VN garment companies plan new paths for expansion as TPP fades

With Mr Trump on his first day in office vowed to scrap the TPP deal, Vietanamese textile and garment companies charting new paths for expansion. Than Duc Viet, deputy general director of Vietnam’s Garment 10 the state run textile company said that if TPP falls through, they can always look to Europe or South Korea. After all, they haven’t been making all improvements just for the TPP.

Mr Duc referring to the Trans-Pacific Partnership, a comprehensive, 12-nation trade pact that would have given Vietnamese exports easy access to a vast market. While this is a setback for Vietnam’s industrial policy, resourceful companies already have their own plans for going global well underway.

Garment 10, commonly known as Garco 10, is a symbol of Vietnamese industry. The company is taking the likely failure of the TPP in stride, confident that the improvements Mr Duc referred to will serve it well.

The garment maker’s main factory, now staffed with 400 workers, is the very embodiment of continuous improvement to boost productivity.

The company has also invested in physical capital. Affixing buttons and ironing, tasks previously done by hand, were automated in 2014, more than doubling productivity. A year later, an automated distribution system was put in place on a dress-shirt line to deliver to each worker exactly the number of garments that he or she can effectively handle. Both are state-of-the-art technologies in Vietnam.

At Garco 10, productivity has risen consistently, leading to higher output and greater quality even as the number of employees stays the same. As an alternative to TPP nations, Garco 10 is setting its sights first on South Korea. A free trade pact between Vietnam and South Korea took effect in December6 2015. Next is the European Union, which is slated to have a functioning free trade agreement with Vietnam by 2018.

Vietnam has trade agreements with more than 10 economies, including Australia, Chile and the Asean Economic Community, which links the country to fellow members of the Association of Southeast Asian Nations. Unlike the TPP, these deals do not include rules of origin for products and materials, so exporters can compete on quality alone, Mr Duc said.

This means vast opportunities for Vietnam’s textile industry, which combines low wages and high quality.