VN textile sector stands chance to achieve export target despite hurdles

Việtnamese textile and apparel sector has set a target of seven percent growth over 2016, with total export earnings of over $30 billion. It stands chance of achieving its export target this year despite facing many challenges in exporting to key markets, such as the European Union (EU) and the United States, according to experts.

With Vietnam earning $6.84 billion from garment and textile exports in the first quarter of this year, 11.2 percent more than in the same period last year, it appears to support their target expectation, according to the Việtnam Textile and Apparel Association (VITAS).

Currently, Vietnamese garment and textile products are available in 40 countries and territories, with major markets including the United States, Japan, the Republic of Korea, China and the EU. VITAS has urged enterprises to optimise the capacity of their equipment to reduce production costs and seek orders for high-quality products.

But Đặng Phương Dung of the VITAS advisory board said that the growth rate of export value and volume to the EU was low, with local manufacturers receiving only small orders. Việtnam’s garment industry has also not developed in terms of design, so most textile and garment enterprises have found it difficult to compete for export orders from this market.

High import tax rate of 8-12 percent to the EU market is also one of the obstacles facing garment exporters to this market.

The EU is the second largest export market of Vietnamese garment products, but it has only captured a 1.9 percent share of the union’s total import value, according to the association, presenting opportunities for growth.

However, Dung said that meeting the rules of origin under the Việtnam-EU Free Trade Agreement in terms of preferential tax rate would be the biggest challenge for Vietnamese garment exports.

The garment industry expects ASEAN countries, including Việtnam, to sign an FTA between the ASEAN region and the EU, and then local garment enterprises would have more options to get material for garment production from other ASEAN countries, meeting rules of origin under the FTA.

According to the association, many enterprises invested in building textile and dying factories on an extensive and intensive scale to boost opportunities in production and business for the planned Trans Pacific Partnership (TPP),.

But now that the TPP with the United States is no longer in the cards, experts said that these facilities would help the textile and garment industry complete production processes and actively source material, focusing on the significant opportunities offered by other FTAs, such as the Việtnam-EU FTA and the Việtnam-Republic of Korea FTA.

According to the General Department of Customs data, in 2016 the textile and garment sector reached total export value of $23.8 billion, an increase of 4.6 percent year-on-year. In particular, the United States continued to be the largest export market of Vietnamese garment products, accounting for 48 percent of the total garment export value. Export value of textiles and garments into the United States has increased by 12-13 percent each year in recent years.