Unclogging textile-garment sector supply chain

The local content rate of textile and garment products has reached 46-47 percent

Raw material dependence

The textile and garment industry has long been recognized as a driving force behind Vietnam's economic growth. This year, experts predict that textiles and apparel exports will exceed US$45 billion. Despite these impressive numbers, the country's capacity to increase the local content of textile and apparel products remains low, resulting in limited added value. In recent years, localization rates have hovered around 46-47 percent.

According to the Ministry of Industry and Trade, the textile and garment sector is facing stiff competition from countries with cheap labor and abundant raw materials, including China, Bangladesh, Turkey, India, and CPTPP (the Comprehensive and Progressive Agreement for Trans-Pacific Partnership) member countries. Although the industry has made great strides in exports, the real potential for added value and sustainable development can only be realized through robust domestic production throughout the entire supply chain.

Many textile and apparel companies in Vietnam have reported that they import approximately 70 percent of their raw materials and accessories, primarily from China. The industry as a whole is struggling with a cycle of exporting yarn and then reimporting fabric due to insufficient weaving and dying facilities. This highlights the need for investment in technology and resources to support the growth of the industry and attract multinational businesses.

In light of the global economy's expected instability in the coming years, the textile and apparel industry will need to rethink its strategy. Reducing dependence on the global market, securing self-sufficiency in raw materials and accessories, and gradually shifting focus to the domestic market will be key to the sector's success.

Robust mechanisms and policies required

Experts believe that the textile and garment sector in Vietnam requires development and creation of domestic value chains integrating with the fashion industry, compliance with export regulations and capitalizing on signed free trade agreements (FTAs). The industry should also continue to enhance investment in technological innovation and evolve business models to cater to changing consumer trends.

The Vietnam Textile and Apparel Association has suggested that the government expeditiously approve strategies for development of textile-garment and leather and footwear industries to 2030, with a vision to 2035 to create favorable conditions for setting up large industrial parks with wastewater treatment facilities and advanced, environmental friendly technology, attracting investment in textile and dyeing, and resolving fabric supply constraints for garment exports.

The Ministry of Industry and Trade has outlined several technological innovation solutions, particularly in weaving and dyeing, to enhance support industries of the textile and garment sector and gradually address the supply shortage.

According to experts, the support industry development policy in the textile and garment sector must consider certain key elements such as the need for industrial parks for raw material production with well-connected roads and a seamless seaport system; chain links between textile, dyeing and garment factories in the region to reduce transportation and product costs; financial mechanisms and tax incentives to encourage enterprises to invest in wastewater treatment systems.

The policy and industry development strategy should also clearly define the key regions and locations for setting up industrial parks and wastewater treatment plants, calling for secondary investors to address the supply shortage.

To address the shortage of raw materials, the textile and garment industry is collaborating with the Ministry of Industry and Trade to establish several large textile and garment industrial parks with wastewater treatment systems and environmental protection measures, meeting the green standards of the textile industry.