The textile and garment industry in Vietnam currently ranks among the top 3 global exporters and the top 4 export industries of Vietnam. However, to produce a garment product, Vietnamese enterprises have to import up to 90% of raw materials, mainly from China. Meanwhile, many large export markets require textile products from Vietnam to have a high localization rate. Therefore, the construction of factories producing textile raw materials to meet export demand is extremely important…
Mr. Pham Xuan Hong – Chairman of the Embroidery and Weaving Association in Ho Chi Minh City (Agtek) stated that in the first three months of 2024, orders have returned to textile enterprises in Ho Chi Minh City, with many orders scheduled until May and June. Most of these orders are small, consisting of thousands or hundreds of products instead of tens of thousands as before. This also indicates a trend of recovery in the near future.
Chinese enterprises introducing textile machinery and raw materials to explore investment opportunities in Vietnam.
However, the most challenging issue for the textile industry at present is the excessive dependence on imported raw materials. Domestic enterprises can only self-supply about 10%, while the remaining 90% is imported, posing significant risks if Vietnam’s raw material import market experiences disruptions. On the other hand, Vietnam has signed many free trade agreements (FTA), most of which require textile products to comply with rules of origin.
For example, the CPTPP agreement requires textile exports to member countries to ensure 3 stages from fiber onwards (Vietnamese textile products for export must be produced in Vietnam from fiber onwards), while the EVFTA agreement requires export enterprises to meet 2 stages from fabric onwards (fabric onwards must be produced in Vietnam). However, the majority of fibers and fabrics used for textile exports are imported. Specifically, Vietnamese enterprises import up to 70% of fabrics from China. This is also the reason why enterprises have not fully utilized the tariff preferences in the FTAs that Vietnam has signed.
Despite the weakness in raw material production, domestic enterprises still find it difficult to invest in this field, as up to 80% of them are small and medium-sized enterprises with limited financial capacity. With the strength in textile raw material production, Chinese enterprises have come to Vietnam to explore investment opportunities in this gap.
Mr. Vo Tan Thanh – Vice Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) stated: “China has a tendency to invest abroad, and Vietnam is one of the most attractive investment destinations. Since the beginning of 2023, VCCI has welcomed many delegations of Chinese enterprises and investors to survey in Vietnam. In addition to investing in the fields of restaurants, hotels, consumer goods…, Chinese investors have expanded into other sectors, including textile raw materials.”
Most recently, at the end of March 2024, many large Chinese enterprises specializing in the production of textile raw materials also came to Ho Chi Minh City to seek import partners at the China Homelite Vietnam exhibition. On April 10, the Taiwan Textile Association collaborated with 26 companies in the textile auxiliary industry of Taiwan (China) to come to Ho Chi Minh City to introduce their new products to Vietnamese textile enterprises, as Vietnam is the largest export market of Taiwan in terms of textile raw materials, especially fibers and fabrics.
Mr. Huynh Minh Vu – Deputy Director in charge of the International Integration Support Center of Ho Chi Minh City stated that many investors from the United States, China, and some other countries have come to explore investment opportunities in the textile industry. Large raw material manufacturing plants will help alleviate the shortage of supply for the textile industry, and compliance with rules of origin requirements in the CPTPP, EVFTA… will also be more optimistic. “The trend of supply chain shifting and the implementation of FTAs help Vietnam attract FDI into the shortage supply sources of the Vietnamese textile industry. This is one of the factors helping to gradually reduce dependence on external raw materials of textile enterprises,” Mr. Vu said.
Source: CongAnNhanDan.Vn
