Mending the holes in Vietnam’s textile, garment industry

09:03 | 23/10/2019 Industry

(VEN) - After more than two decades of development at an average annual growth rate of 15 percent, Vietnam’s textile and garment sector has become a key economic sector. In 2017, its revenue and export value reached US$37 billion and US$31.2 billion, respectively. The sector has generated jobs for nearly three million workers.

mending the holes in vietnams textile garment industry

The textile and garment sector is a complete network consisting of supply chains that link all work stages, from material production to spinning, dyeing, finishing and tailoring, operating according to value chains. Textile and garment companies often base their manufacturing facilities in places where they find favorable conditions in terms of human resources and infrastructure. According to Nguyen Van Tuan, President of the Vietnam Cotton and Spinning Association, the Vietnamese government’s international integration and investment encouragement and attraction policies, as well as its efforts to upgrade infrastructure, have contributed to the growth of the textile and garment sector.

Sustainable textile and garment manufacturing facilities are generally located in in populous countries with a per-capita gross domestic product (GDP) below US$8,000 per year. Vietnam’s GDP averages about US$2,350 per person per year and if it continues to grow an average seven percent annually, it will remain a textile and garment manufacturing hub for many years, said Nguyen Van Tuan. Therefore, in his opinion, Vietnam needs to build a firm foundation for sustainable development of the textile and garment sector.

Despite its double-digit growth, the Vietnamese textile and garment sector is facing a development gap among its various work stages. While spinning and tailoring are developing rapidly, fabric production, including weaving, dyeing and finishing, remains underdeveloped. This “bottleneck” hinders the sustainable development of the textile and garment sector. Specifically, two thirds of domestically made yarns and fibers are exported, but prices keep falling. Meanwhile, the entire sector is heavily dependent on fabric imports.

Vu Duc Giang, President of the Vietnam Textile and Apparel Association, said free trade agreements (FTAs), such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA), have created a level playing field for Vietnamese textile and garment companies, in particular, and the entire industrial sector. However, increasing domestic material resources is a challenge for the textile and garment sector.

Material supply for production is also a challenge for Vietnam to make the most of opportunities presented by its FTAs. Nguyen Thu Trang, Director of the Vietnam Chamber of Commerce and Industry’s WTO Center and Integration, said that unless Vietnam meets the origin of goods terms under these agreements, Vietnamese goods will be exported at previous tax rates without any preferences. “Preferences of the EVFTA, the CPTPP and other FTAs will encourage Vietnam to increase investment in weaving and dyeing, helping it resolve the material supply problem for the textile and garment sector,” Trang emphasized.

In the opinion of Nguyen Van Tuan, the strategy to develop the support industry for the textile and garment sector should focus on eliminating weaknesses in fabric production, especially in dyeing. The government expects this support industry will meet 45 percent of the textile and garment sector’s demand for materials by 2020 and 65 percent by 2025.

To achieve this target, more preferences are needed for investment in specialized industrial zones. Vietnam must also attract more foreign direct investment, promote cooperation, linkages and technology transfer among dyeing and weaving businesses, and improve the quality of human resources to meet practical demand in the field of weaving, fabric production, dyeing and finishing.

Most domestic and foreign-invested textile and garment manufacturing companies in Vietnam have to employ foreign

experts and technicians for stages such as dyeing, fabric finishing, wastewater treatment and environmental

management, leading to increased production costs and reducing the competitiveness of products.

Hoa Quynh