Difficulties in vietnam’s export of textiles and clothing to the european union market in the period from 1992 to 2007

INTRODUCTION

Background of the study

Globalization has been much concerned by the whole world for a long time, meanwhile international trade has played a very important role in socio- economic development Especially, exports have significant impacts on the economic growth of a nation; therefore, many developing countries have the trend of pursuing industrialization on exports Vietnam is also not out of this trend.

Export activity has had great influences on Vietnam’s economic growth for many years It has affected Vietnam’s Gross Domestic Product (GDP) considerably “Goods and services exports now constitute around 70 per cent of Vietnam's GDP up from a 30 per cent share recorded in the mid 1990s” (Department of foreign affairs and trade - Australia, 2012) According to Ho Chi Minh city department of industry and trade (Feb 2005), the export turnover of Vietnam reached over $ 26 billion in 2004; it was 28.9% over the previous year, which made the GDP growth rate of Vietnam ranked first in the region in 2004, higher than that in 2003 Jodie Keane and Dirk Willem te Velde (2008, quoted in UNCTAD, 2005 and WTO, 2006) stated that Vietnam belonged to the top 20 less developed nations with a high dependence on the export of clothing See appendix 2: Top 20 less developed countries with a high dependence on clothing exports Strong competitions on export market among countries indirectly improve the quality of merchandise in the global, as well as products produced by Vietnamese enterprises Vietnam is a member of WTO, APEC etc So that, it forces this nation to produce better products in order to create competitive advantages This is essential because Vietnam’s manufacturing capacity and technology are worse than many other countries too Exportation, besides,changes the economic structures of nations Previously being an inward economy, Vietnam has become an outward one Further more, export promotion reduces unemployment and improve living conditions Last but not least, export partly promotes external economic relationships

Some major types of exported commodities of Vietnam are rice, sea products, crude oil, coffee, rubber, pepper, coal etc Especially, textiles and clothing are goods exported much This type of commodity is concerned by many countries Md Golam Robbani (2004, quoted in Yang & Zhong, 1998) said that textiles and clothing played an important role in the beginning stages of industrialisation in Britain, Japan, North America and in the export-oriented growth of East Asian nations recently Following Jodie Keane and Dirk Willem te Velde’s work in 2008, T&C are the significant source of exports in low income and developing countries such as Bangladesh, Cambodia, Sri Lanka and Pakistan; they depend on T&C exports for more than 50% of total manufacturing exports, 83.5% in Bangladesh and 80% in Cambodia for example “Developing countries are supplying more than half the world’s exports of clothing and a third of global textile exports, double their shares of the late 1960s” (Maurizio Giuli, n.d.)

Vietnam government determines textiles and clothing are essential exported merchandise and always facilitates this export In fact, Vietnam’s export of textiles and clothing has had certain difficulties; however, its achievements cannot be rejected General Statistics Office of Vietnam (n.d) listed main goods for the exportation of Vietnam from 1995 to 2010; the value of textiles exported has been upward year by year See appendix 3: Some main goods for exportation. The United State (US) and the Europe Union (EU), Korea and Japan are said to be important markets of Vietnam’s textiles and clothing export In 2001, the export turnover to the European Union market was 741,011,500 Euro (Ho Chi Minh city department of industry and trade, 2004) See appendix 4: Vietnam’s textiles and clothing export turnover to the Europe Union market In 2004, the textiles and clothing export turnover of Vietnam reached $ 4,32 billion, an increase of 17,2% It reached $ 663 million when exporting to the EU market, an increase of 32% (Ho Chi Minh city department of industry and trade, 2005).

As be known, EU has been a large and potential market for Vietnam’s export of textiles and clothing EU is a big area in term of population; it includes

27 member states “The population of the European Union reached 502.5 million on 1 January 2011 according to data provided by the statistical office of the

European Union This is one million and a half more than a year ago.” (Merco Press, 2011) This is definitely populous EU is located in Western and Northern Europe Despite of being a union of many nations, there are socio-economic similarities among these member states Being a sustainable economy, Europeans have quite high standard of living For fashion items, they pay attention to the quality and fashion of products more than their prices It requires manufacturers to produce qualitative products which are trendy

Because of three reasons: the importance of export to Vietnam, the top position of textiles and clothing in the list of Vietnam’s exported commodities and the potentiality of the European Union market, the researcher selects the research topic of difficulties in Vietnam’s export of textiles and clothing to the European

Union market in the period from 1992 to 2007.

Significance of the study

In his report, Hal Hill (1998), who comes from Australian National University,said that “Failure to achieve export success in this industry is invariably symptomatic of deep seated domestic obstacles and an inability to build on strong potential comparative advantage.” So that, what are specific obstacles the industry has to cope with? Athough many previous studies have emphasized the difficulties and challenges in textiles and clothing exportation, the quantity is still quite few Moreover, they are not really clear and specific “The MFA was an explicit attempt to protect developed country producers by restricting exports of textiles and clothing from developing to industrialized countries It sought to provide temporary protection to developed country firms to undertake the changes necessary to compete against lower cost producers from developing countries.” (Khalid Nadvi and John Thoburn, 2003) Following HabubankSecurities in 2011, Vietnam had a big competitor that was China and especially the economic status of EU affected Vietnam’s export of textiles and clothing to this market negatively “Despite many decades of tariff reduction under the aegis of the General Agreement on Tariffs and Trade (GATT) and the WorldTrade Organization (WTO), trade barriers remain high.” (Sangeeta Khorana andKwok Tong Soo, n.d.)

This study is carried out with the aim of finding out more systematic and specific difficulties, especially it focuses on Vietnam’s export of textiles and clothing to the EU market only It has been definitely a potential market There are a lot of Vietnam’s companies produce textiles and clothing products and export them to this market Their success will contribute much to the development of the sector, as well as the GDP of the country Consequently, it is considered to be more really necessary to do the research Enterprises know their challenges well, which will help them to identify which position they are in,what they are good at and what they need to improve Knowing reasons is the way helping them to find out solutions Understanding the situation of exportation and the nature of difficulties companies have to face with, the government can set up more suitable regulations and policies Obviously,concentrating on this industry is crucial and useful “The clothing industry is a source of output and job growth in many developing countries and provides them the much-needed foreign exchange to foster further economic growth” (MdGolam Robbani, 2004).

Research aims and objectives

The overall aim of the study is exploring difficulties in Vietnam’s export of textiles and clothing to the Europe Union market from 1992 to 2007, with the hope that the findings will be useful for enterprises to know those difficulties well and master them In order to achieve that aim, it is necessary to consider three aspects Understanding the existing failing of Vietnam textiles and clothing export and manufacturing enterprises themselves is the very first thing to do. For instance, these companies can find some steps in the manufacturing or export process difficult The second aspect originates from the situation of Europe Union market at that time The state of economy, finance, society, culture etc can influence on the export positively or negatively Last but not least, the impact of competition from the other exporters should not be denied.

In his research paper, Maurizio Giuli (n.d.) identified that a lot of European textiles producers have been out of business, which dues to the intense competition from international newly industrialised producers Obviously, the EU is a potential market in which many companies over the world would like to have a large market share China is one of the top textiles and clothing exporters in the world The competition from this country influences the other exporters, including Vietnam Specifically, three objectives are identified as follow:

1 To identify the common weaknesses of Vietnam textiles and clothing export and manufacturing companies

2 To evaluate the bad impact of the state of Europe Union to Vietnam’s export of textiles and clothing to this market

3 To identify China’s competitive aspects, which Vietnam had to cope with in the export of textiles and clothing to the Europe Union market.

Boundary of the study

This study is conducted to find out the difficulties in Vietnam’s export of textiles and clothing to the European Union market in the period of 15 years, from 1992 to 2007 The researcher chooses the starting time is 1992; because on December 15 th , 1992, the textile trade agreement between Vietnam and the European Union was signed officially The expected outcomes are supposed to be valuable for Vietnam textiles and clothing export and manufacturing companies to learn relevant lessons and find out solutions in order to overcome difficulties.

Research design

Firstly, the relevant definitions and theories are mentioned; the previous studies being related to Vietnam’s export of textiles and clothing are collected, and then the researcher conducts the literature review to assess the strengths as well as the weaknesses of these studies All of them are presented in the chapter of literature review Secondly, in the methodology chapter, the researcher identifies the research strategy, the methods of data collection and data analysis After collecting the data, researchers carry out the analysis of the data.All the findings are discussed in the result chapter In the last chapter, the main points are concluded and the recommendations are given out.

LITERATURE REVIEW

Introduction

Textiles and clothing is considered as one of the oldest industry in the world A lot of nations take advantages of this industry to promote their economic growth by manufacturing and exporting this type of merchandise to foreign markets. Consequently, many related articles has been published and there have been a lot of studies carried out with the purpose of exploring issues being related to this industry

In the second chapter of literature review, definitions, theories, models and issues being related to each objectives are laid out After evaluating and considering those models, the most suitable models applied in the study are selected.

Common weaknesses of Vietnam textiles and clothing export and manufacturing companies 14

Export is believed to play an important role in the T/C industry; this activity stimulates the economic growth of a nation in general and the development of the T/C sector in specific First, obviously, expanding the business to international markets can bring much more profits for enterprises Profits will be significantly upward if firms can get a large market share For many producers,domestic market cannot fulfill their demands of doing business sometimes; their abilities are strong enough to do much more than operating in the domestic market only In the situation, international markets are the target such producers should look forward to achieving in order to get profits as much as possible Second, the activity of export facilitates companies to have chances to access new knowledge, learn new experiences Because doing business in foreign markets is different from that in domestic market of course Each nation has its own culture and economic status; therefore, companies have to launch various strategies for each market The business strategies used for domestic market, cannot be applied for international markets Attracting foreign capital is the third benefit A domestic firm cooperates with a foreign firm by contracts of production and export; or they support each other in the certain steps of business process, which means that domestic enterprises can take advantages of foreign capital source in order to support their operation Fourth, the skills of labors will be improved For the labors who work in the business and management sectors, the domestic market, of course, is familiar with them; whereas international markets are very strange to them, which stimulates them to make efforts The efforts in the working process will enhance their inherent abilities Moreover, as be known, products exported to international markets, need to be appropriate for international standards Sometimes, producers consider the requirement of the standards as a challenge Thus, for workers who directly take part in the manufacturing process, such rigorous requirements force them to try to improve their skills In general, export has a good impact on the development of T/C industry This can be also considered as a leverage to stimulate the growth of a country; it helps a developing country like Vietnam to develop much more It is good for Vietnamese T/C industry to export as much as possible However, there have been many weaknesses owned by Vietnamese T/

As defined by Cambridge university in its 2013 dictionary press, weakness is simply a particular part or quality of someone or something that is not good or effective In the process of manufacturing and exporting T/C, or even in the management of leaders, maybe there are some steps that are not controlled well and effectively One of the objectives of the study is finding out weaknesses of Vietnam textiles and clothing export and manufacturing companies According to Source ASEAN (2010, quoted in Vinatex, n.d.), the weaknesses of Vietnam T/C firms are lack of skilled labors with experiences in management, fashion and technology, exports depending on accessories and fabric imported, undeveloped brands, weak national comparative advantages Cambridge University (2013) defines textile as cloth made by machine or hand in large quantities, clothing as clothes in general For this T&C industry, it is known as one of the largest, oldest and most global industries in the world, said Jodie Keane and Dirk Willem te Velde (2008) According to Md Golam Robbani (2004), this sector used to be governed by protectionist regimes such as The Agreement on Textile andClothing, the Multifibre Agreement, the Short Term Cotton Arrangement and theLong Term Cotton Arrangement Following the WTO (n.d.), the Agreement onTextiles and Clothing (ATC) and other restrictions were abolished in 2005; but this sector is now controlled by the general rules regulated in the multilateral trading system.

The textile and clothing (T/C) is a big industry and the manufacturing process of T/C is said to be quite complex Brussels (2003) defined that it was a diverse and heterogeneous industry; the series of products are various such as hi-tech synthetic yarns, cotton bed linen, wool fabrics, industrial filters, nappies, haute couture etc In his working paper, Brussels (2003) also outlined the complex steps of producing textiles It included the preparation and spinning of textiles fibers, weaving, the finishing of textiles, the manufacture of made-up textile articles, the manufacture of other textiles, the manufacture of knitted and crocheted fabrics and the manufacture of knitted and crocheted articles Or Sangeeta Khorana and Kwok Tong Soo (n.d.) identified the production stages of textiles and clothing; they are ginning, spinning (yarn), weaving and knitting (fabrics), dyeing and processing, and garments manufacturing Md Golam Robbani (2004) also mentioned major steps in textiles and clothing production process as follow:

Table 1: Major steps in textiles and clothing production process

Major steps in textiles and clothing production process

The more complex the process of manufacture is, the many more related problems firms have The above mentioned steps of producing textiles and clothing are the very simple steps of the basic manufacturing process However, there are many related factors that affect not only finished products but also their price and quality

In order to identify difficulties and weaknesses which firms have to cope with more easily and clearly, Porter (1990) divided the factors of production into

Dying, Printing and Finishing (Grey Fabrics)

Finished garment categories: human resources (quantity, cost of personnel, skills etc.), physical resources (land, water, climate conditions, mineral deposits, geographic location etc.), knowledge resources (the nation’s stock of scientific, market knowledge, technological), capital resources and infrastructures In addition to this above- mentioned division, Golam Robbani (2004) adopted from USITC (2004), identified infrastructure as (1) roads, ports, rail and air for moving of good in and out of the country, (2) shipping and other transportation times and costs,

(3) access to reliable sources of energy, water and telecommunications For the first factor, labor obviously influences on the prices, as well as the quality of finished products Labor is defined to be “the economic resource that includes all forms of human effort that results in the production of a good or service in exchange for a wage or salary” (Canadian Foundation For Economic Education, n.d.) Firms can save time with a large quantity of labors and vice versa. Unskillful labors, of course, cannot create good products as expected It takes more time for them to manufacture a certain quantity of goods too According to the NSDC of India (National Skill Development Corporation) (n.d.), skill requirements in garmenting for labors were stated in the report of Human resource and skill requirements in the textiles sector as follow:

Table 2: Skill requirements in garmenting

Manager - Knowledge of types of raw materials

- Knowledge of types of fabric defects

- Awareness of the price trends of materials such as fabric

- Skills of communication and negotiation Purchase associate/ executive

- Ability to calculate the amount of requisite quality fabric required

- Knowledge of types of fabric defects and other quality parameters.

- Communication with fabric manufacturers Merchandisin g

- Understanding of various production activities

- Ability to handle multiple customers.

- Understanding of buyer requirements of design and quality.

- Ability to work closely with other functions

- Skills of time management skills

- Skills of using computer Design Designer - Design and develop products according to buyers’ requirements.

- Ability to modify existing designs according to the current trends

- Keep abreast with the latest fashion trends in the markets

- Knowledge of Styling, Elements of Design, Fabric Study, Basics of Costing, Pattern Making and Draping.

Manager - Knowledge of pattern making

- Ability to undertake production, inspection planning and control

- Skills of man-management Line

Supervisor - In-depth knowledge of inspection methods and production process

- Knowledge of types of fabrics and understanding of stitching processes.

- Ability to guide sewing machine operators.

- Skills of man-management Operator - Ability to control machines

- Knowledge of machine maintenance procedures

- Knowledge of Pattern Making, Grading,Draping.

- Knowledge of CAD for Pattern Development

- Ability to sew complete garment.

- Ability to control quality requirements, the orders can be cancelled due to the small issues of quality

- Interacting with the merchandiser to understand customers’ requirements

- Knowledge of in line and final quality testing procedures

Source: National Skill Development Corporation - India (n.d.)

Workforce includes both workers who directly produce goods and labors who are responsible for management and business sectors All of them need to have certain skills to work effectively Especially, labor cost affects the prices of finished products The following table shows the hourly wage costs in some countries in 1993:

Table 3: Hourly wage costs in the textile industry, selected countries,

Source: Maurizio Giuli (n.d., quoted in European Commission, 1995, from Majmudar M 1996)

As be seen in this table, in 1993, the labor cost in Vietnam was low in comparison with the other countries, but China This factor seemed to be Vietnam’s comparative advantage Second, physical resource plays an important role For this sector of T/C, raw materials such as fabrics, yarns, fibers etc are the most important resources The bad quality of those resources, the shortage and the high prices will be challenges for export and manufacturing companies. Third, knowledge resources should not be ignored The lack of knowledge can lead to the wrong decisions in production, especially the lack of technological knowledge and inadequate market knowledge Fourth, nothing can be run without money According to Canadian Foundation For Economic Education (n.d.), capital resources include a lot of manufacturing equipment from the simplest tools to the most modern computer network, from the smallest storage to the largest office buildings The lack working capital cannot ensure the smooth operation too “The working capital is what you use everyday in operations running out of working capital is bad because that means you are off balance.” (John Nowly, n.d.) Last but not least, infrastructure such as bad transportation systems will affect the process of moving goods from domestic countries to foreign markets The high cost of shipping will make the prices of products increased Identifying weaknesses based on above factors and categories is clear and adequate

For the activity of export, Vietnam achieved a certain success despite export barriers The value of Vietnam’s export of T/C from 1997 to 2001 is mentioned by the pink line in the following figure:

Figure 1: Textiles and Clothing Exports of Cambodia and Vietnam, 1997-2001 (in millions of US$)

Source: Md Golam Robbani (2004, quoted in USITC, 2004)

Sangeeta Khorana and Kwok Tong Soo (n.d., quoted in Bilkey, 1978; Leonidou,1995b, 2004) pointed out that export barriers are classified into external and internal barriers Weaknesses of export firms can be also said to be internal barriers encountered by these firms when they want to export their goods to the other countries “Internal barriers are intrinsic to the firm and home business environment These are characterised by problems faced in export activities and are incurred either through the exporting firm’s organisational resources or its approach to export marketing that affect the ability of firms to export.”(Sangeeta Khorana and Kwok Tong Soo, n.d.) In their working paper, they gave out the list of internal barriers; they are transportation, inadequate market information, distribution difficulties, corruption, inadequate physical infrastructure, lack of awareness about changing EU legislation and new buyers,difficulties experienced in establishing contact with new buyers in foreign markets Procedural and documentation problems are two other internal barriers

(Sangeeta Khorana and Kwok Tong Soo, n.d., quoted in Bilkey, 1978; Leonidou,1995b, 2004) Besides, Kaleka & Katsikeas (1995) and Leonidou (1995 a, b).pointed out four factors of internal barriers: experience, managerial factors,socio-economic factors and the lack of knowledge; however, the list of factors is not as specific as the formers’.

The state of Europe Union affected Vietnam’s export of textiles and clothing to this market .21

According to the official website of European Union (n.d.), European Union is a unique political and economic partnership among 27 European countries which cover much of this continent For the business environment of the EU single market, the European Commission (n.d.) points out that the EU issues the rules of four freedom of movement for goods, services, capital and people; it is highlighted that the objectives of single market can only achieved if European policies create favorable climate for business to grow across the borders As a result, EU firms need to be much more competitive in order to compete against each others This is a disadvantage for international companies which want to expand their business to the EU or export their commodities to this large market It is difficult for them to compete for their market share

When evaluating the influences of the state of EU to export nations, Werner

(2001) emphasized the EU trade regime He mentioned mainly EU import quotas, preferential trade agreements, customs tariffs According to Jappe

(2009), the supply chain and the quota regime were also mentioned in the evolution of EU trade policy towards textiles and clothing export countries As stated by Y ves Bourdet, joakim Gullstrand and Karin Olofsdotter in their 2007 work, the gravity model was adopted to estimate the effects of the state of EU trade policies on developing countries exports It focused on issues such as trade preference schemes, customs unions, regional trading blocs, exchange-rate regimes Although they are important aspects, it is inadequate There are many other aspects, factors which affect exportation.

With the aim of addressing how the state of EU influenced on Vietnam’s export of T/C to this market for 15 years, PESTEL model can be applied PESTEL is derived from six factors; they are political, economic, socio-cultural, technological environmental, legal İhsan Yỹksel (2012, quoted in Dinỗer, 2004; ĩlgen & Mirze, 2007; Lynch, 2009) identifies sub-factors of each theme as follow:

 Political: Relations with the EU, Democratization process, Regional relations, Developments in north Africa and middle east, Political stability

 Economic: National income, Monetary policy, Investment incentives, Fiscal policy, Foreign investment, Energy cost, Current deficit, Foreign debt, Unemployment

 Socio-cultural: Level of education, Life style, Awareness of citizenship,

Obey the rules, Democracy culture, Will to work of the people.

 Technological: Technologic investment policies of government, New patents, Support the research and development activities by government, Rate of change in technology , Adaptation to new technologies.

 Environmental: Transportation infrastructure, Traffic safety, Public health,

Green issues, Urbanization level, Disaster management.

 Legal: Competition laws, Consumer rights, Judicial system, Implementation of laws, International treaties

Politics is a sensitive field; it can be considered as the head, which affects all of other fields “It is usually believed that economic growth can take place only in the presence of political stability” (Ishrat Husain, 2009) A tiny change in politics can lead to changes in economics, legislations etc Changes in relationships between two countries can influence on that two nations’ trade significantly For economic factors, these factors such as monetary policies, foreign investments etc definitely affect trade in a direct way Socio-cultural factors are important. For example, customers’ purchasing power is partly based on people’s lifestyle or their culture One of the most important aspects is legal factor Competition laws, consumer rights, international treaties etc will be sub factors which influence on the export directly In his work, Ibrahim (1996) stated that nearly a hundred of investment laws and over a thousand of bilateral investment treaties have been applied for foreign investors

Following Johnson, Gerry Scholes, Kevin Richard Whittington in 2006,PESTEL framework is applied to identify macro environmental factors that can influence business strategies, and to assess how those factors can affect business performance For this T/C sector, some factor or sub factors, which cannot be really related to this sector, can be skipped

Although being the member states of the EU, there are still certain differences among 27 countries in terms of PESTEL Hence, It is necessary to highlight outstanding or extraordinary points in each EU members Those points can affect Vietnam’s export of T/C significantly It is important for firms to select the most potential member states in order to export commodities to their markets For example, because of differences, the percentages of market share of clothing retailers in EU countries are different:

Table 4: Market share of clothing retailers in main EU countries - Percentages

Source: Maurizio Giuli (n.d., quoted in Texco, 1990)

China’s competitive aspects, which Vietnam had to cope with in the export of textiles and

with in the export of textiles and clothing to the European

It cannot be denied that EU is one of the most potential markets in the world.

Thus, there are many international organizations seek chances to expand their business to this market and hope to gain a market share Competition among export nations has certain impacts on Vietnam’s export of T/C Cambridge

University (2013) defines competition in economics to be the situation in which businesses or people are trying to be more successful than each other, for instance by making more sales in a market Each nation, besides, also has its own competitive aspects Understanding those of competitors and how they affect Vietnam’s export, it will be easier for this country to find out solutions. Among competitors over the world, China is said to be one of largest competitors Although Vietnam also has some competitive advantages compared to China such as good embroidery skills and needle work etc., China has been still considered as Vietnam’s big competitor

China is known as a very populous nation with nearly 4,000 years of culture This country is not only one of the biggest economies but also one of the top exporters in the world It was stated that China was influenced by the collapse of international export markets and the 2009 financial crisis; however, it was among the first to recover quickly (British broadcasting corporation, 2013). Tran Thi Anh Dao (n.d., quoted in Gaulier and alii, 2006) indicates that in the year of 2004, China is the third largest exporter in the world and is becoming one of the main competitors in international market; it is also believed to become the largest exporter by the next decade China can get that position because of its competitive advantage compared with the competitors around the world For the T/C industry, the EU market cannot be out of China’s target markets This nation’s export of clothing to the EU market increased 39.9 percent by volume and 43.9 percent by value in the first eight month of 2005 (Raphael Minder, 2005).

Porter (1990) applied the theory of nations’ competitive advantage to compare various textiles industries, to identify competitive weaknesses and strengths among countries Its determinants are demand conditions, factor endowment,supplying and related industries, rivalry conditions However, this above determinants were not adequate Marco Biselli (2009, quoted in Adams,Gangnes and Shachmurove, n.d.) defines that “competitiveness is the ability,under present conditions, of a country’s producers to command world markets”.Golam (2004), adopted from USITC, outlines factors of competitiveness in the textiles and apparel industry very clearly and specifically; they are business climate, infrastructure, proximity and preferential access to market, labour and management, raw-material inputs, level of service provided and reliability of supplier Each factor is divided into categories as follow:

 Business climate: Political stability; Security of production and shipping;

Safety of personnel; Minimal administrative burden and corruption; Transparent and predictable legal, commercial and regulatory system; Free trade zones; Compliance with internationally recognized health and labor standards; Real exchange rates; Subsidies and tax credits; Market demand and economic growth

 Infrastructure: Roads, ports, rail and air for moving of good in and out of the country; Access to reliable sources of energy, water and telecommunications; Shipping and other transportation times and costs.

 Proximity and preferential access to market: Proximity to major markets; preferential access to major markets

 Labor and management: Availability of workers; Availability of qualified managers, including middle management; Compensation rates; Labor skills and productivity

 Raw-material inputs: Access to quality and cost-competitive domestic and regional yarn and fabric production; Tariffs on imports of raw materials; Cost and availability of capital to invest in new machinery and purchase raw materials; Rules of origin for trade preferences.

 Level of service provided and reliability of supplier: Reputation for quality and on time delivery; existing business networks (relationship with customers, supply chain linkages); Level of service provided (e.g., full- package versus assembly); Lead time and flexibility to respond to quick turnaround orders; Flexibility and variety in styles or products and lot sizes offered

First, considering the business climate helps specialists to evaluate both the cost and the risk of doing business Second, the infrastructure is especially important to the export firms; because merchandise needs moving from the domestic countries to the others countries This factor affects the firms’ ability of export significantly In fact, a lot of developing nations still have to face with poor infrastructure, South Asia countries for example Third, the proximity and preferential access to the market means that firms are able to meet customers’ needs quickly When the demands appear, the suppliers can launch suitable products in time Fourth, labor and management cannot be ignored Of course,low labor cost will reduce the cost of production; so that profits increase The labor cost in developing countries often much lower than that in developed countries The hourly labor costs in the T/C industry of nations over the world in

1998 is presented in the following figure:

Figure 2: Hourly costs in the textile and clothing industry, 1998 (US$)

Source: Jodie Keane and Dirk Willem te Velde (2008, quoted in OETH, 2002)

As be seen, the charts show that the labor costs in China was very low compared with a lot of nations, but India, Pakistan and Indonesia For management, firms can be operated well if the management skill of leaders is good Firth, the raw material inputs are crucial too to textiles and clothing industry The quality, price and availability of material are factors which need considering Some countries are abundant in materials whereas some others have to face with the shortage of materials such as Sri Lanka or Bangladesh Last but not least, the level and reliability of service from suppliers is also need considering The retailers always expect the best service from suppliers Md Golam Robbani (2004) said that many retailers have the trend of becoming manufacturers without factories or they seek for full package service from foreign suppliers, not domestic ones It is the warning to domestic suppliers

Among the above mentioned aspects, there will be some certain aspects in which China has its advantages, compared with Vietnam There have been studies of this field In the research of China’s role in the global textile industry,Marco Biselli (2009) found out that labor cost is one of China’s competitive aspects It is also known that the T/C industry is labor intensive However, it is necessary to identify whether labor cost is China’s competitive advantage,compared with Vietnam or not Because Vietnam is also a country in which the labor cost is quite low.

RESEARCH METHODOLOGY

Introduction

This research has three inter-related objectives set within the context of Vietnam’s export of T/C to the EU market:

1 To identify the common weaknesses of Vietnam textiles and clothing export and manufacturing companies

2 To evaluate the bad impact of the state of Europe Union to Vietnam’s export of textiles and clothing to this market

3 To identify China’s competitive aspects, which Vietnam had to cope with in the export of textiles and clothing to the Europe Union market.

Chapter 2 - Literature Review – defines the terms: weaknesses, textiles and clothing, competitiveness, discusses the process of manufacturing and export, the EU market, China’s export of T/C, evaluates old related studies and introduces related theories and models such as PESTEL model, factors of competitiveness, factors of production and list of internal barriers

This section - Research Methodology – will provide the research strategies, as well as methods of data collection and data analysis with the aim of maximize its validity and reliability Besides, limitations and potential problems are going to be raised in this chapter too.

Research strategy

John Biggam (2011) said that research strategy is where you describe how you tend to carry out your study The research strategy that will be applied to conduct the study is a historical research Following John Biggam (2011), historical research is “research that focuses on primarily on events that occurred in the distant past (e.g the conditions under which soldiers lived during the First World War), but it can also deal with events in the recent past (e.g the growth of the Internet)” For the study, the researcher investigates difficulties inVietnam’s export of T/C to the EU market in the recent past, from 1992 to 2007 by combining events to conclude what difficulties Vietnam T/C export and manufacturing firms had to face with

For the research, the other strategies are not as appropriate as the historical Case study is usually adopted to focus on just one individual unit, one organization or a part of one organization Experimental strategy is not suitable too because in this study, the researcher do not intend to test any theory as it is defined “ Experimental research tends to be the domain of the scientist, where he attempts to test an hypothesis through some type of experiment” (John Biggam (2011) Similarly, action strategy cannot be the strategy of the study As mentioned by John Biggam (2011, quoted in Cunningham, 1995), this type is often applied when the researcher would like to solve or understand a particular problem better, and within the environment where he is working Survey is usually adopted in order to conduct a contemporary research; this study is a non-contemporary research as it focuses on the period of 15 years, from 1992 to

For sampling technique, convenience sampling will be used to choose participants It is one of non-probability approach According to Virginia (n.d.), in non-probability approach, each element in the whole population does not have a nonzero probability of being included in the sample Appling this type of technique, the researcher will select available people instead of choosing participants from the whole population As mentioned by John Biggam (2011), this type is often applied for the form of exploratory research The study is implemented with the aim of exploring difficulties in Vietnam’s export of textiles and clothing For the research, managers and employees of Vietnam’s T/C export and manufacturing companies, who are easier for the researcher to approach, will be selected to be participants Therefore, the researcher can save a lot of time to find out potential participants and get their most detailed and significant ideas It is convenient because they are people who the researcher has certain relationships with Applying this type of sampling technique, it is difficult to claim that the result is representative On the other hand, the data collected is more in-depth and qualitative.

Data collection

In order to achieve the objectives of the research, data will be collected from people who directly work for T/C export and manufacturing enterprises, as well as the managers of those firms They have many more experiences in this field than the others Hence, the data will be more reliable

As mentioned in the previous part, convenience is adopted as the sampling technique The researcher focuses on interviewing 5 participants: 2 managers and 3 employees The data will be extracted from interviews The semi-structured questions including open questions and closed ones are prepared beforehand For qualitative interviews, applying semi-structured questions and open-ended questions will encourage meaningful responses (John,

Besides, secondary data is a convenient source too According to John Biggam (2011), the results will be triangulated in case the researcher applied more than one technique So that, the researcher can get a range of perspectives, which is useful to collect qualitative information; and so achieve a more rounded picture (John, 2011, quoted in Geertz, 1973) Secondary data is a wide source of data “In secondary data analysis, the individual or group that analyzes the data is not involved in the planning of the experiment or the collection of the data Such analysis can be done based upon information that is available in the statistical information in the published articles, the data available in the text, tables, graphs, and appendices of the published articles, or upon the original data” (Russell, 2001) The researcher finds it easy and fast to approach. This type of data can be collected through related books, newspapers, journals, annual reports, studies, websites etc On the other side, secondary data can be not updated and not reliable in case the researcher is not careful in the process of collecting data; therefore, it is necessary to select reliable and updated sources to collect data.

Data Analysis

In the process of doing interviews, the questions are broken down into specific themes according to the specific objectives of the study The interviewing questions are structured according to the models selected in the literature

Compare data among participants’ responses and compare data with literature review findings review This helps the interviewers and interviewees to be more concentrated and collect exact and clear data Especially, it supports the data analysis process

After collecting data, the responses of participants will be reviewed, described Then they are compared and contrasted to each themed groups of interview questions, said John Biggam (2011) After that, the responses will be evaluated and synthetized Especially, the researcher will compared with secondary data collected and literature review findings The approach of data analysis are shown more clearly in the following table:

Limitations

In spite of the fact that the researcher will make efforts to take advantages of interviews, potential problems can still happen The quality of the interviews and collected data depends on the personal attitude and the behavior of interviewees; the collected data can be not totally exact due to the bias of interviewees The responses of participants may draw up different results.Moreover, although the data can be collected in depth to some extent, it should not be generalized to be right for all of enterprises Interviewees just show their views of general situations, existing common difficulties that many firms had, not for all firms However, it is expected that what is researched in the study will be interesting to other researchers, and it will add to the series of studies in textiles and clothing industry.

FINDINGS AND DISCUSSION

Introduction

The study is carried out in order to explore difficulties in Vietnam’s export of textiles and clothing to the European Union market from 1992 to 2007, with the hope that the findings will be useful for enterprises to know those difficulties well and master them, as well as for the government to set up more suitable policies. The research strategy that is adopted to conduct the study is a historical research In order to achieve the aims of the study, data is collected from people who directly work for T/C export and manufacturing companies, according to the sampling technique of convenience Besides, secondary data is also synthesized to achieve a more rounded picture of this field In this chapter, the researcher is going to describe the data collected from samples firstly, do the analysis for the next step, and finally synthesize the data The findings of the study are provided in accordance with the research objectives.

Findings and discussion

4.2.1 Common weaknesses of Vietnam textiles and clothing export and manufacturing companies

For the first objective of this research, the interviewees were asked to specify difficulties that Vietnam companies had to face with in the process of manufacturing and exporting textiles and clothing (from 1992 to 2007) The interviewees responded the question according to the list of factors of production which was provided for them as a reference The factors in which Vietnam enterprises had difficulties are going to be presented

According to the interviewees, although the quantity of labor was adequate, the skills of labor were not at the same level; some labors were more skillful, some others were less skillful As a result, managers had to find out solutions and organize short courses to train less skillful workers Of course, firms had to afford the cost of training courses

Actually, Almost Vietnamese workers who directly produce products just finish grade 12 They are employed without any qualification of T/C production. When becoming employees of factories, they will be trained from the scratch, which takes time and money The number of new workers who have had certain working experiences in this field is very small On the other side, in the training and working processes, Vietnamese workers are able to become more skillful Of course, there are still a certain quantity of workers who are less skillful and need training much more A wonder can be raised; companies can employ people who have better qualification and people who are trained in advance from the scratch So that, firms do not have to train them to work But in Vietnam, firstly, companies cannot hire people having high qualification with such low levels of wage And if labor cost is increased, prices of products are upward too, which lead to the weak competition against the other countries’ products Secondly, in Vietnam, training centers served in the garment sector are very rare. Consequently, almost new workers are not trained in a formal way in advance.

In general, for T/C industry, Vietnamese workers can be said to be skillful; however, the quality of all items and the productivity can only be ensured when the skills of labor are similarly good Owning a good workforce will be an advantage if Vietnam desires to compete with other exporting countries, especially with China, which has an abundant and superior workforce On the other hand, although workers, who directly produced products, were said to be skillful, companies were lack of skilled labors working in other sectors such as fashion, business, management and technology

For labor cost, the interviewees responded that the level of salary for Vietnamese labor was not high, compared with the other countries However, in Vietnam, the level of salary had a trend of increasing while the revenue was not upward, which led to the delay in the payment of wages sometimes. Consequently, workers, in some situations, were not satisfied This partly influenced the effectiveness of manufacturing process due to psychological factor

As be seen, a lot of types of costs, especially the cost of raw materials,the cost of transportation, were high Additionally, salaries paid for workers tended to go up As a result, it seemed to be very difficult for factories to afford the costs Sometimes, there were lacks of working capital because they had to pay for the above mentioned costs, wheareas they could not get the money from customers and partners immediately This was the reason why the delay in the payment of wages for workers happened sometimes

Compared with many other countries, the labor cost in Vietnam is quite low However, the literature review highlights that this comparative advantage of Vietnam tends to be unstable when manufacturing technologies become more advanced; because machines can replace manual labor Besides, according to Minh Quang (2010), a representative, who is from the American Chamber of Commerce located in Vietnam, said that Vietnam was losing the competitive advantage of labor cost This comment is not totally right Actually, the level of salary that factories pay for workers has become higher, but this has happened only in big cities; meanwhile, there are not many big cities in Vietnam In general, the average labor cost is still low in comparison with other countries. The main related problem Vietnamese firms need to resolve is how to fulfill workers’ aspirations; improving living conditions for them and avoiding late payment are really necessary things to do When workers’ psychology is aroused due to the anxiety of money, they may go on strike It can make other workers worried too and influence on the images of companies

The interviewees complained that the quantity of raw materials supplier was rare; so that companies did not have many choices Although the quality of those materials, such as fabrics, yarns, fibers etc., was quite good in general, it is unavoidable that fabrics were bad and tended to tear very easily sometimes.

In some situations, the materials were not supplied fully as ordered These problems made the production delayed It took time to wait for the compensative batch of raw materials One outstanding point is that the price of these raw materials were quite high as identified by the interviewees Vietnam enterprises had to import a large quantity of fabrics from other countries annually because of the domestic material shortage The point obviously affected the revenue The VND was depreciated compared with the USD; meanwhile,Vietnam companies had to pay for imported fabrics in USD Besides, they must also pay another sum of money for the import tax of fabrics As a result, product prices became higher, which weakened Vietnam’s competition in the international market In fact, the very first steps in manufacturing textiles were also not conducted by Vietnamese factories themselves About 80% of accessories and fabric were imported from other countries

Table 6: Structure of Imported T&G Commodities of Vietnam (%)

Source: Trade and Competitiveness Research Team (2001, quoted in GSO, n.d.)

It can be seen in the above table that among a lot of materials, fabric was the item imported most This shows the evidence that how fabric was rare in Vietnam It will be better for enterprises to be supplied with accessories made domestically China is an example; nearly 100% of materials were made in China, which made prices of products reduced

To conclude, the shortage of materials, the unstable quality and the high level of price were main obstacles Vietnam enterprises had to experience.Companies sometimes cannot deliver goods on time as ordered due to the delay in production Besides, the unstable status of VND currency will go on being the disadvantage of Vietnam

In general, the knowledge of foreign market was still controlled inadequately, said interviewees Mastering the market not well was the reason why nearly 80% of Vietnam products was still distributed through intermediaries. Vietnamese companies were not able to advertise their brandnames by themselves and access customers directly Therefore, they had to cooperate with foreign companies or had contracts of producing items following standards set up by foreign partners instead of expanding their business to international markets directly This obstacle made profits reduced Vietnamese firms could not take advantages of their unexplored potentiality

Lack of market knowledge existed due to the fact that Vietnam companies did not have many chances to access foreign markets directly Almost Vietnam factories itself could not afford the cost of participating in international fairs and exhibitions in the EU So that, they did not have many chances to seek for partners and new customers, as well as promote their images In fact, Vietnam commercial network was spread over the world; however, abnormally, very few market information was provided for domestic factories It led to the delay of producing new products that meet fashion trends in time Actually, there are many state owned organizations are established But they are not run effectively It seems that staffs are not responsible for what they have to do. This may be the fault of government when not controlling them well The government should be more responsible for the operations of such commercial network over the world

Vietnam needs to find out solutions to solve this problem seriously Lack of market knowledge can be considered as one of the major factors which weaken enterprises’ inherent potentiality and constrain the industry development; because mastering information is the key of success and is an essential task that companies need to do if they would like to enter any market.

According to the investment policy of Vietnam textiles and clothing industry, the period of time to withdraw the capital back was from 5 to 7 years for garment sector only and from 7 to 10 years for textile sector This period was quite short, said interviewees Companies did not have enough time to get money back

Further more, the literature review highlighted that the FDI into Vietnam was quite low, which was detrimental to textiles and clothing factories

Figure 3: Foreign investment in Vietnam’s textiles and garment industry: Foreign Investors in Vietnam by Origin (1997)

Source: Trade and Competitiveness Research Team (2001)

CONCLUSIONS AND RECOMMENDATIONS

Introduction

The research is implemented with the aim of exploring difficulties in Vietnam’s export of textiles and clothing to the EU market from 1992 to 2007 In order to achieve the overall aim, three specific research objectives are identified as follow:

4 To identify the common weaknesses of Vietnam textiles and clothing export and manufacturing companies

5 To evaluate the bad impact of the state of Europe Union to Vietnam’s export of textiles and clothing to this market

6 To identify China’s competitive aspects, which Vietnam had to cope with in the export of textiles and clothing to the Europe Union market.

After the process of collecting data from interviews and the source of secondary data, the findings in detail are mentioned in chapter 4 This section will review the objectives mentioned above and the result is going to be summarized, then recommendations that are in accordance with objectives are going to be shown.

At the end of the chapter, the sub-section of self-reflecting the research process is included as well.

Research objectives: Summary of Findings and Conclusions

5.2.1 Research Objective 1: Common weaknesses of Vietnam textiles and clothing export and manufacturing companies

The interviewees identified 6 main weaknesses of Vietnam textiles and clothing export and manufacturing companies in the period of 15 years from 1992 to

2007 The first weaknesses were related to the factor of human resources: the unevenness in labors’ skills, the delay in the payment of wages due to the fact that the level of salary had a trend of rising whereas the revenue was not upward Second, the shortage of raw materials, the rare quantity of domestic material suppliers, the high price of materials imported from foreign suppliers were main problems related to physical resources Third, the market knowledge was not updated in time and fully, which lead to the delay in creating new products according to new trends; because of this, firms found both seeking for new customers and promoting brand names difficult For the fourth factor-capital resources, the periods of withdrawing capital back, regulated by authorities, were quite short and the FDI flowing into Vietnam was low The low circulation of money was another obstacle for T/C companies Moreover, there were no special funds for the Vietnam T/C sector; firms had to get loans from banks and suffer from high interest rates The firth weaknesses were about infrastructures; traffic jams interfered with the transportation process of commodities from the warehouse to the port; when goods were moved from Vietnam to the EU, the quantity of vehicles was not adequate in the peak periods of time; the cost of freighting commodities from Vietnam to the EU was high The administrative procedure in Vietnam was the sixth problem; getting C/O form from Vietnam Chamber of Commerce and Industry was not easy; the way of measuring standard products that regulated by the government, was not unified

Besides, four other weaknesses were related to distribution, competition, technology, exchange rate regimes Vietnam firms did not pay attention to the distribution of products, promotion of brand names, marketing and sales suitably For competition factor, Vietnam companies themselves had many competitors such as producers coming from India, Bangladesh, Pakistan, Philippines, Hong Kong, Korea; the biggest competitor was China Technology was not advanced enough to be used to produce products which required high technology Types of products Vietnam firms produced were mainly traditional products The last matter was about the devaluation of VND

There is one unexpected conclusion that the study has not covered;although Vietnamese T/C industry had a lot of such difficulties, the government seemed not to support manufacturers much Regulations and policies were not suitable; especially, some state-owned unions were run ineffectively, even irresponsibly Vietnam commercial network was an illustration It was spread over the world with the aim of providing domestic firms updated information.However, strangely, the network seemed to be useless

5.2.2 Research Objective 2: The state of the European Union affected Vietnam’s export of textiles and clothing to this market

The state of the EU influenced on Vietnam’s export of textiles and clothing to this market mainly in terms of the socio-cultural and economic factors For the former, the process of market research was complex, which originated from the different cultures existing together in the EU; the big challenge was how to create products that were able to fulfill various needs of customers Further more, it was necessary for enterprises to give out products with good quality; especially, they had to be fashionable in order to suitable for the EU citizens’ consuming habits For the latter, the EU did some actions with the purpose of protect its T/C industry from exporting nations: “green mark” required for exported goods to the EU, trade protection measures such as anti-dumping tax, anti-funding tax, MFA, ATC, as well as regulations that were applied to be able to resolve trade obstacles originating from WTO laws Moreover, before 2005, the imported quota imposed for Vietnamese commodities was much lower than that imposed for the other ASEAN nations and China Besides, the quantity of product types imposed quotas was larger than other countries’ too.

For this objective, the impact of the on-going Euro Zone crisis is discussed too The crisis has reduced the demand of EU market for Vietnamese T/C products significantly Vietnamese producers has made efforts to expand their export to new markets as a solution Moreover, they still continue handling existing problems in the traditional EU market

5.2.3 Research Objective 3: China’s competitive aspects, which Vietnam had to cope with in the export of textiles and clothing to the European Union market

According to the interviewees and the literature review, China had five competitive aspects which Vietnam had to face with: the abundant quantity of labor with cheap labor cost and superior skills; cheap prices of products due to the abundant resource of raw materials and cheap labor cost, attractive and diversified mode of products thanks to domestic developed fashion industry;available raw material inputs; China’s boom on sales that originated from the abolish of restrictions on T/C trade by WTO in 2004; the actions Chinese government did to be against the bad impact derived from the elimination of restrictions, as well as its effort in attracting the FDI.

Recommendations

Facing with challenges, Vietnamese enterprises had better find out solutions to resolve existing difficulties, as well as exploit their potentiality thoroughly

Developing human resources is an important task This resource can be divided into two kinds: labors who directly make products and labors who are responsible for business and management sectors For the former, Vietnam firms should organize short courses to train labors before letting they take part in the manufacturing process It is also a good idea to invite EU specialists to teach Vietnamese labors; consequently, labors will have chances to access the EU fashion, as well as technical skills Another recommendation is that the T/C sector can be relocated in the countryside where labor cost is cheaper For the latter, factories had better take some individuals to the EU to learn business experiences and research market information The people, after that, can apply what they have learned to give out optimal business strategies

For technology, it is recommended that they should spend sums of money improving equipments and sewing machines that are used to produce products directly Productivity can be increased due to the efficient operation of modern machines; thanks to this, labor cost will be lower too Moreover, Improving technology can facilitate Vietnamese firms to make decisions of producing types of products that require high technology instead of producing traditional types only

The standard system of measuring quality such as HACCP (Hazard Analysis and Critical Control Points), ISO 9000, etc are the targets Vietnam manufacturers should look forward to achieve when producing products Thus, it can be easier for Vietnamese products to overcome technical barriers the EU market set up

As be known, mode of products has been the outstanding competitive point of China For this factor, Vietnam producers needs to strive much for competing with China Because the fashion industry in Vietnam has not developed, lack of superior designers has become a weakness of enterprises It is quite hard for Vietnam firms to create diversified modes of products immediately because developing the fashion industry requires a long process. Therefore, it is recommended that Vietnam companies now had better concentrate on creating products that own their unique characteristics; they will be different from products made by other countries Thanks to special characteristics, Vietnam can not only make another comparative advantage but also promote the images of Vietnamese brand names in international markets

A large quantity of Vietnam’s T/C companies are listed to be small and medium-sized For this types, their abilities are not strong enough to distribute commodities to the EU market directly So that, it will be better for Vietnam small and medium-sized firms to cooperate with the EU enterprises and products will be distributed under the brand names of the EU enterprises As a result, they do not have to pay attention to distribution section in which Vietnam companies had difficulties On the other hand, for companies that are able to distribute their goods to the EU market by the direct way, they should pay attention to marketing much more As be mentioned above, there are many cultures existing together in the EU, so that, it is necessary for Vietnam firms to set up specific marketing approaches applied for specific areas or various groups of customers

Especially in order to avoid effects derived from the on-going Euro Zone crisis, seeking new markets is a good idea for Vietnam T/C companies On the other side, they still have to concentrate on solving difficulties in the EU-the traditional market of Vietnam’s export of T/C

The government support can be considered as a leverage that helps domestic producers to operate more effectively and promote the development of T/C industry

As be known, T/C industry is related to some additional industries such as cotton, fabric etc Because of this, Vietnamese government should launch suitable policies in order to help those additional industries to develop Being not in the same shoes with China, where the area is so large, Vietnam do not have many empty areas Thus, in Vietnam, the areas used for planting cotton trees should be zoned clearly The fallow need scheming again too It is also necessary to select the best type of cotton which is suitable with the climatic condition in Vietnam

Lack of market information is a weakness Although Vietnam commercial network is spread over the world, it has been not run effectively It is the government’ s responsibility to review the operation of this network It should be controlled more strictly by authorities Besides, there are many fairs held with the aim of making chances for producers over the world to promote brand names and seek for customers However, not all of Vietnam firms can afford the cost to take part in these fairs It is recommended that Vietnam can be the host to hold fairs in the EU, which facilitates a lot of Vietnam enterprises to join in those fairs The government also had better carry out trade promotion programs with the EU to make more chances for Vietnam exporters

Capital seems to be the big obstacle of many T/C companies They often have to get loans from banks and suffer from interest rates Special fund used for only T/C sector will be a good idea Further more, the government needs to adjust policies more suitably with the purpose of attracting the FDI The very first thing to do is simplifying the investment procedure The administrative procedure has been said to be very complex and rigid It is essential for the government to simplify it It is also important to establish investment incentives such as tax incentives, financial incentives etc and try to introduce foreign investors those incentives Beside the effort of attracting new investors, the government had better pay attention to take care of current investors too, help them to solve the complex administrative procedure for instance

As be mentioned, the EU has had certain measures to protect domestic producers from the competition Vietnam can consider China’s solutions as a suggestion It is a very good idea to set up a system of precaution; a signal will be turned on whenever there is something adverse to Vietnam producers.

Learning Statement

Becoming a student of Leeds Metropolitan University is a memorable experience in my life I have not ever had working experiences in the field of international trade and finance; I have conceived that this is my disadvantage when taking part in this master course.However, in this learning process, I have made much efforts to get knowledge from lecturers, as well as learn useful experiences from classmates, who have had certain practical working experiences in international trade and finance sector Especially, this is the first time I have implemented a dissertation There were a lot of new things I explored and lessons I learned from the process of researching Additionally, I experienced not only positive but also negative emotions I was very excited at first when I began to select a topic for the first academic research in my life And then I was quite discouraged because of the shortage of materials I was nervous afterward as I found it so hard to arrange interviews with samples In the end, I felt very comfortable and a bit proud of myself when I overcame those difficulties

The very first thing I achieved was the in-depth knowledge being related to textiles and clothing industry in general and difficulties in Vietnam’s export of textiles and clothing to the European Union market in specific I got the certain understanding of the operation of this industry, its achievements, existing difficulties and challenges too, especially in Vietnam Sometimes in the researching process, I had thoughts of being willing to work for this field in future in my mind When knowing something more well, I often starts to be interested in it much more

The skill of research was the second thing I learned from the dissertation implementation I knew what the steps of conducting a dissertation were and how I could do those steps There were some obstacles I got Because of the usefulness of the research and my interest in this field, I decided to select this topic Immediately after selecting the topic, I began to search for materials At first I could not find out many related academic materials, which made me worried However, afterward I was more patient and continued searching materials My problem was that I only focused on finding out materials which were about the topic exactly; I ignored studies, articles, books etc that were related to the topic to some extent Actually, some headings or sub-headings saying about my topic, were still included in those materials And I perceived of my misunderstanding Generally, my topic was unchanged from the scratch On the other hand, in the very first steps of researching, I did not perceive of the problem of my topic, which was not narrowed suitably I could not see through the problem when I conducted the dissertation proposal But when the official researching process was carried out, I found it difficult to conduct; however, at that time, I still did not know how to narrow the topic Fortunately, the supervisor gave me an advice of selecting a certain period of time for this topic in order to make it more feasible Consequently, I knew that it seemed to be very hard to research a too broad topic Actually, ideas are often confined by my inherent thoughts When the supervisor gave me advices, I conceived that my idea was not the best; I myself raised a question of why I could not think of such ideas There are something I cannot see sometimes, but another person can see it maybe At that time, I recognized the importance of the supervisor The supervisor’s advices and comments were very useful in my process of research. And if I could do the research again, I would search for related materials at first, and then I would choose the exact topic afterward Because I would not be confused and worried in case there were not many references Further more, for theories and models need selecting to be suitable for the study, I was quite confused when I could not choose any models that were able to applied And it took much time to find out those suitable models and theories For the step of identifying the methodology Honestly, this chapter was quite vague for me to comprehend at first I found out many materials of dissertation guide to read. Especially, although I said to interviewees about my dissertation and would like to interview them in advance, I could not collect data on time At that time, some of the interviewees were very busy at work We found difficult to arrange meetings, especially meetings with managers I even had to do an interview via telephone I felt very worried when I could not do the interviews on time as planned; I was afraid of not being able to finish my dissertation on time Luckily,

I could do it finally Moreover, I had had the feeling of confusion and worry before implementing interviews with participants, because it was the first time I had interviewed someone After the interviews, I found myself much more confident in communicating and interviewing someone In the end, there was a sense of satisfaction at finishing the research; it seemed that I did a large research on my own for the first time

Third, I learned how to select, analyze and synthesize data Facing with a lot of various sources of information, sometimes I saw the materials like a mess.

I finally decided to note down the important points I got from the literature, and then grouped them into themes This helped me to access data in a more logical way For some points, the data I got from the interviewees and the data from the literature review were different from each other So that I had to compare and contrast them, after that discuss and analyze them

The research also enhanced my skill of time management Beside the fatigue derived from daily works, I had to establish an optimum schedule of doing the study in order to do the study in the most effective way I had to alternate between the periods of time for research and relaxation in order to ensure my health Sometimes I got stress when I had obstacles in some steps of researching or was too concentrated on thinking, which caused my terrible headaches Taking some medicines and spending much more time to relax by having walks in the park were my solutions Beside my schedule, the reminders from the International Training Project of the Academy of Finance also helped me to rearrange the time scale more flexibly.

My writing and reading skill was developed too I have not written such a long paper in English before Being a person whose English is not the native language, I had certain limitation of vocabulary, structures as well I had to looked up new words in dictionaries many times in the process of reading literatures and writing up the thesis However, I made an effort to write up the dissertation as smoothly and logically as possible My vocabulary being related to this topic in specific and economy in general were improved too Moreover, the reading skill was enhanced thanks to the process of literature review

For future students who will implement your own research, I would like to advice you to select topics you are really interested in Because of this, you will be able to do the study successfully despite of difficulties derived from the researching process It is believed that difficulties cannot be avoided when conducting a research I myself love garments and I have intended to work for import and export companies in future; which are my big motivations

Although the thesis has achieved the overall aim of exploring difficulties in Vietnam’s export of textiles and clothing to the European Union market It is also hard to say that the findings can be generalized to be right for all of companies. All of findings can be right for some enterprises; or among these findings, just some points are right for some other firms Nevertheless, it is believed that the result are valuable to other researchers, and it will add to the series of researches of textiles and clothing sector I suggest the other researchers to conduct next studies with the aim of exploring solutions that Vietnamese enterprises did to cope with those existing difficulties

To conclude, taking part in this master course and doing the dissertation are memorable and crucial experiences to my life It helped me to explore my abilities Because this is the first time maybe, I used to wonder that how I can do such an academic research; finally, I finish my own thesis I am glad to see that my work is done after a lot of obstacles The process of researching helped me to not only understand the field of textiles and clothing deeply but also enhance my skills of researching, time management, writing and reading inEnglish Especially, it taught me how to overcome difficulties by myself.

Top 20 less developed countries with a high dependence on clothing exports

Source: Jodie Keane and Dirk Willem te Velde (2008, quoted in UNCTAD, 2005 and WTO, 2006)

Some main goods for exportation

Source: General Statistics Office of Vietnam (n.d)

Vietnam’s textiles and clothing export turnover to the Europe Union market

to the Europe Union market

Source: Ho Chi Minh city department of industry and trade, 2004

Interview form

Thank you for agreeing to attend this interview This interview forms part of my dissertation into difficulties in Vietnam’s export of textiles and clothing to the Europe Union market in the period from 1992 to 2007 The purpose of this interview is to obtain your views on a number of aspects related to the above mentioned topic

1 THEME: Common weaknesses of Vietnam textiles and clothing export and manufacturing companies

Vietnam companies had to face with difficulties in the process of manufacturing and exporting textiles and clothing (from 1992 to 2007)

Could you specify what difficulties were in terms of the following categories? Please specify difficulties in detail and give examples.

1.2.1 Raw materials (fabrics, yarns, fibers etc.)

1.3.2 Market knowledge (inadequate and incorrect)

1.3.3 Lack of awareness about new buyers

1.3.4 Difficulties in establishing contact with new buyers in foreign markets

1.3.5 Lack of awareness about changing EU legislation

1.5.1 Roads, ports, rail and air for moving of good in and out of the country

1.5.2 Shipping and other transportation times and costs

1.5.3 Access to reliable sources of energy, water and telecommunications.

1.7.2 Procedural in the Europe Union countries

2 THEME: The state of Europe Union affects Vietnam’s export of textiles and clothing to this market

The state of Politics, Economics, Culture, Society etc in the Europe Union had an significant impact on Vietnam’s export of textiles and clothing to this market. Throughout the period of 15 years (from 1992 to 2007), there were certain changes in the state of the EU too

Could you specify how the state of Europe Union affected Vietnam’s export of textiles and clothing to this market in terms of the following factors? Please specify them in detail and give examples.

4.1 Technologic investment policies of government

4.2 Support the research and development activities by government 4.3 Rate of change in technology

3 THEME: China’s competitive aspects, which Vietnam has to cope with in the export of textiles and clothing to the Europe Union market

China is one of the top textiles and clothing exporters in the world The competition from this country influences the other exporters, including Vietnam. China has its own competitive aspects, which Vietnam has to cope with in the export of textiles and clothing to the Europe Union market

Could you specify what China’s competitive aspects are in terms of the following factors? Please specify them in detail and give examples.

1.3 Security of production and shipping

1.4 Minimal administrative burden and corruption

1.5 Transparent and predictable legal, commercial and regulatory system 1.6 Free trade zones

1.7 Compliance with internationally recognized health and labor standards 1.8 Real exchange rates

1.10 Market demand and economic growth

2.1 Roads, ports, rail and air for moving of good in and out of the country 2.2 Access to reliable sources of energy, water and telecommunications 2.3 Shipping and other transportation times and costs.

3 Proximity and preferential access to market

3.1 Proximity to major markets; preferential access to major markets

4.2 Availability of qualified managers, including middle management 4.3 Compensation rates

5.1 Access to quality and cost-competitive domestic and regional yarn and fabric production

5.2 Tariffs on imports of raw materials

5.3 Cost and availability of capital to invest in new machinery and purchase raw materials

5.4 Rules of origin for trade preferences.

6 Level of service provided and reliability of supplier

6.1 Reputation for quality and on time delivery

6.2.1 Supply chain linkages6.2.2 Relationship with customers

6.3 Level of service provided (e.g., full-package versus assembly)6.4 Lead time and flexibility to respond to quick turnaround orders6.5 Flexibility and variety in styles or products and lot sizes offered.

Statement of originality and authenticity

FACULTY OF BUSINESS AND LAW

Course: Master of Art in International Trade and Finance

Statement of Originality and Authenticity

This dissertation is exactly an original and authentic piece of work by myself I have totally acknowledged and referenced all materials from secondary sources.

It has not been presented elsewhere for assessment in whole or part

From the early time of doing this dissertation, I have read the Examination Regulations and I recognized the potential consequences of any break of discipline

Local Level Approval: Postgraduate Research Project

LOCAL LEVEL APPROVAL: POSTGRADUATE RESEARCH PROJECT

Low risk project involving human participants

Course: Master of International Trade and Finance

Project Title: Difficulties in Vietnam’s export of textiles and clothing to the European Union market in the period from 1992 to 2007

The participants include: employees and managers of Vietnam’s textiles and clothing export and manufacturing companies

I confirm that I am proposing to undertake this research project in the manner described I understand that I am required to abide by the terms of this approval throughout the life of the project I also understand that I may not make any substantial amendments to this project without consent; and that if I wish to make significant amendments to the project I will seek approval for this immediately, and will not undertake such research unless and until approval is granted

Nguyen Mai Chi May 9 th , 2013

Approval – Research Ethics Co – ordinator

……… ……… ………This form will be retained for the purposes of assurance of compliance and audit for the duration of the research project and for five calendar years thereafter.

Dissertation Proposal

Globalization recently has been concerned by the whole world for a long time, and international trade has played an important role in socio-economic development Especially exports have significant advantages for the economic growth of a country; therefore, many developing countries have the trend of pursuing industrialization on exports Vietnam is not out of this trend too

Export activity has great influences on economic growth It affects Vietnam’s Gross Domestic Product (GDP) considerably “Goods and services exports now constitute around 70 per cent of Vietnam's GDP up from a 30 per cent share recorded in the mid 1990s” (Department of foreign affairs and trade - Australia, 2012) According to Ho Chi Minh city department of industry and trade, Feb 2005, The export turnover of Vietnam reached over $ 26 billion in 2004; it was 28.9% over the previous year, which made GDP growth rate of Vietnam ranked first in the region in 2004, higher than that in 2003 Fierce competition on export market among nations indirectly improves the quality of merchandise over the world, as well as products made by Vietnam Vietnam is a member of WTO, APEC etc Hence, it forces this country to produce better products to have competitive advantages It is essential as Vietnam’s manufacturing capacity and technology are also worse than many other nations. Exportation, besides, changes economic structures of nations Previously being an inward economy, Vietnam has become an outward one Moreover, export promotion reduces unemployment and improve living conditions Last but not least, export partly promote external economic relationships

Some major merchandise exports of Vietnam are rice, crude oil, sea products, coffee, pepper, rubber, coal etc Especially, textiles and clothing are goods exported much Vietnam government determines they are essential exported merchandise and always facilitate this export Vietnam’s export of textiles and clothing has had certain difficulties; however, its achievements cannot be rejected General Statistics Office of Vietnam (n.d) listed main goods for the exportation of Vietnam from 1995 to 2010 The value of textiles exported has been upward year by year See appendix 1: Some main goods for exportation The United State and the Europe Union (EU), Japan and Korea are said to be important destinations of Vietnam textiles and clothing export In

2001, the export turnover to the Europe Union was 741,011,500 Euro (Ho Chi Minh city department of industry and trade, 2004) See appendix 2: Vietnam’s textiles and clothing export turnover to the Europe Union market In 2004, the textiles and clothing export turnover of Vietnam reached $ 4,32 billion, an increase of 17,2%; it reached $ 663 million when exporting to the EU market, an increase of 32% (Ho Chi Minh city department of industry and trade, 2005).

As be known, EU has been a large and potential market for Vietnam’s export of textiles and clothing EU is a big area in term of population It has 27 member states “The population of the European Union reached 502.5 million on

1 January 2011 according to data provided by the statistical office of the European Union This is one million and a half more than a year ago.” (Merco Press, 2011) It is definitely populous EU is located in Western and Northern Europe In spite of being a union of many member states, there are socio- economic similarities among these member states Being a sustainable economy, Europeans have quite high standard of living For fashion items, they pay attention to the quality and fashion of products more than their prices It requires manufacturers to produce quality products which are trendy

In his report, Hal Hill (1998), who comes from Australian National University,said that “Failure to achieve export success in this industry is invariably symptomatic of deep seated domestic obstacles and an inability to build on strong potential comparative advantage.” So that, what are specific obstacles this industry has to face with? Athough many previous studies have emphasized the challenges in textiles and clothing exportation, the quantity is still quite few.Furthermore, they are not really specific and clear “The MFA was an explicit attempt to protect developed country producers by restricting exports of textiles and clothing from developing to industrialised countries It sought to provide temporary protection to developed country firms to undertake the changes necessary to compete against lower cost producers from developing countries.”(Khalid Nadvi and John Thoburn, 2003) Following Habubank Securities in 2011,Vietnam had a big competitor that was China and especially the economic situation of EU affected Vietnam’s export of textiles and clothing to this market negatively “Despite many decades of tariff reduction under the aegis of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO), trade barriers remain high.” (Sangeeta Khorana and Kwok Tong Soo, n.d.)

This research is carried out with the aim of finding out more systematic, clear, specific difficulties, especially it focuses on Vietnam’s export of textiles and clothing to the EU market only It has been definitely a potential market There are many Vietnam’s firms produce textiles and clothing products and export them to this market Their success will contribute much to the development of the industry, as well as the GDP of the country Hence, it is considered to be more really necessary to do this research Enterprises know their challenges well, which will help them to identify which position they are in, what they are good at and what they need to improve Knowing the reasons is the way helping them to find out the solutions

Specific research questions will be explored in this study:

1 What are the common weaknesses of Vietnam textiles and clothing export and manufacturing companies?

2 How does the state of Europe Union affect Vietnam’s export of textiles and clothing to this market?

3 How does competition affect Vietnam’s export of textiles and clothing to the Europe Union market?

7 To identify the common weaknesses of Vietnam textiles and clothing export and manufacturing companies

8 To evaluate the impact of the state of Europe Union to Vietnam’s export of textiles and clothing to this market The current state of Europe Union can affect positively in terms of some aspects and negatively in terms of the others.

9 To evaluate the impact of competition to Vietnam’s export of textiles and clothing to the Europe Union market

This research is going to be conducted to find out difficulties in Vietnam’s export of textiles and clothing to the Europe Union market Specifically, it focuses on common weaknesses of Vietnam’s textiles and clothing export and manufacturing companies, the impact of the state of EU and competition to the exportation of this country

4.1 Common weaknesses of Vietnam textiles and clothing export and manufacturing companies

The textile and clothing (T/C) is a big industry and the manufacturing process of T/C is quite complex Brussels (2003) defined it is a diverse and heterogeneous industry; the series of products are various such as hi-tech synthetic yarns, wool fabrics, cotton bed linen, industrial filters, nappies, haute couture etc In his working paper, Brussels (2003) also pointed out the complex process of producing textiles It included preparation and spinning of textiles fibres, weaving, finishing of textiles, manufacture of made-up textile articles, manufacture of other textile, manufacture of knitted and crocheted fabrics and manufacture of knitted and crocheted articles The more complex the process of manufacture is, the many more related problems firms have

In order to identify difficulties, weaknesses which companies have to face with more easily and clearly, Porter (1990) divided factors of production into categories: human resources (quantity, skills, cost of personnel etc.), physical resources (land, water, mineral deposits, climate conditions, geographic location etc.), knowledge resources (the nation’s stock of scientific, technological, market knowledge), capital resources and infrastructures In addition to this above- mentioned division, Golam Robbani (2004) adopted from USITC (2004), identified infrastructure as (1) roads, ports, rail and air for moving of good in and out of the country, (2) shipping and other transportation times and costs,

(3) access to reliable sources of energy, water and telecommunications.Identifying weaknesses based on above factors and categories is clear and adequate

4.2 The state of Europe Union affects Vietnam’s export of textiles and clothing to this market

When evaluating the impact of the state of EU to export countries, Werner

(2001) emphasized EU trade regime He mentioned mainly EU import quotas, customs tariffs, preferential trade agreements Although they are important aspects, it is inadequate There are many other aspects, factors which affect exportation According to Jappe (2009), the quota regime and the supply chain were also mentioned in the evolution of EU trade policy towards textiles and clothing export nations

As mentioned by Y ves Bourdet, joakim Gullstrand and Karin Olofsdotter in their 2007 work, the gravity model was applied to estimate the effects of the state of EU trade policy on developing countries exports It focused on issues such as trade preference schemes, regional trading blocs, customs unions, exchange-rate regimes “It has constantly gained in popularity and use partly as a result of improved theoretical underpinnings.” (Y ves Bourdet, joakim Gullstrand and Karin Olofsdotter, 2007) This is a good model to apply Besides, socio-cultural situation is also an indirectly factor which affects EU trade policies and the potential of this market

4.3 Competition affects Vietnam’s export of textiles and clothing to the Europe Union market

It cannot be denied that EU is one of the most potential market in the world. Consequently, there are many countries seek chances to get into this market and gain a market share Competition among export nations has certain impacts to Vietnam’s export of T/C Each nation, besides, also has its own competitive advantages Understanding those of competitors and how they affect Vietnam export, it is easier for this nation to find out solutions