Vietnamese textile and garment cos leaving market due to unstable policies

At a workshop held by the World Bank (WB) and the Vietnam Chamber of Commerce and Industry (VCCI), Truong Van Cam, deputy secretary general of the Vietnam Textile and Apparel Association (Vitas) said that many textile and garment companies due to the state’s unstable policies are leaving the market.

According to analyst, the government seems to be too optimistic about opportunities to be brought to the textile and garment sector by TPP.

In 2015, Vietnam exported $27 billion worth of textile and garment products, 60 percent of which went to TPP member countries. However, foreign invested enterprises (FIEs) pocketed most of the money.

With the TPP’s strict requirements on origin of products, Vietnam would not be able to get benefits from TPP.

Vietnam imports 10 percent of yarn and 5.3 percent of cloth from TPP countries. This means that it imports most of materials needed from non-TPP countries. Meanwhile, the products with non-TPP origin won’t be able to enjoy preferential tariffs.

Vietnam now has 6,000 textile & garment companies, of which garment companies account for 70 percent. Of the number, only 17 percent are textile enterprises, 6 percent spinning, 4 percent dying enterprises and 3 percent makers of input materials and accessories.

Seventy percent of enterprises now make products under the mode of cutting – assembling – trimming. This means that Vietnamese are proficient in the last phases of the production chain, but less so in dyeing and weaving.

Pham Xuan Hong, chair of the HCMC Textile, Garment, Knitting and Embroidery Association, said that the profits earned by Vietnamese enterprises are modest because they mostly do outsourcing for foreign partners, while 60-70 percent of materials needed are imports, mostly from China.

The State’s policies need to be designed in a way to encourage investors to do business and stay in the market.