However, numerous challenges exist due to strict requirements set by the countries of origin.
Despite the added advantages that having access to these markets brings, a heavy dependence on importing input materials remains the major weakness of Vietnam’s garment and textile sector.
During the first nine months of 2018, garment and textile export turnover for the reached US$22.56 billion, while imports of input materials recorded high growth with cotton estimated to have grown atUS$2.41 billion, up 30.3%, fabric at US$9.39 billion, up 13.5%, fibre and yarn at US$1.78 billion, up 34.6%, according to the Ministry of Industry and Trade.
Reoccurring bottlenecks affecting efficiency
In spite of this high export turnover, Vietnamese garment and textile businesses still primarily depend on import sources. Deputy Minister of Industry and Trade Nguyen Quoc Khanh at a recent inauguration ceremony of Bao Minh Textile and Garment Joint Stock Company said that the apparel and textile industry is forecast to hit US$35 billion this year despite facing critical shortage of fabric.
With anticipation high for new-generation FTAs such as EVFTA and CPTPP to take effect in late December, the garment and textile sector see huge potential as tariff lines will be slashed to zero. CPTPP in particular will help the sectors to expand their market shares in some nations that have high tariffs such as Canada, New Zealand, and Australia.
Despite the opportunities that these FTAs present, CPTPP and EVFTA both have some of the strictest rules of origin in regards to yarn and fabric respectively. This situation has caused a major stumbling block to Vietnam’s garment and textile industry which has mirrored previous difficulties encountered in the yarn, dyeing, weaving and finishing processes.
According to economist Pham Tat Thang from the Ministry of Industry and Trade (MoITthe sector still lacks high quality fabric to meet demands of specialized orders from its foreign partners. The fact shows that the industry has to import nearly 70% of raw garment material, with some companies even importing up to90% of their raw garments in order to meet the demands of production.
Solutions for removing bottlenecks from the industry
As a necessity for ironing out snags in the sector, Chairman of the Vietnam Textile and Apparel Association Vu Duc Giang said the association has worked put a specific plan of action and has called on both local and foreign investors to provide sufficient supply source for production activities.
In the first eight months of the year, total foreign direct investment (FDI) capital poured into the textile and clothing industry, hitting a record high of more than US$2 billion.
In addition to this record high, the association has also called for greater investment in high value products. Almost all countries in the world such as EU member nations, the US, the Republic of Korea, Japan, Thailand, Hong Kong and China have poured investment into Vietnam’s textile and clothing industry.
Germany’s Sudwolle Group for example, has invested in the construction of a sheep wool factory in Da Lat city, located in the central highland province of Lam Dong. Amann Group, also of Germany, have also invested in building a sewing thread factory in the central province of Quang Nam.
Groups from other European nations such as Italy have invested in a knitted fabric factory in Pho Noi, Hung Yen province. In addition to European investors, an Israeli group has also built a yarn, textile and dyeing factory in Phu Cat, BinhDinh province.
Local businesses have also put money into huge investments in the textile, dyeing, and finishing sectors to try and take full advantage of FTAs.
Phong Phu International Joint Stock Company have invested in the soft washing phase through advanced technologies of Industry 4.0 for jeans and khaki products. Robotic Process Automation (RPA) has provided new technologies that can do low skilled jobs far more efficiently than ever before. In this case, a laser design machine used in the soft washing phase can do the work of 60 workers.
Two factories of Bao Minh Textile Joint Stock Company have been recently starting using RPA technology to maximize business potential from FTAs.
To epitomize their commitment to meeting a higher standard of international regulations, Bao Minh Company even has a modern waste water treatment system located in its Industrial Park.
The treatment system ensures all waste at the factory to meet the highest standards before being discharged into the environment, thus reducing the park’s impact on the local environment.
Mr Giang expressed his belief that the industries will ensure a sufficient supply source for production activities in order to achieve sustainable development across the whole sector in the coming years.