Vietnamese local investors lack interest in garment, textile materials field

At a conference hosted by the Vietnam Textile and Apparel Association (Vitas) recently, economic expert said that Vietnamese businesses in the field of garment and textile material have been showing lack of interest due to low profit margin and long payback period.

They forecast that Vietnam now has 5,028 garment and textile businesses while the number of material suppliers is only 604. The material deficiency has created which is unlikely to improve in the next five years.

At the same time much room has been created for businesses to join in this field. However, mostly investors have been foreign direct investment (FDI) firms than local investors.

According to data by Vitas, FDI capital to the garment and textile industry has reached US$2 billion by the end of last year. Local businesses have lacked funds and needed assistance mechanisms to attend the supply chain.

On the other side, many provinces and cities have limited licensing textile and weaving projects to prevent environmental pollution although they are two indispensible phase off cloth production. This has contributed in making a number of Vietnamese products fail to meet origin rules and enjoy incentives from free trade agreements.

More than 60 percent of small and medium enterprises in Vietnam have investment direction in 5-10 years instead of 50 years as Japanese firms. This originates from the instability of Government policies to attract and assist investors.

Besides, current regulations have showed many problems and badly affected businesses’ investment and development strategies. Therefore material projects with payback period of 20 years or longer have not been chosen by local investors. A representative of Hoan My Company said that the company had to spend $25 billion on a zipper plant and much more to weaving machines.