Vietnam textile industry getting ready to gain the most from TPP

Vietnamese textile businesses are getting ready for the Trans-Pacific Partnership, hoping the free trade agreement will usher in an era of unprecedented growth. The Vietnam National Textile and Garment Group (Vinatex), the country’s largest textile company, plans to invest $91 million to build a second plant on a 3.7-hectare site in the southern province of Kien Giang which is scheduled to open by next spring.

The new plant will have 32 production lines and the capacity to produce 12 million items of clothing or linen annually. It is expected to boost sales by $37 million.

The company’s first plant was built in the same province early last year. Open to the sea and relatively close to the economic capital of Ho Chi Minh City, Kien Giang is becoming a new hub for the textile industry, which is expected to see a rise in demand thanks to the trade pact.

Currently, most imports of sewing materials to Vietnam come from China, which is not party to the agreement. Hopes are therefore growing that domestic demand for materials will increase, hence the upfront investments.

An Phuoc, another textile company, is set to spend 628 billion dong ($28.2 million) to build a silk plant in Thanh Hoa Province in central Vietnam. Construction will start as early as April for a scheduled opening in February next year.

U.S.-based Kraig Biocraft Laboratories, overseas player which produces artificial fibers are also keen to invest to set up a subsidiary in Vietnam along with a research base and a plant to produce test products. It will also engage in joint studies with the help of the Vietnamese government on new materials and silkworm development.

In June last year, Taiwan’s Far Eastern group started building a plant in Binh Duong Province in south Vietnam for $274 million. It will be the company’s third production base along with ones in Taiwan and China. The new plant will have a range of facilities capable of producing synthetic fibers, spinning and dyeing.

Last year, South Korea’s Rio Industries opened a plant in the central province of Quang Nam for $6 million to produce 4,400 tons of synthetic fibers annually.

The Vietnam textile industry is gearing up for TPP as it will eliminate tariffs in many areas but, in principle at least, will only benefit garment manufacturers sourcing materials from within the TPP community, a mechanism called the “rules of origin.”

The World Bank estimates that, of the 12 member countries, Vietnam stands to gain the most from the TPP agreement.