garments. The Vietnam Chamber of Commerce and Industry (VCCI) has had many discussions with businesses. When the agreement comes into effect in early August, there are still many textile and garment enterprises confused about the rules of origin of raw materials, technology investment or social responsibility that the EU requires.
We have invested about USD 25 mn in automation in all our three factories. With this investment, when EVFTA officially takes effect, the tax rate of 16% or 18% will immediately fall to 12%. Since the European market has high demand for fashion garments, which is our strength, by meeting this demand from export of our goods, our profits too will increase.
Benefits from technology investment are visible to all, but not all garment and textile enterprises can bring in new technology. Currently only about 2% of businesses are using modern technology, because most businesses still do outsourcing, and such low profits cannot be reinvested. Vietnam is currently the third largest garment exporting country in the world, but 50% of garment companies are still implementing the simplest of manufacturing methods such as cutting tailoring (CMT), the lowest added value in the textile chain. At present, only 5% can make goods in the form of proactive materials and design participation (ODM).
Therefore, in about 20% of the enterprises that are exporting goods to the EU now, only about 5% can receive a tax reduction when EVFTA takes effect. But I also believe that this agreement will be a motivation for many businesses to transform their working plan. We must adopt technology and investment in it, and not wait for customers to motivate this move, otherwise we will not be able to meet the needs of our customers.
- Sir, what support did VitaJean receive from the State during the Covid-19 pandemic phase, and what support policies do you expect for the textile industry?
- When the Covid-19 pandemic broke out, many businesses faced difficulties, and the Government informed of various programs to support those businesses that had been hit. These programs haven't reached us yet, but VitaJean received a lot of local support.
At present VitaJean is still overcoming difficulties accumulated over the years. These we are tackling on our own without the support of the government. Concerning policies for the industry, we hope the Government will maintain consistent policies, and not waver in its support to help businesses get back into production.
- Thank you very much.