FDI increases in textiles and garments: Good news or concern?

15:06 | 07/07/2015 Investment

(VEN) - Foreign direct investment (FDI) flows into the Vietnamese textile and garment sector have continued to increase, helping domestic businesses fill the gap in terms of material production and meet origin-related requirements set in several trade agreements. However, domestic businesses have yet to be self-sufficient in terms of materials and they will be dependent on material supplies from FDI companies instead of imports.

FDI increases in textiles and garments:   Good news or concern?

According to the Vietnam Textile and Apparel Association, since the beginning of this year, a number of large FDI projects in the textile and garment sector have been granted investment certificates and preparations are underway for construction to begin.

In Binh Dinh Province, the Delta Galil Vietnam textile-dyeing-garment plant invested in by Delta Galil Industries Ltd and based on an 18,000sq.m area in Cat Trinh Commune, Phu Cat District is under preparation for construction. With total investment of US$13 million, the plant will specialize in manufacturing fibers, shuttle-woven fabrics, textile products, knitted, crocheted and non-woven fabrics, clothing, knitwear, and crochet works.

In Quang Nam Province, some large projects such as the One Woo Garment Factory based in the Ha Lam-Cho Duoc Industrial Zone with US$6 million of Korean investment, and the PanKo Tam Thang Company’s US$30 million Tam Thang Dyeing, Textile and Garment Factory based in the Tam Thang Industrial Zone, Tam Ky City, have received investment certificates.

Foreign investors poured US$2 billion into the Vietnamese textile and garment sector last year, while in the first four months of this year,  this figure reached US$750 million, with investment from China, Chinese Taipei, Thailand, Malaysia, India, and Russia.

Data from MoIT showed that the export value of the textile and garment sector reached US$1.65 billion in May and US$8.11 billion in the first five months, up 8.4 percent compared with the same period last year, and nearly 62 percent of domestic clothing manufacturers have received export orders for the second quarter of 2015.

However, domestic businesses are becoming increasingly inferior to FDI companies in terms of export growth. Among the 62 successful textile and garment exporters in the first quarter of this year, domestic businesses accounted for less than a half. FDI companies have more advantages in terms of capital and technology than Vietnamese businesses, particularly in the context of the opportunities posed by new trade agreements.

At a recent meeting held to review last year’s business results, Vietnam National Textile and Garment Group Chairman Tran Quang Nghi said that preparing to make the most of opportunities presented by trade agreements was a continuous and long-term process. These preparations could last one or two decades but the opportunities would arise only at specific points of time. Therefore, domestic businesses need to accelerate their preparations, otherwise they will miss opportunities and fail to compete with foreign investors.

Hai Linh

Theo ven.vn