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Vietnam’s garment industry faces challenges from rising wages



Although Vietnam’s minimum wage increase is still more than three months away, the labor-intensive textile and garment industries have already felt the impact and are looking for solutions to cope with the fina…

Although Vietnam’s minimum wage increase is still more than three months away, the labor-intensive textile and garment industries have already felt the impact and are looking for solutions to cope with the financial burden.
The Vietnam National Wage Commission agreed in early September to increase the minimum wage in 2016 by 12.4%. The new wage is expected to be approved by the government in October 2015. Therefore, companies in this industry plan to change the product structure of factories in urban areas, expand production in rural areas, and reduce labor subsidies and bonuses in order to survive in difficult times.
VuDucGiang, chairman of the Vietnam Textile and Garment Association, said at a press conference at the Vietnam International Fashion Show that the above-mentioned 12.4% salary increase will cause great challenges to enterprises.
Enterprises in Vietnam’s Zone 1 (Hanoi and Ho Chi Minh City) and Zone 2 (CanTho, Danang, Haiphong, Hanoi and the outskirts of Ho Chi Minh City) will be hardest hit. For example, workers’ wages at VietTienGarmentCorp in Vietnam will increase by VND 86 billion (approximately 380 billion VND). Ten thousand U.S. dollars). He said that as a member of the National Wage Council, he supports wage increases, but only in a gradual manner to help companies survive the current severe economic situation.
The industry is already feeling the pressure of upcoming wage increases. While foreign importers are already shifting orders to other countries such as Myanmar and Bangladesh because of the possible increase in production costs in Vietnam, companies are trying their best to cope.
In the long term, as the Vietnamese government continues to raise wages in 2018 to ensure that labor wages are livable, the inflow of foreign investment funds into the local textile and garment industry may slow down. In addition, companies have pointed to a region-based wage fixation system. Contradictory phenomena, for example, there is a garment factory in Vinh Bao District, Hai Phong City, which is close to Thai Binh Province and about 80 kilometers away from Hai Phong City. Vinh Bao belongs to District 4, while Hai Phong City belongs to District 1.
If the Vietnamese government confirms the approval of the above-mentioned minimum wage increase plan, the monthly minimum wage in District 1 will be VND 3.5 million (an increase of VND 400,000), and that in District 2 will be VND 3.1 million (an increase of VND 350,000). , District 3 is VND 2.7 million (an increase of VND 300,000), District 4 is VND 2.4 million (an increase is VND 250,000).
Chairman Giang said that Vietnam’s textile and garment exports from January to August 2015 were US$17.8 billion, an increase of 10% compared with the same period in 2014. The industry’s export target for this year is set at US$27.5-28 billion. Vietnam’s garment industry faces the challenge of rising wages

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