Vietnam exports its apparel and textile products to 180 countries.
Vietnam textile and clothing industry is deeply rooted in history. Hundreds of years ago, women in Vietnam knew sericulture and weaving thread into beautiful silk. Even today, they use elementary tools for clothes full of sophisticated touches and high value. In 1950s and 70s, Vietnam’s textile industry jumpstarted with the coming of the big factories.
Textile industry is one of the most important sectors in the country’s economy. It creates huge job opportunity and employment. The sector is biggest export earner. Vietnam has about 6,000 textile and apparel manufacturing companies. It offers jobs to 2.5 million people. The population in Vietnam is about 90 million.
After China and Bangladesh, Vietnam, in 2016, has been recognized as the third top garment exporters in the world. The apparel exports account for 16% of the country’s total exports (2017).
Export at a glance
Vietnam exports its textile products to 180 countries. Garment manufacturing accounts for 70% of the total businesses. U.S. Europe, Japan and South Korea are top markets for Vietnam textile and garment products.
Despite several challenges and pressures from the abandonment of the Trans-Pacific Partnership (TPP) trade deal last year, Vietnam’s textile and garment industry exceed its 2017 target of $30bn. The export turnover was over $31bn, an increase of 10.23% from the previous year.
What is happening at domestic market?
Along with export promotion, Vietnam’s domestic market too experienced growth powered by emerging young consumers and growing disposable incomes with the coming of the urbanization. Country’s retail sales are rising at a rate of 20% annually and spending on apparel is the second highest category followed by spending on food items.
A recent report from ‘Textiles Intelligence’ predicted a strong growth where the production capacity of the industry is all set to rise by 12-14% p.a. from 2016-2020. The domestic textile and garment market has gained a year-on-year growth rate of 10 per cent in 2017, according to Vietnam Textile & Apparel Association.
While export potential is predicted to rise by 15% annually during the same period, the report further predicted that the Vietnamese textile and apparel industry, by 2020, will become US$50 billion industry.
Challenges ahead
A research by the Ministry of Labor says, every $1 billion of export value generated from Vietnam’s textile and apparel industry can create an additional 250,000 jobs. However, the textile labor cost in Vietnam is still relatively low compared to neighboring countries in the region. In 2016, the minimum wage of garment manufacturing industry in Vietnam was about USD 108 per month. But, the growing costs of electricity and transportation, along with an increase in minimum wages, are now becoming a bigger concern for the industry players. Consequently, despite remaining high at global demand, the industry faces many challenges.
Most of the manufacturers in Vietnam do not have their own brands. They produce for foreign brands. The manufacturing units in Vietnam are outsourcing partners. These limitations poses challenges for the new entrants in the industry. The small-scale enterprises are more vulnerable since big brands give priority to already established manufacturers.
On the other hand, Vietnam’s garment industry is highly dependent on imports for its machinery, equipment, raw materials, and accessories which is a stumbling block for profit margins.
According to 2016 CRI report, over 80% of products of garment manufacturing industry in Vietnam were exported, making industry overly dependent on exports for its earnings and foreign investments. Meanwhile, Cambodia and Bangladesh pose a tough competition to Vietnam as the wages there are lower than that of Vietnam.
Initiative to overcome the challenges
Vietnam government has already started investing heavily in the development of support industries to overcome the high cost of raw material. During 2006-15 period, Vietnam was the second biggest investor in the development of shuttle-less looms and the biggest investor in ring spindles and open-end rotors, amongst the ASEAN countries.
The country has also shown a marked expansion in its knitting sector. Rang Dong Industrial Park– a cotton manufacturing plant spread in 1,500 hectares worth US$400 million has been established in Vietnam’s Ninh Thuan province with production value of US$3 billion on an annual basis.
Government is helping apparel manufacturers with opportunities to enhance their value-adding capabilities, develop their own brands, and become original design manufacturers (ODMs). Analysts are of the opinion that if Vietnamese enterprises make input materials, their products would be able to replace Chinese products and can compete with Chinese products in price.
Inflow of FDI
In the calendar year 2017, Vietnam witnessed a steep 11.9 percent spurt in Foreign Direct Investment (FDI) as compared to the previous year, says a government release. FDI in Vietnam’s flourishing textile and apparel industry is increasing rapidly, which is making the country one of the most popular destinations in Asia for textile investment.
According to the data from Vietnam’s Foreign Investment Agency (FIA), FDI investments in Vietnam were up 152.78% year-on-year in the first two months of 2017, and investment in Vietnam’s textile and apparel industry now accounts for 21% of the country’s total FDI.
FIA also reports that Chinese investors have registered 123 investment projects in Vietnam between January and February of 2017. One of the largest Chinese investments is the $220 million invested in a Vietnam polyester synthetic fiber plant in central Tay Ninh province.
Textile investment from South Korea in Vietnam is also increasing. By early 2017, South Korea’s Sea-A Group has committed a total of $2 billion in capital in Vietnam’s textile and garment industry.
Vietnam’s apparel and textile industry plays an important role in national socio-economic development of the country. As trade and economic linkages continue to grow between India and Vietnam, India should grab the opportunity of success story of Vietnam. India’s ‘Look East’ policy combined with Vietnam’s growing engagement within the region and with India will pay rich dividends. India’s relations with Vietnam are marked by growing economic and commercial engagement. India is now among the top ten trading partners of Vietnam.
Published On : 24-04-2019
Source : The Policy Times
