Vietnam may be at risk with Chinese taking over textile operations

Vietnam local authorities have stop encouraging investments in the textile industry because textile factories cause big environmental problems. Therefore, Chinese to expand their production in Vietnam are taking over operating enterprises.

Nguyen Van Hoan, former president of the Hanoi College of Textile, Garment Industry & Fashion, noted that Chinese have taken over existing Vietnamese companies because this method allows them to avoid strict regulations. Hoan is worried as Chinese are trying to poach Vietnamese skillful workers from Vietnamese enterprises while not having to pay for training cost.

Thai Tri Dung from the HCM City Economics University also noted that a series of merger and acquisition (M&A) deals have been made recently between Vietnamese and Chinese in the textile and garment industry.

The actual goal of Chinese is to set up a network which can provide workers to them. It is reasonable to think that Chinese would attract skilled workers from Vietnamese enterprises, he said, adding that Vietnamese enterprises should think carefully about whether to become satellite companies in Chinese chains.

More and more Vietnamese textile producers to become Chinese satellite companies have sold their companies to Chinese investors.

Dung pointed out that the Chinese move of taking over Vietnamese companies would influence human resource development and export. Therefore, recommends remaining very cautious about deals with Chinese businesses.

As, once Vietnamese companies become Chinese subsidiaries, Vietnam’s export markets would become China’s markets. In theory, Vietnam exports products, but China pockets money, he explained.

In the long term, this will create uncertainties in the national economy as Vietnam’s textile and garment export would be entirely controlled by Chinese enterprises.

According to Dung, the risk is very high. Textile and garment is Vietnam’s key industry which makes products for export. If Chinese can control the industry, they would also control the other business fields such as agriculture and seafood.

Vietnamese experts do not highly appreciate Chinese FDI as they believe Chinese investors mostly bring outdated technologies to Vietnam which causes environmental pollution.