From small to medium
09:37 | 26/07/2019 Trade
(VEN) - The textile and garment industry is said to be one of the major beneficiaries of the recently inked EU-Vietnam Free Trade Agreement (EVFTA). Vietnam Economic News’ Viet Nga spoke with Cao Huu Hieu, Executive Director of the Vietnam National Textile and Garment Group (Vinatex), about the trade deal’s impact.
|Vinatex Executive Director Cao Huu Hieu|
What can domestic textile and garment companies expect from the EVFTA?
The EU spends a large amount of money on textile and garment imports annually, US$280 billion in 2018. China and Bangladesh are the two largest textile and garment suppliers for the EU market. Vietnam’s market share is very small, just more than two percent, meaning that there’s still much room for Vietnam to promote exports to this market.
The presence of Vietnamese textiles and garments in the EU market remains limited because the EU consists of 28 member countries with different consumer customs and habits. EU importers often place smaller orders compared with those from other markets and keep changing their design requirements, discouraging Vietnamese companies from export. Tariff cuts under the EVFTA are expected to encourage domestic companies to boost exports to this market.
To benefit from EVFTA preferences, businesses must abide by its rules of origin. What has Vinatex done to prepare for this?
The EVFTA’s fabric-forward rule of origin allows Vietnam to import fabrics free-of-tax from the Republic of Korea (RoK) to manufacture exports to the EU. Vietnam currently imports about 14 percent of its fabric needs from the RoK.
To benefit from FTAs, Vinatex has taken various investment and market development measures and disseminated information to improve business awareness of all FTAs. The group has also encouraged its member companies to establish linkage chains with the goal of improving product quality and lowering prices while satisfying rules of origin.
Domestic textile and garment companies should purchase materials free-on-board (FOB) and work as original design manufacturers (ODMs) rather than doing jobs outsourced by foreign firms.
How can Vietnam simultaneously attract European investment in the textile and garment sector and promote its exports to the EU?
The EU has a thriving textile industry. In the era of Industry 4.0, we expect to see growing competition as well as machinery and technology transfer between Vietnamese textile and dyeing companies and European businesses. We hope the two sides will set up connections to exchange experts and organize training courses to enhance the knowledge and skills of Vietnamese workers.
Could you share your forecasts about Vietnam’s textile and garment exports for the rest of 2019?
In the first half of 2019, Vietnam exported an estimated US$18.1 billion worth of textiles and garments, up 9.3 percent compared with the same period last year. Exports to the US accounted for US$7.22 billion, up 11.7 percent; to the EU: US$2.56 billion, up 4.52 percent; to Japan: US$1.89 billion, up 5.20 percent; to the RoK: US$1.63 billion, up 4.6 percent; and to China: US$2 billion, up 10.3 percent.
Trade tensions between the US and China have caused hindrances to the global textile and garment supply chain, and the Vietnamese textile and garment sector in particular. Changes in the global cotton, yarn and fabric markets are unpredictable. Vietnamese yarn manufacturers will be most vulnerable to these changes as more than 70 percent of their exports are to China. However, garment manufacturers will be less affected.
Vietnam’s 2019 textile and garment exports are predicted to reach nearly US$39.8 billion, up 9.5 percent compared