The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA) have helped Vietnam attract more foreign direct investment (FDI) in textile-garment projects in the country, officials said.
At a press conference held on June 18 to introduce the third Denims & Jeans Exhibition, which will be held in HCMC late this month, Nguyen Thi Tuyet Mai, general secretary and head of the representative office in HCMC of the Vietnam Textile and Apparel Association (VITAS), noted that Vietnam is one of the most attractive markets for those keen on the apparel sector.
Early last year, when the United States, the largest buyer of Vietnam’s textiles and garments, withdrew from the Trans-Pacific Partnership (TPP), the FDI capital injected into the local textile-garment sector dipped and tended to flow to other markets with a lower-cost workforce and lower import duties, such as Cambodia, Myanmar and Bangladesh. Since the third quarter of last year, foreign investments in the sector have increased again due to domestic textile-garment enterprises’ high-quality products and short delivery time.
According to VITAS, Vietnam has inked 16 bilateral and multilateral free trade agreements (FTAs), including CPTPP and EVFTA, which will take effect in the near future, creating numerous opportunities for local textile-garment producers.
Mai said import duties of the European Union, Vietnam’s second-largest importer, currently ranging from 10% to 12%, will be cut to zero when EVFTA comes into force. She forecast South Korea would overtake Taiwan to become the largest investor in Vietnam’s textile-garment sector in the near future as this country has clinched a two-way FTA with Vietnam and a cooperation agreement with the European Union.
At the press conference, Sandeep Agarwal, CEO of India-based Balaji Enterprises Company, said Indian textile-garment producers could see potential in the Vietnamese market and are seeking export opportunities there.
In reality, Vietnam’s apparel sector has attracted a large volume of FDI. Some 137 projects were approved in 2014 with total registered capital of nearly US$1.75 billion.
The respective numbers for the following years were 197 and US$2.6 billion in 2015, and 184 and US$1.5 trillion in 2016. Last year, although the United States withdrew from the TPP, Vietnam attracted 129 FDI apparel projects worth US$651.4 million.
In the first five months of the year, cities and provinces approved several FDI projects to produce materials and accessories for the sector. In addition, investors of projects launched in the country tended to pour more money into these projects. According to data by the General Department of Vietnam Customs, textile-garment exports amounted to US$2.35 billion in May, up 11.2% month-on-month, taking the total amount in the first five months of the year to US$10.91 billion, marking a year-on-year growth of 15.8%.
The United States remained the largest buyer of Vietnamese apparel products in the five-month period, at US$5.15 billion, rising 12.7% versus the year-ago period and accounting for 47% of Vietnam’s total textile-garment exports. The European Union ranked second with export revenue of US$1.46 billion, followed by Japan with US$1.39 billion and South Korea with US$1.09 billion.
According to local enterprises, a trade war between the United States and China would benefit China’s rivals, including Vietnam. Last year, local textile-garment exporters shipped fibers, fabrics, shirts and jackets to China for the first time. Chinese apparel products with competitive prices have been exported to many countries worldwide, and a few countries can export such products to China. Thus, Vietnamese apparel products have proven their quality and competitive prices.
Mai noted that the target of US$34-34.5 billion in apparel export turnover this year, which is 10% higher than the result last year, is achievable.
The large amount of FDI will contribute to developing textile-garment supporting sectors, raising the localization rate.
However, localities hesitate to approve projects involved in fabric dying out of fear of environmental pollution, Truong Van Cam, vice chairman and general secretary of VITAS, told a teleconference on comprehensive solutions to promote exports, held early last month.
For instance, Hong Kong-based TAL Group, which wants to invest in a dying project in Ba Thien 2 Industrial Park in Vinh Phuc Province, has not yet received an investment certificate from the local government, despite receiving the approval of the prime minister and the Ministry of Natural Resources and Environment.
Most FDI projects in the sector are related to fiber, garments and material production. Textile and dying projects account for a mere 9% of the total FDI apparel projects, Cam stated.
According to VITAS, it is impossible to develop supply chains to benefit from EVFTA and CPTPP if local authorities refuse to give the green light to textile and dying projects. Cam proposed provinces allow foreign firms to make investments in these projects but prioritize those with modern wastewater treatment systems.
Minister of Industry and Trade Tran Tuan Anh also suggested provinces and cities should accept investors of textile and dying projects if they can ensure environmental protection.