Vietnam textile and garment industry likely to boost on entering into agreement with US and EU

Vietnam on entering into an agreement with two leading markets, the US and EU will see a boost in its textile and garment industry. With the signing of Trans-Pacific Partnership Agreement (TPP) and Vietnam-EU Free Trade Agreement, the Vietnamese garment and textile products will start enjoying the benefit of zero percent tax rate in the US and EU markets.

Currently, the average tax rates applied to the Vietnamese garment and textile products in the US and EU markets are 17.5 percent and 9.6 percent respectively.

However, under the TPP agreement, Vietnam can only avail of the zero percent tax rate if the fibres is produced in Vietnam or other TPP countries. This make it mandatory for Vietnam to produce fibre locally as most countries with TPP have not yet developed the fibre industry.
While, under the Vietnam-EU Free Trade Agreement, EU has imposed conditions on fabric production. Both quantity and quality of domestically-made fabrics fail to meet export requirements. Due to its weak weaving and dyeing segments.

According to the Vietnam Textila and Apparel Association, (VITAS) in 2013, Vietnamese textile and garment industry consumed 7.4 billion square meters of fabrics when export turnover reached US$20 billion, of these, 1.4 billion square meters were domestically made and the balance 6 billion square meters were imported.

At present, Vietnam exports limited garment and textile products to the US and EU which is only 8 percent and 3 percent of their market share respectively. Last year, the US and EU markets spent US$105 billion and US$260 billion on garment and textile products.
The textile and garment export turnover is projected to touch US$40 billion by 2020-2025 which will require 12 billion square meters of fabrics and five million work forces.

Vietnam has a good human resource supply to develop its garment and textile industry as of the 90 million Vietnamese, sixty percent comes in the working age which can help Vietnam be the world center of garment and textile production.