With a total investment of US$12 million, the plant is expected to be put into commercial operation in August next year with an annual capacity of 21,600 spools.
Once completed, the plant will generate jobs for 200 workers and produce 100 percent cotton yarn with average output of 240 tonnes per month.
The development strategy for the garment industry has been approved by the Prime Minister and the Ministry of Industry and Trade for the Central Region, including Quang Nam, Da Nang and Thua Thien-Hue, according to the Vietnam National Textile and Garment Group (Vinatex).
The region is the manufacturing centre of the country's textile industry, and the plant will help it to stay competitive when various free trade agreements are signed, said Vinatex deputy chairman Le Tien Truong, adding the plant would set a national industry standard.
As the driving force behind the Vietnamese textile and garment industry, Vinatex has also formed a joint-venture with Japan 's Itochu Group to develop support industries for the sector.
According to Vinatex, the two sides had come to an agreement to build a US$120 million fibre production plant in the northern province of Nam Dinh's Bao Minh Industrial Zone. The plant will have an annual capacity of 50,000 spools.
Both Vinatex and Itochu Group are in the legal stages with plans to start construction of the plant at the end of this year.
Since last year, multiple foreign fibre, yarn and textile producers had come to Vietnam to seek investment opportunities in textiles, dyeing and material production, Truong said.
Large firms like Hong Kong's Texhong Group, Japan's Toray International Inc and Mitsui Group, Austria's Lenzing Group and China's Sunrise Co Ltd had expressed interest in forming joint ventures with Vinatex, he added.
The Hong Kong-based apparel manufacturer TAL Group late last month revealed plans to boost investment in Vietnam with its second project to produce fabrics, garments and textiles worth around US$200 million.
The Hong Kong clothing producer first entered the local market in 2004 with a US$40 million garment and textile factory in Phuc Khanh Industrial Park in the northern province of Thai Binh.
Vietnam reportedly earned nearly US$8 billion from textile and garment exports in the first half of this year, up 16.8 percent year-on-year, of which US$981 million came from yarn and fibre exports, a rise of 11.9 percent.
However, the country also spent around US$5.4 billion on importing raw materials for the sector, up 21.1 percent against last year.
Experts said that the sector was appealing to global investors who were hoping to foster local production of Vietnamese garment and textile products.