Vinatex may fall short of targets

Friday, May 2, 2008
Viet Nam Garment and Textile-Group (Vinatex) may not meet its targets this year because of the rising price of raw materials, according to its chairman, Le Quoc An.

Rising production costs are hurting textile and garment enterprises, especially the dramatic increases in coal, oil and petroleum.

And the price of raw materials, such as cotton and other fibres, has also increased by an average of 20%.

According to a recent Vinatex survey, so far this year, rising fibre prices have lifted production costs by VND40bil (US$2.5mil). Cotton prices alone are costing the firm additional VND284bil ($18mil). Another VND50bil ($3mil) is lost to high petroleum and coal prices.

Altogether, these increases will push Vinatex production costs up by an additional VND800bil, said An.

To deal with the high prices, Vinatex is trying to cut down on costs while boosting labour productivity. An said it was necessary to use more domestic materials and limit production losses to 5-10%.

Despite the challenges, Vinatex still wants to expand through selecting investment projects and expanding its export market. It is also considering investing VND11.39tril ($712mil) this year on expansion.

The group will spend more than $344mil to expand production and more than $318mil in industrial-zone and property-development projects.

The country's textile sector as a whole earned nearly $7.8bil in export turnover last year. The sector is expected to make $9.5bil in 2008.

New raw material source

Vinatex has recently set up the Viet Nam Textile Materials Production and Trading Joint Stock company (VinatexMat) with a charter capital of $12.5mil.

The establishment of VinatexMat, which specialises in producing and trading raw textile materials, is aimed at creating a source of raw materials for the nation's textile and garment sector.

To boost the sector and national development, the company has also co-operated with Binh Thuan Province to create zones for cultivating raw materials. (Viet Nam News)