Bright prospects seen for garment, textiles

The garment and textile industry has achieved significant success in the first quarter and its outlook for the whole year is optimistic, the Ministry of Industry and Trade reports.

The ministry said that the garment and textile industry achieved the highest growth rate at 20.2 per cent in the first three months. The average increase in the rate of the country's industrial production in the same period was only 4.9 per cent.


The industry's export revenue in Q1 also surged 21.9 per cent to US$4.5 billion.

The ministry said many garment and textile producers had won export contracts extending to the end of Q3, with some scoring contracts lasting until the end of the year. All producers are also using designated production capacity to meet the spike in demand.

Preparing to seize opportunities from trade agreements including the Trans-Pacific Partnership (TPP) that are expected to be signed this year, local textile and garment producers have also sped up their investments in fibre production, knitting, dyeing and garment production.

Deputy general director of the country's largest textile and garment producer Vinatex, Le Tien Truong, said investment in material production was imperative for raising the use of local inputs and raising the quality of products. He also said that investing in production would benefit the textile, garment, leather and footwear sectors affected by the TPP.

The TPP, which has entered the final stretch of negotiations, will lower import taxes in many large member economies like the US, Canada, Australia, and Japan. China is not a member.

Import tariffs in the US, the biggest buyers of Viet Nam's leading exports, textiles, will be cut from 17-32 per cent to zero.

But it will also impose conditions. Under the TPP's ‘yarn forward' rule of origin, to be eligible for the tax breaks, all manufacturing processes including yarn spinning, knitting, and dyeing must be carried out in a TPP member country.

Truong said Vinatex was seeking VND9.72 trillion ($458 million) to invest in 57 projects, including fibre production, knitting, dyeing and garment production. However, he acknowledged that the sizable $458 million investment capital would be difficult to raise if there is no support from the Government.

Given Vietnamese garment manufacturers do not possess the financial arsenal to invest in their own yarn and textile facilities and rely on China and other Southeast Asian countries for most of the feedstock, many foreign firms from mainland China, Taiwan and Hong Kong have entered Viet Nam's garment and textile sector to build yarn and textile facilities.

Economists have said that if there is no change in the domestic material production for the garment and textile industry, the trade deal would benefit incoming foreign firms more than local companies in the sector.

To deal with the shortcoming, the Ministry of Industry and Trade has urged domestic garment and textile producers to develop all aspects of the sector's value chain, including yarn spinning, knitting, and dyeing; and improve their designs, trade promotion and distribution networks to capitalise on the opportunities afforded by the TPP.