Vietnam’s textile and garment sector has seen fast and sustainable growth over the past years, playing an important role in national socio-economic development.
Although Vietnam’s entry into the Trans-Pacific Strategic Economic Partnership Agreement (TPP) is still in the negotiation process, Vietnamese textile and garment enterprises have devised plans to prepare for their participation into this new potential but also challenging organisation. Read More
Although Vietnam’s entry into the Trans-Pacific Strategic Economic Partnership Agreement (TPP) is still in the negotiation process, Vietnamese textile and garment enterprises have devised plans to prepare for their participation into this new potential but also challenging organisation.
The Number One Exporting Position of Vietnam
Exploring the opportunities and challenges of the textile and garment industry of Vietnam, before the country joins the TPP we carried out a survey to learn the reality of this number one exporter.
According to the Vietnam Textile and Apparel Association (VITAS), the textile and garment industry is one of the largest economic sectors in the country. It has 4,000 enterprises with a turnover of 20 billion dollars a year, accounting for 15% of GDP and making Vietnam the fifth largest textile and garment exporters in the world. Vietnamese textile and garment products have been exported to 180 countries and territories in the world, in which the largest markets are the United States, Europe and Japan.
To learn more about the reality of this sector, we went to visit Dong Nai Garment Joint-Stock Company (Donagamex) in Bien Hoa 1 Industrial Zone in Bien Hoa City, Dong Nai Province. Although it was after New Year Festival, the workers were busy at work filling orders for export. According to the leaders of the company, although it is the beginning of the year, the company has received orders for September, 2014. This year, Donagamex strives to reach an export turnover of 47 million dollars, an increase of 10% over last year. The company has operated seven sewing lines in Dong Xoai Town of Binh Phuoc Province and will add 15 lines at Dong Xuan Loc Garment Company in Xuan Loc District, Dong Nai Province. It is expected that these lines will start operation in June of this year.
Prospects and Challenges of Joining the TPP
At the 19th TPP official negotiation round in late August, 2013 many experts affirmed that the textile garment industry of Vietnam was internationally competitive and was able to enjoy benefits from the trade treaties. This is also a reason that the textile and garment industry is a top prioritised sector in the negotiations about Vietnam joining the TPP.
According to Le Tien Truong, Deputy Chairman of VITAS and Standing Deputy General Director of Vinatex, 60% of Vietnamese garment exports are mostly concentrated in the TPP member countries, so Vietnam will enjoy preferential tariffs when it joins the TPP.
This is a favourable factor for the Vietnamese textile and garment enterprises to increase their export market share, especially in the US market because Vietnamese garment exports are levied with a tax of about 17-18%. After Vietnam joins the TPP, the tax will be gradually reduced to 0%. With the original rules encouraging the use of the materials from the TPP block, in the long term, Vietnam will invest in the production of materials, specifically fibers and dyes. Importantly, the textile and garment industry will have more opportunities to build an auxiliary sector for itself.