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College of Management
I-Shou University
Master Thesis
Comparative Factors of Textile and
Clothing Industry in Vietnam
Advisor: Teng Ying Maw
Graduate Student: Ha Phuong Thao (Emily)
June 2014
Acknowledgements
Foremost, I would like to express my sincere gratitude to my advisor Dr. Ying Maw
and my co- advisor is Hsiu-Ling Lee for the continuous support of my study and research,
for the patience, motivation, enthusiasm, and immense knowledge. Their guidance helped
me in all the time of research and writing of this thesis. I could not have imagined having a
better advisor and mentor for my study.
Besides my advisor, I would like to thank the rest of my thesis committee: Dr. Ryan
Wu and Dr. Jing Hu for their encouragement and insightful comments.
Last but not at least, I would like to thank my family for giving birth to me at the first
place and supporting me spiritually throughout my life.
Abstract This research is the first to offer a systematic evaluation of the comparative factors for
Vietnam’s Textile and Clothing Industry in the global market. The extensive attempt of
Vietnam in changing international trade as well as growth in technology transfers and
competitive pressures to restructure economy, thus, comparative factors in the global
economy is reflected by the composition of Textile and Clothing exports.
The timeliness of the study is also reinforced by the fact that increased trade integration
of Vietnam over the past few years is likely to have contributed to a shift in comparative
factors in Textile and Clothing Industry in the world market.
The study identifies the pattern of comparative advantage using the Balassa (1989) index
for export data. The index has been calculated at the sector and commodity level of the
Harmonized System of classification. The study also analyses comparative factors according
to factor intensity. The analysis shows broad in the structure of comparative factors of
Vietnam’s Textile and Clothing Industry.
This study will serve as a useful source and provide valuable reference material for
researchers and policy makers associated with and interested in export promotion strategy in
Vietnam.
Keywords: Comparative factors, Textile and Clothing Industry, study, analysis
Table of Content
Acknowledgements .................................................................. Error! Bookmark not defined. Abstract .................................................................................... Error! Bookmark not defined. List of Tables ............................................................................................................................. vi List of Figures .......................................................................................................................... vii Chapter 1 INTRODUCTION ..................................................................................................... 1
1.2.1 Purpose of the study .......................................................................................................... 3
1.2.2 Specific objectives ............................................................................................................. 3
Chapter 2 LITERATURE REVIEW .......................................................................................... 4
2.1 Definition of Comparative Advantage ................................................................................. 4
2.2 Theory of Comparative Advantage ...................................................................................... 5
2.2.1 Ricardian model ................................................................................................................ 5
2.2.2 Heckscher-Ohlin model (H-O) .......................................................................................... 6
2.3 Factors impacting on comparative advantage ...................................................................... 7
2.3.1 Technological Superiority ................................................................................................. 7
2.3.2 Resource endowments ....................................................................................................... 8
2.3.2.1 Traditional endowments ................................................................................................. 8
2.3.2.2 Domestic transport infrastructure ................................................................................... 9
2.3.3 Credit Availability ............................................................................................................. 9
2.3.4 Economies of scale ............................................................................................................ 9
2.3.5 Technological Gap and Product Cycle .............................................................................. 9
2.3.6 Demand Patterns: Demand Considerations ..................................................................... 10
2.3.7 National and International Policies ................................................................................. 10
2.4 Factors affecting performance of export ............................................................................ 10
2.4.1 Domestic transport infrastructure .................................................................................... 11
2.4.2 Foreign direct investment (FDI) ...................................................................................... 11
2.4.3 Quality of institutions ...................................................................................................... 12
2.4.4 Economic Scale ............................................................................................................... 12
2.4.5 Distance between export and import country .................................................................. 12
2.4.6 Land – locked countries .................................................................................................. 12
2.4.7 Common border ............................................................................................................... 13
2.4.8 Colonial ties ..................................................................................................................... 13
2.5 Competitive Advantage ...................................................................................................... 13
2.6 Linking comparative advantage and competitive advantage ............................................. 14
iv
Chapter 3 METHODOLOGY .................................................................................................. 15
3.1 Research Design ....................................................................................................... 15
3.2 Research Framework ................................................................................................ 17
3.3 Data Collection ......................................................................................................... 18
3.4 Research Credibility ................................................................................................. 21
Chapter 4 RESULT AND DISCUSSION................................................................................. 23
4.1 Vietnam’s Export Performance in Textile and Clothing .......................................... 23
4.2 Determinants of Vietnam’s Comparative Advantage and Competitiveness in Textile and Clothing ............................................................................................................. 25 4.2.1 Vietnam’s Export ......................................................................................................... 25 4.2.2 Comparative Advantages and International Competitiveness………………………..27 4.3 International Trade Policy ........................................................................................ 27
4.4 Five Forces Analysis ................................................................................................ 29
4.5 SWOT Analysis ........................................................................................................ 30
Chapter 5 CONCLUSIONS ..................................................................................................... 32
Bibliography ............................................................................................................................. 35
Appendix A Interview Consent Form ....................................................................................... 40
Appendix B Interview Questions ............................................................................................. 41
v
List of Tables Table 4.1: Basic Economic Indicators Of Vietnam .................................................................. 23
Table 4.2: Export Growth 1989-2005 (%)…………………………………………… ………26
Table 4.5: SWOT ……………………………………………………………………………..30
vi
List of Figures Figure 1: Research Framework……………………………………………………………….17
Figure 2: Five forces analysis…………………………………………………………………29
vii
Chapter 1 INTRODUCTION
1.1 Research Background
The advantage of textile and clothing industry in terms of market scale and factor
endowments plays a core industrial sector in Vietnam’s economy. This has been the key
industry of Vietnam due to many reasons as simple technology, light investment, using
unskilled labor, etc. The textile industry of Vietnam has become one of a major ingredients in
Southeast Asia’s textile industry as well as an important member in the global textile market
during the past years. Around 3,800 companies involve in joint stock and limited companies,
and state-owned enterprises. The textile and clothing industry as country’s leading export
sector makes a considerable contribution to the prosperity of Vietnam.
The rapid development of Vietnam’s textile and clothing industry in recent years help
Vietnam become a main component of the nation’s economy. The export value of textile and
clothing products has significantly enhanced and is ranked the second largest share in the total
export value of the country. This factor has supported remarkably to the growth in source of
Vietnam’s gross national product (GDP) and foreign exchange. This industry becomes the
second most important export element of Vietnam only after crude oil with the export value of
the textile and clothing products amounted to US $5.8 billion in 2006. The joining of
Vietnam in the World Trade Organization (WTO) in 2007 has given Vietnam great chances to
develop, particular in the international trade, because of benefit of national treatment,
most-favored treatment same as other members of WTO. Furthermore, joining the WTO also
helps Vietnam expand export markets and access to global market while raising the value of
goods export. From 2001 to 2011, impressive development period of the textile and clothing
industry sector increases around 8% for trade volume. In spite of the depression of the global
economic during the past years, there still has been increasing in the export value of this
industry, exceeding US $11 billion in 2010, an increase of 24% compared with 2009, and US
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$14 billion in 2011, an increase of 38% compared with 2010.
The proportion of the production and exports of Vietnam textile and clothing products
accounted for 18.6% of the world’s total textile export industry and contributed a significant
share in the global in 2010. Presently, with over two million people working in this industry
and occupying nearly 5% of the country’s total labor force (VINATEX, 2012), the rank of
Vietnam is number five in the world. The expansion in export market is the results of the
growth in export value of this industry in recent years. Moreover, besides keeping the
traditional markets such as Japan, US, EU, the textile and clothing companies of Vietnam has
expanded and entered in some new export markets, such as Singapore, Taiwan, Middle East
and Korea.
Many factors including a stable political environment and abundant low-cost labor force
have positive effects on the development of Vietnam’s textile and clothing industry. There are
two major characteristics of Vietnamese labor force involving in low price and sustainability.
Vietnam has an annual source supplementing labor force with a young population and people
who are in working age account for a high proportion. Furthermore, enhancement in
education as well as expanding of urbanization in Vietnam has supplied the textile and
clothing industry with more high quality labor, hence, providing of workers for development
in the future is guaranteed.
In addition, the suitable economic and trade policies of Vietnam have helped Vietnamese
textile and clothing industry reach the higher position in global market of this sector’s
products and become an key industry of the nation’s economy. After adopting strong foreign
direct investment (FDI) inflows, maximum import tariff ratio as well as the non-tariff barriers
were reduced or eliminated, and the state monopoly does not exist in foreign trade anymore.
Trade liberalization has been affected by trade agreements’ implementation, and increasing
market access.
It is clear that Vietnamese textile and clothing producing has a comparative advantage,
2
however, it also faces various problems as low technology, medium and small size of most
enterprises, and low skill level of workers. Moreover, domestic suppliers can not provide
enough materials for the textile company and the lack of local materials is one of major
reasons yielding to decline in the textile and clothing enterprises’ comparative advantage of
Vietnam. Therefore, it is necessary for Vietnam to have suitable measures and policies to
promote textile industry’s comparative and overcome domestic difficulties and challenges.
The thesis aims at an investigation of Vietnamese textile and clothing industry’s comparative
advantage while rendering suggestions for the development of this sector.
1.2 Research Objectives
1.2.1 Purpose of the study
The analysis on factors of Vietnam’s comparative advantage in textile and clothing
industry from 2001 to 2011 is the general objective of this research.
1.2.2 Specific objectives
- To make contribution to the growth of the theory of comparative advantage.
-To evaluate the decisive elements affecting the textile and clothing industry’s
comparative advantage of Vietnam.
- To identify policies aiming at enhancing Vietnam’s comparative advantage.
1.3 Thesis’s Structure
This thesis comprises five chapters. The problem statement and research objectives of
the study are described in chapter one. An overview of the literature review and elements
affecting on comparative advantage of Vietnam’s textile and clothing industry is given in
chapter two. Chapter three explains models and methods used in research. Next, chapter four
reflects research findings and research discussions. Finally, chapter five draws the conclusions
and limitations of the study as well as gives suggestions for further research.
3
Chapter 2 LITERATURE REVIEW
2.1 Definition of Comparative Advantage According to Evans (1989), one of the most lasting and oldest concepts in economics is
comparative advantage. In economics, the production of a party relating to an especial service
or goods at a lower opportunity cost and marginal over another is comparative advantage. If
two countries have different relating efficiencies in manufacturing of goods, they can trade
with each other to have advantages.
Krugman and Obstfield (2003) state that the law of comparative advantage prescribes for
a nation having to specialize products which can be produced more efficiently than other
nation. This emphasizes that a nation can import products with the largest absolute drawback
and export services and goods with the absolute smallest disadvantages. It also emphasizes
that a nation having all products’ absolute cost advantages will import products relating to the
absolute smallest advantages as well as specialize and exports the products with the absolute
largest advantage.
One question referring to the law of comparative advantage is that one nation with the
less efficient manufacture of its products can export any of these products to another nation
with more efficient manufacture of all those products? The trade balance between nations
about the self-equilibrating nature is the answer (Krugman, 1993). Salvatore (2002) believes
that although a country has less efficient manufacture of products than the other, the product’s
price will be lower if its input cost is sufficiently lower. This is equilibrium, and exchange rate
between two nations will be automatically realigned if there is any deviation to ensure
equilibrium of trade. Therefore, a country can import foreign goods if those goods are
manufactured more convenient than at home. It is better for a country to specialize in
importing manufacture those goods which have less efficient and exporting goods whose
manufacture is less efficient.
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2.2 Theory of Comparative Advantage
In international trade theory, comparative advantage concept is one of the most
important theories. Description and prediction the responsiveness of changes in output price
factors to identify kind of exported and imported commodities is the trade theory’s main
purpose (Leamer, 1984). Two basic models of comparative advantage referring to the
Ricardian model and the Heckscher-Ohlin model were early developed to solve these
matters.
2.2.1 Ricardian model Comparative advantage in the classical Ricardian theory states that trade patterns are
decided by relative labor productivities. In international economics, the Ricardian model
plays an important role (Golub and Hsiehh, 2000).
According to Caves and Jones (1977), there are three assumptions of the Ricardian
model including: (1) the only remunerated element of manufacture is labor; (2) there is a
homogeneity in all labor and the wage in all occupations are the same; (3) there is a constancy
in real cost per unit; (4) labor is immobile among countries but mobile between industries.
However, if the Ricardian theory of comparative advantage is redefined in terms of
opportunity cost, a country produces the goods and services at a low opportunity cost, it will
gain a comparative advantage in the manufacture of those products (Salvatore, 2002).
There are some main difficulties of the Ricardian including: (1) Labor is the only input
considered factor; (2) Relative supply determines pre-trade prices, so deciding patterns of
trade does not have the demand side of the model; (3) There is overemphasized in technology
differences between countries without expounding the reason for differing of production
methods.
In addition, another interpretation of the Ricardian model is the accomplishment of
5
price and quantity arbitrage, resulting in incomplete specialization in the short run. In long run
equilibrium, either complete specialization or equality of unit labor costs would be attained, but
the process of adjustment may be very slow.
According to Root (2001), the belief in the validity of the comparative advantage’s
law is base of almost principles of the World Trade Organization (WTO). Even the relaxation of
most of the assumptions does not affect the general validity of the theory in any significant way
(Harkness, 1983), and enough empirical evidence exists to support the theory of comparative
advantage (Bernhofen and Brown, 2004; Schott, 2004; Uchida and Cook, 2005).
In the other hand, the significant amount of useful information that it summarizes
concisely and clearly is the strength of comparative advantage theory. Salvatore (2002) believes
that comparative advantage theory “shows the conditions of production, the autarky point of
production and consumption, the equilibrium relative commodity prices in the absence of trade,
the comparative advantage of each nation” and “it also shows the degree of specialization in
production with trade, the volume of trade, the terms of trade, the gains from trade, and the
share of these gains to each of the trading nations”.
2.2.2 Heckscher-Ohlin model (H-O)
Heckscher-Ohlin model states the difference between countries referring to their capital
and labor factors using in the manufacturing of services and goods. Heckscher-Ohlin theorem
describes that in the H-O model, a nation which have a balanced trade will tend to export
commodities using abundant factor than import those using scarce factor.
H-O theory is verified by a number of empirical studies. Leontief (1953) found that
America was expected to become an importer of labor-intensive products and an exporter of
capital-intensive products. While Keesing (1966) considering the paradox explanation was
differences in human capital, Vernon (1966) believed product cycle theory is a dynamic
extension to the basic H-O theory. Baldwin (1979) also confirmed this paradox by reported
6
results based on study data of Canada, Germany, India and Japan. Because of the Leontief
paradox, the H-O theory’s alternative explanations were looked for by many economists.
Most of these theories were mere extensions and modifications of the basic H-O theory and
the validity of the theory was not reduced in explaining the direction of trade between
countries.
The H-O and Ricardian models are important to make clear the definition of
comparative advantage. These models are also used as guidelines in the construction of the
empirical model.
The theory provides awareness of deciding factors to international supply’s configuration
of textile products, and identifies how countries move toward a new equilibrium when
economic conditions change. Furthermore, theoretical models allow us to contrast results from
empirical models with expectations. The relative costs in the Ricardian theory can be
considered as important conditions to decide the international supply’s configuration of textile
products. These are really necessary for requirements of H-O model.
2.3 Factors impacting on comparative advantage
2.3.1 Technological Superiority
In general, both the principle of David Ricardo about comparative advantage and the
principle of Adam Smith about absolute advantage are relied on the technological superiority of
one country over another country in manufacturing a commodity. In the Ricardian model,
productivity is constant because of only one element of production (labor), hence, the
specialization is complete as constant (opportunity) costs. Nevertheless, the specialization can
be incomplete because the increase in opportunity costs leads to the growth in multi-factor
situations (law of diminishing returns) based on the limitation of quantity of some elements
specific to an industry. Thus, the main source of commodities’ movement across national
boundaries is the technological differences in two countries.
7
David Ricardo’s principle of comparative advantage was explained technological
superiority by comparing opportunity cost with relative prices of commodity between
countries. Moreover, comparative advantage concept is dynamic, and the changes in any
comparative advantage factor involving in government policies, business practices,
specialization, demand patterns, technology and resource endowments can lead to the change in
comparative advantage of a country’s product.
2.3.2 Resource endowments
A country which possesses a superior technology has resource availability to supply
another source of comparative advantage for the other. Some restrictive assumptions indicate
that differences in relative factor endowments can obtain comparative advantage. Heckscher
and Ohlin also believe that a country has trend to manufacture goods which uses its abundant
resource because of the comparative advantage.
2.3.2.1 Traditional endowments
In the models of international trade, capital, labor and land are considered as the traditional
factors. The treatment of capital is more controversial than unskilled labor and land. Physical
capital and human capital are sources of comparative advantage. There are many economists
who have studied about the important of human capital accumulation in economic. According
to Lucas (1988), relation between differences in productivity of physical capital and significant
differences in productivity of human resources across countries is human capital accumulation.
Some studied about the positive relationship between economic growth and human capital
accumulation was carried out by Romer (1990) and Barro (1991). Bougheas and Riezman
(2007), Manova (2008) and Bougheas (2009) implemented some researches about effects on
trade performance of human capital accumulation.
Other resources are human skills, and countries producing commodity which needs more
human skills will have a comparative advantage if they have relatively abundant human skills.
8
For example, electronic products require a highly skilled labor force (such as designers,
programmers, engineers), and countries gaining comparative advantage are those which have
more skilled labor (such as Hong Kong, Singapore and Taiwan) (Keesing, 1966). Endowment
also can be created by the consideration of government to education and training.
2.3.2.2 Domestic transport infrastructure
The quality and extent of domestic infrastructure are internationally immobile of
manufacture. There is the effect of transport-intensities on the composition of comparative and
net exports because of the difference of these elements on delivering products of some
industries to the main export markets.
2.3.3 Credit Availability
One of pre-conditions for development of economic is development of financial.
Countries having the strong development in financial markets tend to have the faster
development in external finance because of relative industrial sectors (Rajan and Zingales,
1998). According to Beck (2003) and Manova (2008), industries using more external finance
have a comparative advantage due to financial development.
2.3.4 Economies of scale
Industrial policies of government in supplying a better trained labor force can lead to
external economies that are operated by shifting firms’ average cost. In Ricardian model,
economies of scale are consistent, and lower production costs are also implied by the existence
of a home market to a foreign market. This may boost or create a comparative advantage for the
industry experiencing such economies of scale.
2.3.5 Technological Gap and Product Cycle
It is obvious that countries which have advanced industries have an earlier start in almost
of produced goods and services, and these help them joint in international markets. Therefore,
developed countries have more opportunities to export new products to the others. According to
9
the Vernon’s hypothesis of product cycle (1966), the size and nature of home demand play an
important role in highly in industrialized nations. Since, initially, the new product involves
experimentation of the features of the product as well as the production process, the countries
that have sufficient home demand for such products produce and export them. However,
because of the popularization of demand’s specific nature and the easy availability of
technology, comparative advantage in some countries’ products have lost. Meanwhile, the
companies tend to develop products that enable country to achieve comparative advantage.
2.3.6 Demand Patterns: Demand Considerations
One of the factors bring the success in international markets is the role of demand in the
home market (Linder, 1961). Linder believed that manufacture of a new product is to satisfy the
local market. Manufacturers use efficient techniques to making product and get comparative
advantage. Study of Linder requiring the export of product between countries has similar
demand patterns.
2.3.7 National and International Policies
Comparative advantage can be created and sustained by national polices relating to export
industries as R&D policy, education and training, export promotion and infrastructure. These
policies are a necessary potential source of comparative advantage and trade welfare. For
instance, the endowment of human capital may be boosted by a good education system because
of intensive activities in human capital; nevertheless, manufacturing of goods or service is not
directly favored by good education policy. Moreover, effects of policies of international
organizations as the WTO, the IMF and the World Bank on some countries can become their
comparative advantage.
2.4 Factors affecting performance of export There are two determinants of export performance including internal and external
components. According to Fugazza (2004), supply-side conditions affect on internal
10
components. Supply conditions are fundamental in defining the export potential of an economy
and, for a given level of access to international markets, countries with better supply conditions
are expected to export more (Fugazza, 2004). Main determinants of supply-side conditions
include: domestic transport infrastructure, macroeconomic environment/real exchange rate,
foreign direct investment and institutional quality (UNCTAD, 2005). Meanwhile, external
components include market access/entry conditions and a country’s location regarding
international markets.
2.4.1 Domestic transport infrastructure
One of the major elements which affect export supply capacity of a country is domestic
transport infrastructure, particularly at the early stages of development. It is clear that impact of
delivery time and transport costs on goods is the influence of infrastructure on trade. There is a
positive relationship between the volume of trade and the quality of infrastructure (Bougheas,
1999). Limao and Venables (2000) show that the poor transport infrastructure of brings many
difficulties to African countries in developing global production networks. Moreover, export
products of African countries are also expensive because of high transport costs, thus they can
not compete to another countries and export value reduced (Mathee, 2007). Hence, it is
necessary to improve transportation conditions and infrastructure to enhance export
performance.
2.4.2 Foreign direct investment (FDI)
One of the important elements influencing on export performance of a nation is FDI.
Seetanah and Khadaroo (2007) believe that productivity and output of a country increase due to
the increase in financial capital because of the help of FDI to use the country’s resources more
efficiently and decrees unemployment. Furthermore, the purpose of FDI to impulse the
development of export markets by taking advantage of comparative of a country, thus, FDI can
contribute to export growth (World Bank, 1993). However, while some studies indicate that
11
FDI have good effects on export performance of receive countries (Fugazza, 2004), others
found that the relationship between FDI and export performance is negative (Jeon, 1992).
2.4.3 Quality of institutions
Quality of institution has been also found to be highly correlated with trade and affect on
export performance. The different quality of institutions may be a source of comparative
advantage (Levchenko, 2004). Biggs (2007) shows that taking advantage of new trading
opportunities can exert a negative impact on enterprises of low-income countries because of
weak and missing institutions. Besides, Anderson and Marcouiller (2002) suppose the quality
of a country’s institution falls down lead to the reduction in the exports.
2.4.4 Economic Scale
Some researches indicate that one important determinant of export performance which is
measured by GDP of export and import nation is economic scale. Accordingly, the exchanging
trade among countries is large if the economies of export and import between them are large
(Antonucci and Manzicchi, 2006).
2.4.5 Distance between export and import country
The greater is the distance between the two countries, the higher are the costs related to
transporting goods, thereby reducing the gains from trade and trade itself (Fugazza, 2004).
Glick and Rose (2002) state that more distant countries trade less and vice versa. Distance
brings about resistance impact on trade flow, mainly because of transport costs and time of
delivery (Antonucci and Manzocchi, 2006).
2.4.6 Land – locked countries
One element also affects export performance by altering international transport costs is
geography of a country. Redding and Venables (2003) state that transport costs increase
because of the limitation of port access in landlocked countries. Hence, the difficulties in
12
enhancing international trade volumes of landlocked countries are higher than coastal countries
(Matthee, 2007).
2.4.7 Common border
According to Fugazza (2004), the trade between nations sharing border is greater than
nations with similar distance but not sharing border. Moreover, trade between two nations also
is encouraged by land border (Glick and Rose, 2002).
2.4.8 Colonial ties
Glick and Rose (2002) explore the impact of colony relationship on trade of countries.
They show that trade between the two countries is encouraged if the two countries were ever
colonies with the same colonizer, or currently are colonies, or one country ever colonized the
other country.
2.5 Competitive Advantage Porter (1990) stated that competitive strategy of a firm relating to cost or product
differentiation is level of competitiveness. Cho (1998) indicated that “Despite all discussions
on competitiveness, however, no clear definition or model has yet been developed. There is
even ongoing debate about the “entity” of competitiveness.” Meanwhile, Hoffman (2000)
believed that a sustainable competitive advantage is “a prolonged benefit of implementing
some unique value-creating strategy not simultaneously implemented by any current or
potential competitors along with the inability to duplicate the benefits of this strategy.”
Barney (1991) carried out a research on determinants of competitive advantage focused on
important attributes of the firm including inability to be substituted, inability to be imitated,
value and rareness. Moreover, Hunt and Morgan (1995) also study about important potential
resources classified as rational, informational, organizational, human, legal, physical and
financial. Hall (1993) analyzed the role of individual factors such as the culture of organization,
data bases, trade secrets, and intellectual property rights.
13
2.6 Linking comparative advantage and competitive
advantage It is obvious that competitive advantage emphasizes on specific factors of firms such as
“created” factors, “created” demand for the product, and internal economies achieved through
innovation. On the other hand, comparative advantage relies on nationally “endowed” factors,
differences in international technology/productivity, external economies, and international
policies. The advantage in trade of a country is derived from both comparative advantage and
competitive advantage. In fact, the forces under competitive and comparative advantage can
be seen to reinforce each other in explaining a nation’s advantage in international trade.
The international trade of Canada can be a good illustration for the principles of
competitive and comparative advantage. Canada has a number of labor and semi-skilled labor
of capital as well as abundantly natural resources involving agricultural, forest and minerals.
Therefore, the strength in exports of Canada to developing countries as Indonesia, India and
Brazil is chemical fertilizers, minerals, wheat, wool pulp, newsprint, heavy machinery and
transport equipment. Meanwhile, main products Canada imports from these countries are light
electronic items, toys, footwear, and clothing. Canada also imports Diamonds of India and
natural rubber and rubber products of Indonesia. Natural resource intensive goods also
predominate in Canada’s exports to countries such UK and Japan. Canada’s trade, both imports
and exports, with USA, its largest trading partner, is still predominated by transport vehicles, a
result of the Auto-Pct since 1965—a good example of the influence of national policies on
international trade.
14
Chapter 3 METHODOLOGY
3.1 Research Design
Purpose of this research is to emphasize on comparative advantage of Vietnam textile
and clothing industry which requires in-depth understanding and detailed information of
textile and clothing production and export, thus, a method of qualitative research was chosen
due to some reasons. According to Punch (1998), “qualitative research is empirical research
where the data are not in the form of numbers”. Therefore, describing and analyzing the
characteristics and nature of human behavior and people group from researcher perspective is
qualities research. Denzin and Lincoln (1994) stated that “qualitative research is multi-method
in focus, involving an interpretative, naturalistic approach to its subject matter”. This means
that qualitative method focuses on nature of issues or phenomena. Moreover, “qualitative
researchers deploy a wile range of interconnected methods, hoping always to get a better fix
on the subject matter at hand” (Denzin and Lincoln, 1994). Aim of qualitative research is to
manufacture knowledge on the basis of detailed, contextual and rich data. Mason (1996)
believed that “qualitative research usually does use some form of quantification, but statistical
forms of analysis are not seen as central”.
It is obvious that qualitative research is concerned with the study of people in their
natural settings. Qualitative researchers use a variety of tools and techniques in order to
develop deep understandings of how people perceive their social realities and in consequence,
how they act within the social world. They seek to make connections between events,
perceptions and actions so that their analyses are holistic and contextual. Beyond these broad
assumptions, qualitative researchers are very careful to stress the multiplicity and variety of
qualitative approaches.
One of the strongest and most useful methods of qualitative research is the in-depth
interview, which proceeds as a confidential and secure conversation between an interviewer
15
and a respondent. By means of a thorough composed interview guide, which is approved by
the client, the interviewer ensures that the conversation encompasses the topics that are
crucial to ask for the sake of the purpose and the issue of the survey. The method of the
in-depth interview is also appropriate if subject and issue are in the nature of something
controversial, sensitive or tabooed. One of the advantages of the in-depth interview is that
there is time for the respondent, in peace, to further develop and give reasons for his or hers
individual point of views - without being influenced by the opinions of other respondents.
Apart from that the method typical involves different techniques which encompass
spontaneous, emotional and perhaps unconscious circumstances within the respondent. There
are two major questions that aim to elicit at the understandings and perceptions of textile and
clothing industry managers and experts. The first one is to evaluate the decisive factors
affecting the textile and clothing industry’s comparative of Vietnam. The other will identify
policies aiming at improving Vietnam’s comparative advantage
16
3.2 Research Framework
Figure 1: Research Framework
This figure indicates that comparative advantage of Vietnam’s textile and clothing
industry is influenced by three major groups. The first group is factors affecting
comparative advantage including technological superiority, resource endowments, credit
availability, product cycle, demand pattern and policies. The second group is factors
affecting performance of export in terms of domestic transport infrastructure, foreign direct
investment, and quality of institutions, land-locked countries, common border and colonial
ties. The study analyzed these factors and attempts to evaluate potential of Vietnam textile
and clothing industry due to comparative advantage.
Factors affecting on comparative advantage
Factors affecting
performance of export
Comparative Advantage of Textile
and Clothing Industry
Technological superiority
Resource endowments
Credit availability
Product cycle
Demand Pattern
Policies. Colonial ties
Domestic transport infrastructure
Foreign direct investment
Quality of institutions
Land-locked countries
Common border
17
3.3 Data Collection
Data is collected by adopting the qualitative methods in this research and two groups
are tested involving affecting comparative advantage group and affecting export
performance group. There are some facts of these factors in Vietnam textile and clothing
industry:
There was an increase of 20.000 modern sewing machines during five years, from
2007 to 2012, thus, the quality of textile and clothing industry was improved. Textile and
clothing industry continuously invest to expand production and renewal of equipment to
meet the quality requirements of global market. Today, almost of used sewing machines are
modern with automatic oil pump and high speed. Besides, today, there are 5,982 textile and
clothing companies in Vietnam, meanwhile, state-owned enterprises account for less than
1%, private owned enterprises and joint stock companies accounted for over 81 % and
companies using FDI accounted for 18 % (Viet, 2013). In 2011, the textile industry used 2.5
million people and 2.85 million workforces are expected to be used in this sector in 2015
(Ha, 2011). Today, it is clear that textiles and clothing industry is one of the industries
having a largest number of labors in Vietnam. However, weakness of Vietnam labor is the
lack of experience, job skills and professional level is not high.
After becoming a member of the World Trade Organization (WTO), Vietnam is
interested in restructuring the financial market in general and capital market in particular.
The participants in the market are also improved the financial strength, scale and risk
management to gradually participate in the global economic chain. The development of the
economy and capital market, especially foreign direct investment, textile and clothing
industry of Vietnam has strong breakout. In addition, long history of textile and clothing
industry of Vietnam helps products have good quality.
18
United States and Japan are the largest export markets of Vietnam's textile and clothing
industry. In 2012, even though demand for imports of textile and clothing of these markets
fell but textile export of Vietnam to the United States and Japan still increased by 9.2 % and
19.3 %, respectively . The first six months of 2013, despite continuing to face difficulties,
export of Vietnam textile and clothing industry still grows to 14.5 %, reaching $ 8.9 billion
(Viet, 2013). In particular, export to the United States accounted for 44.8 % of the total
turnover of the entire sector and export to Japanese market accounted for 24.5% (Viet,
2013). These positive growth signals confirm the competitive position of Vietnam textile
industry in the global market, especially in the United States, Japan. Joining in the WTO
helps Vietnam being abolished quotas on its textile and clothing industry. The United States
is a major export of Vietnam with over 50% market share and after Vietnam joined the
WTO, it forced to abolish quotas (Manh, 2013); therefore, Vietnam has many opportunities
to export textile and clothing products to this market. In addition, other markets such as the
EU also do not have the opportunity to impose quotas as before, thus, Vietnam textile
market becomes more stability.
The development of domestic transport infrastructure brings more convenient to textile and
clothing export of Vietnam. This also decrease delivery cost and save delivery time.
Accordingly, Vietnam is one of the countries attracting many FDI(s) in the world. Currently,
almost of enterprises investing in manufacturing and export textile and clothing in Vietnam
are Taiwan and Korea companies. The number of FDI firms accounted for nearly half of
over 2,000 Vietnam textile companies. Textile and clothing export of Vietnam to these
markets also increase because many investors and traders also import goods to sell in the
domestic market or export them to another country. Furthermore, the development of
economy in Vietnam leads to the growth of quality of institution, and it also become an
advantage of Vietnam compared to other developing countries. In addition, the geography
19
of Vietnam also creates an advantage for export of textile and clothing industry. Vietnam
has many ports and this makes convenience to export and import for Vietnam more than
land-locked countries. Moreover, exports of Vietnam textiles and clothing to the ASEAN
market increased to 44.4% compared to the same period of last year. Cambodia is the lead
country on imports of Vietnam textiles in ASEAN, with turnover up by 103% compared to
the same period in 2012 (Manh, 2013).
In summary, although there is still has some weakness, the export of Vietnam textile and
clothing products have the fast development and gain determinant success. The interviews
emphasize on explaining elements that affect comparative advantage of Vietnam textile and
clothing industry and opinion of respondent about how to minimize weakness as well as
maximize strength of this sector export. Experts and exporters in textile and clothing industry
will be selected as the interviewees because of their ability to provide profound awareness and
ideas for the interviewer. Experts in research are scientists or economists who have special
and obvious understandings about Vietnam textile and clothing industry.
Hanoi – the capital of Vietnam will be the place to conduct the interviews due to the
location of big Vietnam textile and clothing enterprises. While, some interview is face-to-face
interview, the other will be carried out through Skype. All of them are recorded as audio that
can be in Vietnamese or English. Any interview conducted in Vietnamese will be translated
into English. In addition, this study also uses secondary data. The term "secondary data" refers
to data that were collected for other studies. According to Hyman (1972), secondary data is “the
extraction of knowledge on topics other than those which were the focus of the original survey”
(p.1). Meanwhile, Glaser (1963) stated that “the study of specific problems through analysis of
existing data which were originally collected for another purpose” (p.11). In this paper, the
sources of secondary data will be collected from internet books, articles, journals, newspapers,
reports relating to textile and clothing industry and methods to improve its comparative ability
20
3.4 Research Credibility
Credibility refers to the quality of being trusted and believed in. It may also refer to
anything that increases the feeling of legitimacy and overall trustworthiness in the prospect.
Credibility describes the measure’s consistency of a definition or a concept. It is clear that the
importance of information is quality but quantity. Hence, content of data collection is more
concerned than amount of data collection. Eisend (2006) stated that “credibility is seen as a
multidimensional concept that is related to various communication sources”, thus, credibility
of the research depends on the source credibility. Source credibility has been defined within
the persuasion literature as “judgments made by a perceiver concerning the believability of a
communicator” (O’Keefe, 1990, p.130). Therefore, using some techniques as multiple
analyses or triangulating data to evaluate the result credibility of research is so necessary.
Moreover, because of the reliability, the sources used in study also need to be double checked.
To avoid incredibility in research, correct understanding between interviewer and interview is
very important. For example, groups of interviewee target should be people who have many
experiences and knowledge in textile and clothing industry. Accordingly, the question in the
interview also need to be easy to understand and clear to ensure the answerers do not
misunderstand and lead to the deviations in research results. In addition, to improve and
support the credibility of findings and results, secondary data will be collected in this study.
3.5 Data Analysis
One of the most popular analyses of qualitative analysis method is thematic analysis.
According to Braun and Clarke (2006), thematic analysis is a qualitative analytic method for
“identifying, analyzing and reporting patterns (themes) within data (p.79). Qualitative
approaches are incredibly diverse, complex and nuanced (Holloway & Todres, 2003), and
thematic analysis should be seen as a foundational method for qualitative analysis. It is the
first qualitative method of analysis that researchers should learn, as it provides core skills that 21
will be useful for conducting many other forms of qualitative analysis. Thematic analysis in
its simplest form is a categorizing strategy for qualitative data. Researchers review their data,
make notes and begin to sort it into categories. While researchers debate whether thematic
analysis is a complete "method", it is a process that can be used with many kinds of
qualitative data, and with many goals in mind. For that reason, thematic analysis is often
implicitly and explicitly a part of other types of data analysis including discourse analysis,
grounded theory and case study.
Thematic analysis is flexible and what researchers do with the themes once they uncover
them differ based on the intentions of the research and the process of analysis. Many
researchers use thematic analysis as a way of getting close to their data and developing some
deeper appreciation of the content. Researchers interested in looking for broader patterns in
their work in order to then conduct a more fine grained analysis often use thematic analysis as
a first step. Thematic analysis is not tied to any particular epistemology or discipline.
In conclusion, qualitative methods are used to collect data in this study. The in-depth
interview, semi-structured interview and secondary resources to be used to analysis the
comparative advantage of Vietnam textile and clothing industry. Primary source of this study
is interview of skillful people in textile and clothing industry; meanwhile, more knowledge
will be achieved by adopting semi-structured interview. Further, extracting information from
secondary data will be useful for exploring in interview to minimize the shortcoming of
quantity in quality method. Finally, the thematic method is used to analyze data and find out
last conclusions.
22
Chapter 4 RESULTS AND DISCUSSIONS
4.1 Vietnam’s Export Performance in Textile and
Clothing
4.1.1 Overview of Vietnam’s Economy and Textile and Clothing
Exports.
The adoption of Doi Moi (Renovation) in 1986 leaded to the intergration of Vietnam
into the global economy. The changes in economic mechanism, implementing an open-door
policy as well as engaging the country in proactive international economic integration, the
Doi moi process has opened up a new space of very promising development for the entire
Vietnam. The country has reaffirmed its commitment to economic liberalization and
international integration through implementing the structural reforms needed to modernize
the economy and to produce more competitive export-driven industries.
During 2001–2011, Vietnam achieved a steady annual gross domestic product (GDP)
growth of 7.2 percent, which gradually increased its average income per capita from $413.34
in 2001 to $1374.01 in 2011 (Table 4.1). This was achieved by a combination of stimulants,
such as an inflow of foreign direct investment (FDI), exports of low value-added products and
private-sector development. With a GDP of 1374.01 per head in 2011, Vietnam effectively
became a lower middle-income country (following the World Bank’s classification of GDP
per capita between $1,026 and $4,035.
Table 4.1: Basic Economic Indicators Of Vietnam
Indicators 2001 2004 2007 2010 2011
GDP growth (percent) 6.90 7.79 8.46 6.78 5.89
23
GDP, current prices (billion USD) 32.52 45.45 71.11 103.58 122.72
GDP per capita (USD) 413.34 554.07 835.10 1173.56 1374.01
Total Investment 31.17 35.47 43.13 38.56 29.50
Inflation (percent) -0.31 7.90 8.35 9.21 18.68
Export growth (percent) 12.70 25.99 10.27 6.71 3.84
Import growth (percent) 11.74 23.09 26.45 5.86 -3.87
Source: International Monetary Fund
With the economic reforms of 1987, the Vietnamese economy has enjoyed rapid
development where the textile and clothing industries have been pioneers of the reform
process. Vietnam’s entry into the WTO in 2007 provided easier access to international markets.
As the result, the export growth was maintained at relatively high rate, in spite of the fact that
the growth slowed down in 2011.
As indicated, textile and clothing industries play an important role in the economic
prosperity of many nations, including Vietnam. They are ones of the largest exporting sectors
of Vietnam. Vietnam’s textile and clothing industry has been able to sustain a momentum of
robust growth for over a decade. The real growth rate of exports of textile and clothing is
30.14 percent during the period 2001-2004, 21.27 percent during period 2004-2007 and 18.20
percent during the period 2007-2011 (Anh, 2011). The growth rate is higher than that of total
exports over the matched period. By any reckoning, this should be recognized as quite a
remarkable record. However, it is clear that the annual growth rate in the period 2007-2011
slowed down, with the exception of textile. This might be due to the recession of the world
economy.
24
4.1.2 Direction of Vietnam’s textile and clothing exports
The top 10 textile and clothing export markets of Vietnam include China, Italy, Germany,
India, Turkey, France, the United States, Belgium, Korea and Spain.
Export value of textile and clothing to these 10 markets has played an increasing
important role in Vietnam’s exports of textile and clothing. For example, textile and clothing
exports to these markets accounted for only 55.68 percent of Vietnam’s total textile and
clothing exports in 2001. This figure increased to 58.51 percent in 2004, 64.41 percent in
2007 and almost 70 percent in 2011. In indicates that, in relative term, Vietnam has been
exporting textile and clothing less to the rest of the world, but more to these top 10 markets.
Among these 10 markets, Chinese market has been gaining much importance. For
example, textile and clothing exports to China only made up 16.93 percent of Vietnam’s total
exports of textile and clothing. This figure increased to 22.35 percent in 2004, 31.01 percent
in 2007 and 37.85 percent in 2011. Textile and clothing exports to Italy market were ranked
second. However, in relative term, the proportion of textile and clothing exports to Italy has
decreased over time. In particular, textile and clothing exports to Italy accounted for 8.35
percent of Vietnam’s total textile and clothing exports. This figure decreased to 7.89 percent
in 2004, 7.21 percent in 2007 and 5.81 percent in 2011. Exports to Korea were ranked lowest
among these 10 markets. At the same time, the ratio of textile and clothing exports to Italy has
been decreasing. For example, exports to Spain accounted for 4.81 percent of Vietnam’s total
exports of textile and clothing. This figure decreased to 3.32 percent in 2004, 2.21 percent in
2007 and 2.16 percent in 2011.
4.2 Determinants of Vietnam’s Comparative Advantage
and Competitiveness in Textile and Clothing
4.2.1 Vietnam’s Export 25
In recent years, the record of Vietnamese exports has been spectacular, though cyclical.
Vietnamese exports have expanded very rapidly; even compared to China. Its growth is by far
the most dynamic of all Asian exporters. Other Asian countries have also shown rapid export
growth but, despite substantial devaluations, in recent years many have lagged behind
Vietnam. In addition, Vietnamese exports have grown much more rapidly than other Asian
countries’ exports, by 22.67% in 2006 (Ha, 2011).
Table 4.2: Export Growth 1989-2005 (%)
1989-1993 1993-1996 1996-1999 1999-2002 2002-2005
World 27,67 31,14 27,20 20,76 23,88
Vietnam 76,58 142,09 83,45 63,70 80,70
Korea 39,88 64,98 61,06 44,29 56,98
Malaysia 57,73 61,64 28,37 26,21 28,68
Philipines 18,63 53, 45 15,14 21,26 28,68
Thailand 55,33 37,18 18,98 31,30 33,00
Indonesia 41,95 31,33 -5,26 -5,89 34,56
Source: World Bank Indicators 2008
An alternative way to evaluate the development of exports is to see them as a share of
world trade. The results are striking. The market share of Vietnam on the world has been
multiplied by more 25 from 1989 to 2006 (Ha, 2011). Other East Asian countries show
slightly increases in their shares of world trade except China and Korea, the former shows a
increase of 14 times and the latter is 8 times. Export composition reflects the traditional
development ladder (Adams and Ichimura, 1998; and Vernon, 1966) approach, starting with
raw materials in the lowest income countries, then increasing powerfully in the manufactured
mass production goods and finally turning to high-tech and capital goods as the economy's
productive power matures.
26
The Vietnamese government uses policies that promote industries to export. These
policies aim to promote traditional industries known that their output is exported for a long
time, especially textile products. Since becoming a member of ASEAN in July 1995,
manufacture products show more and more their strength in the export structure of Vietnam.
4.2.2 Comparative advantage and international competitiveness.
The explanation of international competitiveness by economists goes back many years to
the theory of comparative advantage and factor pricing (Ricardo and Heckscher-Ohlin). While
Ricardo focused on one production factor and differences in technology (climate), Heckscher
and Ohlin dealt with labor and capital inputs and justified comparative advantage based on
underlying differences in factor endowments and relative factor prices. This approach has
been extended to many products and many factors (Dornbusch, Fisher and Samuelson, 1977).
In the modern theory of trade under imperfect competition, factor-based comparative
advantage continues to play a central role in explaining trade patterns, although scale
economies and strategic motives are also important (Helpman and Krugman, 1985). Ronald
Jones (2000) has also noted that absolute advantages may influence patterns of specialization
if some inputs to production are mobile across borders, as are capital; management and
technology in today globalize economy.
4.3 International Trade Policy
Tariffs remain generally high and their non-uniform structure has given rise to large
variations in effective rates of protection across industries, and consequently preference being
afforded to some industries. Vietnam’s continued use of tariff escalation by stages of
production reinforces import-substitution policies and favors the least beneficial kinds of
production that have little value added for the economy. For Vietnam’s export
competitiveness, tariffs on tradable inputs used in export-oriented industries can create an
anti-export bias. Those industries attempting to export rather than sell in the domestic market 27
receive no output tariff protection but must nevertheless pay the protected input costs of
tradable inputs. The negative effects from the higher costs of inputs are greatest for the textile
and apparel industries, vegetable oils and fats, paper products, leather products and fishing
and food products. Although duties on inputs are in principle offset by the existing
duty-drawback scheme in Vietnam, administrative obstacles and delays discourage use of the
facility.
28
4.4 Five Forces Analysis Five forces analysis is one the most analysis methods to identify factors affecting on
the development of a particular sector. This study also use five forces analysis to find out factors including bargaining powers of buyers and suppliers, threat of substitute products and new entrants, and competitive rivalry within the industry.
Figure 2: Five forces analysis
Bargaining powers of Buyers
(High)
Main revenue of Vietnam
Textile Enterprises depends on
processing orders.
The high competition level of
developing countries
Threat of New Entrants
(Medium)
There is a shortage of labor but this
industry requires a large amount of
employees.
• There are some barriers in the
investment.
Threats of Substitute Products Because the specific characteristics of the garments, pressure of replacement from other products is not high
Bargaining powers of suppliers
Nearly 60% raw material inputs are imported. • Many processed orders must comply with the specified materials.
Competitive Rivalry
within the Industry
(High)
There is the
competition within the
imported and domestic
products
29
4.5 SWOT Analysis Advantages and disadvantages of opportunities, threats of Vietnam textile and clothing
industry are showed in the table below for better understanding those sectors. Table 4.3 : SWOT Strengths - The labor force is cheap and hand skilled. Moreover, average income of
Vietnam textile workers is slightly lower than that of China that therefore has contributed to enhance competitiveness of Vietnam textile products. -Vietnam government has some preferential policies for textile sector, such as FDI or duty free import of raw materials to produce re-exported products within 3-4 months. - Vietnam textile and clothing industry has established a foothold in the world market as accepted by the U.S., EU and Japan.
Weaknesses - The production capacity of raw materials and auxiliary input is weak and it does not meet the needs of the garment industry. Thus, the localization rate of Vietnam textile products is very high and depends largely on material conditions of world market. While the localization rate in garments of Vietnam is only about 30%, while China has reached to 90%. The low localization factor reduces the relative competitiveness of Vietnam textile products compared to Chinese products. - The quality of raw material production in Vietnam has not met the requirements and the cost is higher than China’s raw materials. So, its products have no enough ability to compete with China products. - The size of most enterprises is medium and small, thus, it limited production effect. - Design capacity of Vietnam is still low, so the Vietnam Textile industry is lack of prestigious brands to yield to higher production levels with more added value.
Opportunities -Prospects for the world economy in the long term tend to increase demand for textile products in general as well as the demand for consuming luxury products. -The specialization in the production of textile products between companies facilitate industrial manufacturers to increase profits. - New markets such as the Middle East and Russia are to be explored and the new markets indicate an appointment of new business opportunities for the textile sector of Vietnam
30
Threats -Vietnam textile and clothing sector is now facing to the competition in the domestic market due to products from China, South Korea and Thailand. -China is a strong rival that causes Vietnam difficult to prevail in the world market. Meanwhile, a number of emerging competitors with competitive advantage of low cost labor as Cambodia, Laos, and Myanmar that could threaten the market share of Vietnam. -Strengthening trend of protectionism, especially in the traditional market of Vietnam as the U.S. and EU are likely to cast strongly impact on activity of this industry.
31
Chapter 5 CONCLUSIONS
To foster future production and export, so as to reach continuing development in textile
and clothing industry, more sound policy should be implemented to move the economy and its
export sector towards a desirable comparative advantage structure. Based on the above
analysis, some tenable policy recommendations are made as follows.
Enhancing human capital and raise technology capacity of textile and clothing firms.
Optimization of industry structure, enhancement in human capital and technology are
preconditions to continue development, comparative advantage, technological innovation as
well as to industrial upgrade in Vietnam’s textile industry. In recent years, a large number
textile firms in Vietnam have capitalized on outward processing by using the country’s
unskilled and cheap labor. This outward processing does not generally require very high
levels of technology. The excessive reliance on cheap labor and backward technology to
promote exports has prevented Vietnam from moving up the comparative advantage ladder.
Experience of Asia’s successful economies, such as Japan, the NIEs and some ASEAN
countries, shows that quality human capital is pivotal in raising technology levels and
competitiveness of firms, which in turn will eventually lead to favorable changes in
comparative advantage patterns of the whole economy. Vietnam, therefore, should reform its
education and training system to make it capable of providing a trained labor force that meets
the needs of firms.
The government also needs to provide incentives and practical support for textile and
clothing firms to raise their technology capacity through R&D activities. On the firm level,
firms in the textile industry ought to strengthen input on R&D, persistently improve
technology and release new products into international market as well as impose new
technology to present categories. Technology is the soul for enterprises’ development and core
to competitive advantage, while technological innovation practitioners are enterprises. For
32
large firms and firm groups, it is necessary to establish R&D center to construct a
market-oriented innovation system in which technology and production cyclically promote
each other. From the perspective of global economic development, 60%-70% of benefit
growth in developed countries relies on progress in science and technology, yet in Vietnam,
this ratio is very low. It is therefore urgent for Vietnam to reconstruct and upgrade the
traditional textile industry with high technology. Thus a consummate technological innovation
system is required for technology absorbance and renovation.
Government’s effective regulation and establishment of industrial early-warning system.
While official interferences were widely employed among the Vietnamese government to
control exports, market method, which includes exchange rate, drawbacks and exporting
tariffs, more sound policies and regulations should mainly be adopted by the government in
the current market economy to regulate market order and textile export.
In addition, the government and industry associations ought to analyze Agreement on
Textiles and Clothing (ATC) to find good means for Vietnam’s textile exports, improve policy
cooperation with other countries, investigate trade policies of textile importing countries,
introduce flexible measures to stimulate exports, and settle trade disputes through negotiation
within WTO framework with other WTO members. Vietnamese government and industrial
associations should make active efforts to establish a government-guided industrial
early-warning system which involves government, industrial associations and firms.
Government and industrial associations should also construct industrial information centers
and databases. In order to overcome technical trade barriers, government and enterprises
should provide textile enterprises with assistance, especially in information collection toward
technology statutes, technique standards and assessing procedures.
Consistency between trade and other policy objectives. The results underscore the
importance of a comprehensive approach to design economic development policies which
33
should seek consistency between trade and other policy objectives. Governments should avoid
actively affecting trade patterns in general but such actions may be particularly
counterproductive if they are inconsistent with country‘s resource base and other policies in
place. Thus, when seeking to maintain or develop competitiveness in a certain area—for
instance capital-intensive sectors—this can be best achieved through drawing on best
practices and developing effective broad policies that facilitate capital accumulation. In case
where a country succeeds in increasing its endowment of capital, relative to other countries
and other factors of production, this is likely to result in the re-orientation of its exports
toward capital-intensive sectors. Most importantly, a broad-based approach involves a lower
risk of reducing welfare gains from such specialization, compared to policies involving direct
support to capital-intensive sectors, though we certainly cannot exclude the possibility that the
overall costs of such an approach exceed the benefits.
34
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Appendix A Interview Consent Form My name is Ha Phuong Thao. I am a graduate student at Ishou University in Kaohsiung,
Taiwan. I would like to invite you to take part in my research study, which concerns
investigation of comparative factors of Vietnam textile and clothing industry. The interview
will involve questions about this area. The interview will last at least one hour. With your
permission, I will audiotape and take notes during the interview. The recording is to
accurately record the information you provide, and will be used for transcription purposes
only. There is no direct benefit to you from taking part in this study, however, it is hope that
the research will contribute to promote the development of textile and clothing industry of
Vietnam. Your study data will be handled as confidentially as possible. If results of this
study are published or presented, individual names and other personally identifiable
information will not be used. You will not be paid for taking part in this study. You are free
to decline to take part in the project. You can decline to answer any questions and are free
to stop taking part in the project at any time. Whether or not you choose to participate in
the research and whether or not you choose to answer a question or continue participating in
the project, there will be no penalty to you or loss of benefits to which you are otherwise
entitled. If you have any questions about this research, please feel free to contact me. I can
be reached at [email protected].
If you wish to participate in this study, please sign and date below.
Participant's Name ……………………………………………………………………..
Participant's Signature……………………… Date……………………………………
Best regards,
Ha Phuong Thao
IMBA Dept, Ishou University
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Appendix B Interview Questions
1. Textile and clothing sector is one of the most important industries of Vietnam. What
do you think about its future?
2. Almost of inputs to produce textile and clothing in Vietnam are imported. What
effects of this problem on the industry are?
3. Today, China is considered as the strongest competitor of Vietnam in term with
textile and clothing industry. Do you have any idea to help Vietnam win in this
competition?
4. Cheap labor cost is one of t comparative advantages of Vietnam. How to maximize
this strength?
5. Do you think Vietnam Government to have many policies to enhance the
development of Vietnam textile and clothing industry? What are they?
6. What are factors that impact on export of Vietnam textile and clothing industry?
7. What are the weaknesses make Vietnam textile and clothing export less competitive
compared to competitors?
8. What are the challenges and opportunities of Vietnam textile and clothing exports?
How to use these opportunities?
9. In your opinion, what should textile and clothing exporters do to improve
comparative advantages of textile and clothing industry?
10. What are your suggestions to the growth of this sector?
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