VN MoIT proposes setting up large textile and garment industrial zones

Vietnam’s textile and garment exports grew in the first half of this year, but local firms face difficulties in obtaining production and export contracts for the second half of 2016, according to the Ministry of Industry and Trade (MoIT). To support local firms, MoIT has proposed the development of large textile and garment industrial zones (IZs) on 500 – 1000 hectare to attract local and foreign investment in dyeing, and fabric and yarn production.

The ministry has also proposed that the government provide full support for the building of textile and garment industrial zones located in provinces and cities experiencing socioeconomic difficulties in order to create conditions for the success of small and medium startups enterprises, according to the ministry.

The proposal also targets the development of transport infrastructure connecting the large industrial zones to ports and logistic centres to reduce transportation costs.

The Vienam Textile and Apparel Association (Vitas), which sent to the Government a document detailing the difficulties of textile and garment enterprises and proposed solutions, supports the Industrial zones (IZ) plan proposed byMoIT. To this, Vitas suggested the Government should provide credit for enterprises to build waste water treatment centres at those industrial zones.

According to the ministry reports, six percent export increase in the first half of this year to US$12.8 billion. The industry also saw growth in export value to its major markets, including the US, increasing by 5.9 per cent to $4.29 billion; Japan with an increase of 2.9 per cent to $1.04 billion; South Korea with exports 15.58 per cent higher at $764.9 million.

Nguyen Thi Huyen, Director of the Garment 10 Joint Stock Company, said that she was not optimistic about production by the end of the year, while Brexit is expected to harm the price competition for garment exports.

According to Tran Van Khang, Director of Dong Binh JSC, there has been a lack of export orders since the beginning of the year, triggering stiff competition among domestic manufacturers for customers. His firm experienced a 30-percent drop in the number of orders in the first five months, for which he blamed overstocking and falling demand in import markets.

In addition, export prices have plunged by 10-15 percent, while the firm still has to pay wages, insurance and transportation costs, which are on the rise, he added.

Phi Viet Trinh, Deputy Director of Ho Guom Garment SJC, said that the company’s overseas orders fell significantly in March and April, and only started to rebound in June.

Several trade deals, including the Trans-Pacific Partnership (TPP) and the Vietnam-EU Free Trade Agreement, have not yet come into effect so that Vietnam’s garment customers could not benefit from a preferential tax regime and turned to other foreign manufacturers with more tariff advantages.

The Chairman of Vitas, Vu Duc Giang said that many of Vietnam’s traditional customers shifted their orders to Myanmar, Laos and Cambodia, which enjoy reduced import duties in the US and the EU, the two largest buyers of Vietnamese garments.