Interconnections at the time of Covid 19: the repercussions on Vietnamese textile industry

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Interconnections at the time of Covid 19: the repercussions on Vietnamese textile industry

Jun 08 2020

The lockdown caused by the Covid-19 pandemic has shaken industries around the world. The blockage of a large part of the production activities, in Italy as in the other countries, has generated a great debate: how long will the suspension of these activities be sustainable? And again, who's going to pay the price?

The case of the textile and fashion industry is enlightening to show which global interconnections exist, and where the impact of the pandemic is strongest. Currently, the sector is not only suffering a sharp drop in demand (think of the knock-on effects of this emergency, such as the reduction in family and individual incomes due to redundancies and the decline in demand for non-essential goods) but has also been hit the production side, precisely because its supply chain is global.
As we know, there are also factors linked to the globalization of markets which, especially since the 1990s, have meant that the different stages of production have been "broken up" and relocated where the labour and material cost is beneficial for industries. Let's think about the garments that most of us wear; in most cases they are produced in countries of South and South East Asia and then distributed all over the world. The price of these goods is mainly determined by the post-manufacturing phase that belongs to the value chain of the "developed" countries, i.e. everything related to the advertising and packaging of the product. Among the various countries that deal with the first phase of processing, there are India, Bangladesh and Vietnam.

Vietnam is one of the world's largest clothing manufacturers and supplies fashion chains such as Zara and H&M, hosts more than 6,000 clothing and textile factories employing about 3 million people, according to government data.

The textile and clothing sector contributes significantly to the country's economic growth, in fact it was the largest export sector in 2017. The United States is the largest clothing sales market from Vietnam, followed by Japan and the EU, in second and third place respectively. According to a recent BBC article, the negative consequences of Covid-19 on producers in Southeast Asia began to manifest themselves in February, when the closure of Chinese factories made it impossible to find the raw material for manufacturing they needed from China. When China's textile industries reopened in recent weeks – giving clothing manufacturers hope to get their operations back on track – the demand from the West collapsed, as retailers were forced to close as a result of restrictions imposed by governments around the world.

Large U.S. industries continue to buy textiles from Vietnam and its neighbors, according to the philosophy of "responsible supply," without closing trade with Asian partners. But many buyers have requested the revision and application of more favorable purchasing conditions such as discounts of up to 30% on orders already delivered and not yet paid, deferral of payments and cancellations of orders already in progress. Instead of getting subsidies or tax relief from the U.S. government, industries are putting pressure on the weakest piece of the value chain, which employs most of the most vulnerable workers.

"Their attitude is to only protect the value of shareholders, without paying any attention to textile workers, behaving hypocritically, showing a complete disinterest in their philosophy of responsible supply," said Vijay Mahtaney, president of Ambattur Fashion India.

While the governments of clothing-producing countries certainly have a duty to take care of their citizens, international clothing brands also have a responsibility, not only for the employees of their own companies, but also for workers in their supply chains. This, more than ever, is the time for the garment industry to show what global entrepreneurship looks like. Fortunately, some brands, including H&M and Zara, undertook to fully pay for outstanding orders to clothing companies.

"Brands have profited for many years from productions in low-wage countries, without social security systems, and in many cases have built huge empires through this business model," said Dominique Muller, of the nonprofit cooperative Organization Labour Behind the Label. "Decades of exploitation now need to be repaid to care for their workers."

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