Given the devastating effect of the financial crisis in the US, consumer demand for imported goods has slowed down considerably. The EU, which also faces a credit crunch, also has lower demands for Vietnamese apparels and textiles.
This has prompted Vietnamese garment makers to focus more on their home market since overseas exports, their engine of growth, may be reduced considerably. The demand slowdown is particularly worrisome for Vietnam as it is the world’s ninth largest exporter of textiles.
In order to focus on domestic demand, new strategies need to be planned since Vietnamese home industries would have to compete with foreign imports into the country.
Apparels accounted for 5 percent of the country’s $45-billion retail market in 2008. Consumers in the 20 to 45 age group in Ho Chi Minh City spend 18.5 percent of their income on clothes.
Another strategy is to go upmarket and generate higher value-added products by producing branded and better quality clothes to compete with foreign imports. Vietnamese companies like TCM, Tay Do, Legamex, F-House, An Phuoc, Viettien, Foci, and Ninomaxx are likely to lead this charge.
Vietnam is not the only country implementing such measures of boosting domestic consumption. One possible prescription for China to recalibrate its economic model and become an engine of growth is to stoke domestic investment with heavy government spending and promote policies to increase consumer spending in a nation famous for high savings rates.
Minh Quang, "Vietnamese garment industry should look inward: analysts" dated 1 November 2008 in Thanh Nien Daily [downloaded on 3 November 2008], available at http://www.thanhniennews.com/business/?catid=2&newsid=43371
Yardley, Jim and Keith Bradsher, "Faced with global slump, can China keep up economic growth?" dated 23 Oct 2008 in the IHT website [downloaded on
3 November 2008] , available at http://www.iht.com/articles/2008/10/22/business/yuan.php?page=2