THE EFFECTS OF GLOBALISATION TO TEXTILE AND GARMENT INDUSTRY OF VIET NAM

Textile and garment industry, is one of the most export industry of Viet Nam, is taking advantage from globalisation trend to gain opportunity to boost export by using inherent strengths through lower tariff and easy policy. Therefore, in the purpose of understanding how effective globalisation was in Textile and garment industry of Viet Nam, this report starts from the definition of Globalisation, to the positive and negative effects to countries. Then, go closer and deeper in textile and garment industry of Viet Nam, explores how globalisation impact and which actions need to be taken to gain advantage and avoid disavantage of global trend.

THE EFFECTS OF GLOBALISATION TO TEXTILE AND GARMENT

INDUSTRY OF VIET NAM Assignment word count:

2454

1) Executive summary 3

2) Introduction 4

3) Literature review 5

4) Summary synthesis 8

5) Conclusions 10

References 11

1) Executive summary

“International trade helps economic development when a country’s exports drive its economic growth” (Stiglitz Joseph E, 2003)

Viet Nam, a developing country, still keep going on increasing GDP path in recent uncertainty world Viet Nam is now the member of Association of South East Asian Nations (ASEAN), World Trade Organisation (WTO) and most recently has joined Trans-Pacific Partnership Agreement (TPP), which was inevitable consequence of globalisation trend, contained measure to lower tariff bariers to trade among member countries Taking advantage from that, Viet Nam promote export product into large market, increase global trade turnover and offer many opportunities for international trade and investment

Textile and garment industry, is one of the most export industry of Viet Nam, is taking advantage from globalisation trend to gain opportunity to boost export by using inherent strengths through lower tariff and easy policy Therefore, in the purpose of understanding how effective globalisation was in Textile and garment industry of Viet Nam, this report starts from the definition of

Globalisation, to the positive and negative effects to countries Then, go closer and deeper in textile and garment industry of Viet Nam, explores how globalisation impact and which actions need to be taken to gain advantage and avoid disavantage of global trend

2) Introduction

Globalisation is a huge term and has become more and more popular in today’s world Everyone can hear about “globalisation” in every corner of every countries in the world

“The integration of national economies leading to the notion of a borderless global or planetary economy … An interwoven net of factories, fields, and forests, banks, governments, labouring and farming populations, cities, and transport spread over the surface of earth.“ (Jha Avinash, 2000) Obviously, it’s effect covers a broad range of economics, culture and education in every geographical location, not only in developing but also in developed countries

Both the positive and negative effect come along when every countries join the global world In business field, Globalisation should be seen as the increasing chances for developing country in term

of import/ export product Viet Nam, a developing country, step by step on the path of global integration, definitely couldn’t avoid from influence of global trend This paper aims to analyse the Viet Nam Textile and garment industry in the globalisation context, understand clearly about the global tendency and how’s maximize the benefit as well as minimize disavantage caused by

globalisation

3) Literature review

What is globalisation?

There are many ways of definition which this paper picked some which can clarify easy

understanding

Globalisation is … Author

“refers to the increasing global interdependence of national economies

and development of worldwide business competition, activities, and

markets”

Stonehouse (2005)

“as the process of shortening distances of everything, increasing the

interaction among the sides of the world, creating the benefit from the

both sides.”

Larsson Thomas ( 2003)

“is the trend toward greater economic, cultural, political, and

technological interdependence among national institutions and

economies Globalisation is a trend characterized by denationalization

(national boudaries becoming less relevant) and is different from

internationalization (entities cooperating across national boundaries) The

greater interdependence that globalisation is causing means an

increasingly freer flow of goods, services, money, people, and ideas across

national borders.”

Wild & Wild (2013)

“ Integration on the basis of a project pursuing "market rule on a global

scale””

P McMichael (2000)

“ is the understanding of the world and the increased perception of the

world as a whole

Robertson (2011)

“all those processes by which the people of the world are incorporated

into a single world society.”

Albrow Martin and Elizabeth King (1990)

All above is investigating what’s the globalisation is, the next following would indicate the impact of globalization in international business

“the closer interpretation of the coutries and peoples of the world … brought about by the

enormous reduction of cost of transportation and communication and the breaking down of artificial barriers to the flows of goods, services, capital, knowledge, and peple across borders.” (Stiglitz Joseph E, 2003)

Globalisation can be viewed as either a positive or negative impact

First of all, globalisation contributed into the risen of trade intergration, which impact the tariff and non-tariff barriers of international trade

“A free-trade area is the region encompassing a trade bloc whose member countries have signed

a free-trade agreement (FTA) Such agreements involve cooperation between at least two countries

to reduce trade barriers – import quotas and tariffs – and to increase trade of goods and services with each other.” (O'Sullivan Arthur and Sheffrin Steven M, 2003)

“Average bilateral tariffs (weighted by trade) among TPP countries are very low, with nearly half of them already at less than 1 percent, and over 80 percent below 5 percent of ad-valorem equivalent.” (Cerdeiro Diego A, 2009)

Globalisation brings lots of opportunities in trading which offering an atractive-low tariff among countries, especially members in trade fair or trade agreement Besides the benefit, the positive side

of free trade is that it allows developing countries access to world markets thereby developing their production to a scale that exceeds the needs of the domestic market And, developing countries can not use tariff barriers to protect their nascent industries against attack by multinational companies from developed countries

Additionally, it also brings every country come closer by exchanging the advance technology

Developed countries with a high level of science and technology can exclusively produce high-tech items such as software, electronics and medicines so that they can be sold at high prices for profit Super-monopoly margins come from technology monopolies, while developing countries produce simple, low-gray goods that compete against each other so they are sold cheaply, yielding margins and very low leverage Therefore, in the globalisation progress, developing contries receive the help from developed countries regarding exchaging mordern and advance technology From that, they can improve the product’s quality and productivity Moreover, with higher technology applied, product from developing coutries can adapt to developed countries’s quality requirement in the import progress

Globalization also increases the level of financial liberalization of nations, occurs in falling legal and non-legal barriers to capital laws In the impact on financial market integration, Developing countries are more likely to receive more capital from developed countries for economic development

Besides, the movement of capital become easier than before

The downside of financial liberalization is that foreign investors are speculating on the financial markets of developing countries for profit and then withdrawing from these countries This country

is weakened by the loss of foreign currency leading to financial crisis Financial liberalization can also cause high interest rates on banks, which negatively affect production as a slowdown

The broad influence can also be seen in labour term in case of work-flow migration among countries

or multinational corporation or worldwide enterprise, but in the limit of dicussion, this paper just only pick two field of trading and financing was the focus of report

“ Globalization allows corporations to outsource manufacturing and service jobs from high cost locations, creating economic opportunities with the most competitive wages and worker benefits.“ (Kuruvilla Sarosh and Ranganathan Aruna, 2008)

“With low labour cost, Vietnam is becoming a new manufacturing hub in Asia, especially for

Japanese and Korean firms.” (International Business Publications Usa, 2007)

Outsourcing is one of the important resultants of globalisation Developed countries look for

developing countries to make their product from beginning to end This is the cheaper way in

manufacturing business while reduce the cost from low labour cost countries and the vast currency difference Viet Nam have started targeting offshore clients such as US, Europe, Korea… to getting benefit from outsourcing Textile and garment is the most common industry applying this kind of doing business

4) Summary synthesis

Globalisation brings many advantages regarding to remove tariff barriers, attract foreign investment FDI, the business environment is more competitive

Besides that, strict rule applied on technology, quality standard, input/raw material origin limit taking the chance to export product into difficult market such ad US, Japan, Europe

The benefit obtained from globalisation are extremely significant and easy to recognize, however, Vietnam need to be more careful when trading in global context

In the uncertainty world, where “human decisions affecting the future, whether personal or political

or economic, cannot depend on strict mathematical expectation, since the basis for making such calculations does not exist; and that it is our innate urge to activity which makes the wheels go round, our rational selves choosing between the alternatives as best we are able, calculating where

we can, but often falling back for our motive on whim or sentiment or chance.” (John Maynard Keynes, 1998)

For instance, USA was the largest importer of VietNam for many years, but in 2017, “President Donald Trump has fulfilled a campaign pledge by signing an executive order to withdraw from the Trans-Pacific Partnership (TPP)” (BBC, 2017) VietNam was strongly affected by his decision in term

of export product to USA market, especially for Textile and garment products However, recently

“Trump to reconsider joining TPP trade pact” (BBC, 2018), that would bring many benefits to Viet Nam as a member of this trade agreement Facing with that situation, which actions need to be taken for Textile and Garment industry of Vietnam to minify the nagative impact of uncertainty in global world? They should should be more and more proactive and create initiative in global chain, reduce the dependence on developed countries

The most important competitive advantage of Viet Nam is low labour cost, then low production cost, and bringing the result of product price lower than other competitors However, Viet Nam’s labour is low-qualified who find difficult to adapt new technology and increase productivities From that point

of view, Viet Nam should pay more attention to train workforce that matching with developing world of technology

Focus on research and development so as to understand clearly what customer’s need and then satisfying them well Training fashion design team to increase the quality of product export to hi-end market like US, Japan, Europe By that way, Textile and garment industry of VietNam will step on the higher level in global supply chain

On the other hand, although the fact that outsourcing industry flourished in Viet Nam much

recently, it would be right to consider selling direct production to final customer instead of sharing

Another factor need to be considered is the input material of Textile and garment industry almost imported from other countries This disadvantage causes difficulty in cutting the cost as well as be active in production Therefore, Viet Nam should find the way to manage self-produce raw/ input material that can help avoid depending on offshore supplier and improve domestic material

production gaining more and more turnover

Finally, not only Viet Nam can get benefit from globalisation but also lots of countries have joined international business As inevitable result, the fierce competition with other countries like China, India, Myanmar would increase and reduce the business of Viet Nam To be the winner in this competition, Textile and garment industry of Viet Nam should be focus on quality of product,

increase competitive advantage with lower cost than other

5) Conclusions

Globalisation was becoming hot issue and has impacted nearly every aspect of life

“the widening, deepening and speeding up of worldwide interconnectedness in all aspects of

contemporary social life, from the cultural to the criminal, the financial to the spiritual.” (Held et al, 1999)

No one can avoid from globalisation affect, and it would be the cause of new challenge that support developing countries by fostering economic growth and contributing to decrease inequality From the view of import/ export business, Textile and Garment industry of Viet Nam must be the field which be strongly affected by globalisation It was imposible to avoid changing, but the rapid change

of modern world seems to make Viet Nam meet more complex challenges

There are many benefits getting from joining globalisation for Textile and Garment industry of Viet Nam which is lower export tariff, opened market and advance technology Recognized globalisation

is an opportunity for development, Viet Nam need to be more active to hold the independence in self-produce material and qualifying the product Focus on the quality of product and improve the productivity, from that, increase the export product value and competitive in global world, bring more and more turnover Workforce also need to be paid attention, for example, advance human knowledge and skills to work in a professional environment

Every single phenomenon has it pros and cons Avoid stuck in bad impact and gain benefit from good impact always the smart way when doing business in globalisation world

Albrow Martin and Elizabeth King (1990) Globalization, knowledge and society London: London BBC (2017) Trump withdraws from TPP trade deal BBC News [online] Available

from: http://www.bbc.com/news/world-us-canada-38721056 [Accessed April 17, 2018]

BBC (2018) Trump to reconsider TPP trade pact BBC News [online] Available

from: http://www.bbc.com/news/business-43747211 [Accessed April 17, 2018]

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America and the Caribbean (LAC)

David Held, Anthony McGrew, David Goldblatt and Jonathan Perraton (1999) Global

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Kuruvilla Sarosh and Ranganathan Aruna (2008) Economic Development Strategies and Macro-and Micro-Level Human Resource Policies: The Case of India's “Outsourcing” Industry Industrial & Labor Relations Review 62 (1)

Larsson Thomas (2003) The race to the top – The real story of Globalisation Washington, D.C: CATO Institute

O'Sullivan Arthur and Sheffrin Steven M (2003) Economics: Principles in Action Needham, Mass: Prentice Hall

P McMichael (2000) Development and Social Change Los Angeles, California: SAGE

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Stonehouse George (2001) Global and transnational business Chichester [u.a.]: Wiley

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