Vietnam need to seek foreign investment to develop domestic suppliers

Free trade agreements (FTAs) to create many opportunities and conditions in developing markets to garment, textile, leather and footwear industries as well as challenges due to origin rules for textiles and garments, said Ho Thi Kim Thoa, deputy minister of industry and trade.

Meanwhile, Phan Chi Dung, deputy head of the light industry department, said the textile, garment, leather, footwear, milk and paper industries have seen large billings for their exports, but materials for their production have been mainly imported.

According to the Ministry of Industry and Trade, Vietnam’s manufacturers need 8 million sq.m of cloth, but local producers can only provide 1.8 million sq.m, while the remaining cloth must be imported,. The local market supplies only 1 percent of the domestic demand for cotton, while 99 percent of cotton used in homes is imported.

Accoring to Le Phu Cuong, a Vietnamese trade counselor in Turkey, Vietnam and Turkey has great potential for cooperation in the textile, garment, leather and footwear industries.

Large industrial companies in Turkey have promoted investment in the garment and textile industry in foreign countries. Further, Turkish enterprises have planned to move their production from China to Vietnam due to high production costs in China and available materials in Vietnam, according to Cuong.

But they have not had many projects in Vietnam, due to difficulties in getting Vietnam visas and the lack of information about local markets, the investment environment, incentives and commercial mechanisms for Turkish enterprises.

They have also been worried about competition with Korean, Japanese and Taiwanese enterprises in Vietnam. Therefore, Vietnam’s trade office and industries should promote information about projects, the investment environment and industrial zones for Turkish enterprises through exhibitions and seminars.

Nguyen Duy Phu, Vietnam’s trade counselor in Taiwan, said that Taiwanese enterprises would promote investment in the textile and garment industries in Vietnam to take advantage of FTAs, and especially the Trans Pacific Partnership (TPP). But there were difficulties in obtaining locations for new projects because provinces are worried about environmental pollution.

He said that Vietnam needs special regions for investment to develop parts suppliers for the textile and garment industry, so the nation can control environmental pollution from such projects.

Meanwhile, deputy minister of industry and trade Ho Thi Kim Thoa said that to attract foreign investors, the ministry had built the Pho Noi Industrial Zone in Hung Yen Province and Rang Dong Textile and Garment Industrial Zone in Nam Dinh Province. The ministry also plans to establish two other industrial zones in Dong Nai and Binh Duong provinces. Those industrial zones will offer incentives for foreign parts suppliers in the textile, garment, leather and footwear industries.

Vietnamese enterprises lack investment and technology to develop the textile industry, so they need foreign investment. To deal with these challenges, industries should seek foreign investment to develop domestic suppliers of parts or material for manufacturing, to take advantage of the FTAs.