Garment, textile sector urges more government support

Impressive results

The Vietnamese garment and textile sector achieved impressive results in 2017. The sector’s export turnover reached more than US$31 billion, up 10.23 percent compared to the previous year. The rapid growth rate is expected to continue this year with an estimated turnover of more than US$33.3 billion. The sector is expected to grow by 14 percent over the next two years and a further 10 percent up to 2030.

In addition to maintaining traditional markets such as the US, the EU, Japan and the Republic of Korea, domestic garment and textile businesses have been expanding to new markets such as China, Russia and Cambodia.

Speaking at the fourth Vietnam Textile Summit 2018 held in Hanoi on June 27-28, Dr. Tran Du Lich, a member of the Prime Minister’s Economic Advisory Group, said the Vietnamese garment and textile sector had maintained an average annual growth rate of 18 percent over the past 20 years, with local content of 57 percent. The development of the garment and textile sector has also promoted the development of the cotton fiber industry, petrochemical industry and other textile supporting industries as well as trading, services, and the fashion industry. “The sector contributes to the success of foreign direct investment (FDI) attraction. FDI accounts for about 60 percent of garment and textile export turnover,” Tran Du Lich said.

Under the impact of free trade agreements (FTAs) of which Vietnam is a signatory, tariffs on garments and textiles exported to some countries are due to drop sharply. The export tax on some products will be reduced to zero, creating new opportunities for Vietnam to increase export added value and promoting economic growth. In addition, competitive labor costs and preferential policies will continue to make Vietnam an ideal destination for investors in the sector.

Recommendations

Experts say that the world’s garment and textile sector has changed. Green growth has become a strategy for large textile brands such as H&M and Zara, with the use of environmentally friendly materials.

However, the Vietnamese garment and textile sector seems to have grown only in quantity. Dependence on imported raw materials will make it hard for industrial manufacturers to make the most of opportunities provided by FTAs to which Vietnam is a signatory.

Tran Thanh Hai, deputy director of the Agency of Foreign Trade under the Ministry of Industry and Trade, said that in the long run, the Vietnamese garment and textile sector will face certain difficulties. For example, the recently signed Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) among 11 Pacific Rim economies will be a strong driving force for Vietnam’s garment and textile sector by offering attractive tariff preferences. However, with strong commitments to labor and environmental standards across the Asia-Pacific region, the CPTPP will pose challenges for labor-intensive sectors. In particular, the CPTPP’s rule of origin provisions are based on the yarn-forward concept, which basically states that all garment materials, from the yarn, fabric, sewing thread and the final garment itself, must be made within the region in order to qualify for duty preferences. Such barriers must be addressed in order to help the garment and textile sector make the most of opportunities.

Tran Du Lich recommended that government policies play an important role to help businesses develop. Vietnam’s vocational training policies in the industry have not been effective and will need further support. In addition, the government should encourage businesses to mobilize capital on the stock market, as well as encourage the linking of value chains by supporting small and medium-sized enterprises under the law on the promotion of small-and-medium sized enterprises (SMEs).

Ven Tran, director of the Vietnam Office of Weave Services Limited, said there were still three main challenges to sustaining this strong growth - low productivity, environmental regulation and long lead time, meaning retailers and manufacturers fail to meet customers’ expectations.