The Foreign direct investment poured into the textile and garment sector has increased sharply in Vietnam anticipation of Trans Pacific Partnership (TPP) in the first six months of this year. At least $1.12 billion out of the $5.58 billion worth of capital registered went into the sector. One of the three largest projects was capitalized at $660 million, the highest ever in the field. Analysts warn that this will put pressure on Vietnamese businesses and the entire economy.
The $660 million project, in a yarn factory in Dong Nai province, was registered by an investor from Turkey. The others include a $300 million project registered by a British investor in HCM City and a $160 million project in Tay Ninh province by a Hong Kong investor.
Prior to that, Vietnam licensed three large projects to investors from China, including $400 million textile and garment complex in Nam Dinh province, $300 million in Quang Ninh province and $200 million in Hai Duong.
Smaller projects are capitalized at tens of millions of dollars. Forever Glorious, a subsidiary of Sheico Group from Taiwan, has committed to invest $50 million in a project to make underwater sportswear.
Gain Lucky Limited belonging to Shenzhou International plans to invest $140 million to develop a fashion design and high-end product development center.
According to the Vietnam Textile and Apparel Association (Vinatas), on Vietnam officially joining the TPP, it would enjoy a zero percent tariff when exporting textile and garment to the US instead of 17-30 percent tariff.
But the biggest challenge faced by the Vietnamese textile and garment now is the heavy reliance on imported materials. It needs to import 50 percent of input materials to make finished products, mostly from China. Meanwhile, only the products using input materials from TPP member countries will be able to enjoy the preferential tariff of zero percent.
Vinatex is the only Vietnamese textile and garment company which has input material factories. The corporation has developed 51 fiber production, weaving, dyeing and garment projects since 2013 with total investment capital of VND8 trillion. However, the projects would only be able to satisfy 50-60 percent of the groupâ€™s demand.
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