Footwear exporters out of step
  • | VIR | November 11, 2011 08:36 PM

The main reason is enterprises paying more for social insurance when the new minimum wage requirement came into effect from October 1.

Saigon Garment Manufacturing Trading, with two facilities in Ho Chi Minh City and more than 2,000 employees, is worried about a decline in profits.

Under the new rule, Minh Tien Bag Manufacturing, located in Ho Chi Minh City, paid VND100 million or $4,800 for social insurance each month.

Golden Top Limited chief executive officer assistant Dao Xuan Long said in 2011 even with more orders from Chinese customers, the Haiphong-based footwear company still faced hardship in paying its 1,200 employees under the new wage standard.

Meanwhile, current customers are more reluctant to order in the first quarter of 2012.

“If negotiations are not successful, customers will immediately switch to other countries in the region,” Long added.

Saigon 2 Garment vice president Nguyen Huu Toan said enterprises could not alter selling prices, while Bangladesh and Indonesia may prove more tempting for clients.

In recent years, some Korean, China and Indonesia companies have moved to Vietnam in order to take advantage of low wages. However, according to Vietnam Textile and Apparel Association, when production costs increased, foreign investors would be more cautious when investing in Vietnam.

“Rising minimum wages negatively affects textile and footwear industries which always hire large number of workers. This will reduce Vietnam’s competitive advantage compared to other countries,” said Mirae Fiber vice president Chris Kim.

The decline in local textile and garment firms’ profits is also because of a dependency on imported raw materials which have become more expensive. For example, cotton prices increased by 45 percent compared with the same period last year. In the nine months of 2011, raw material imports for textiles accounted for $9.2 billion

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