Garment sector requires greater FDI for export target fulfilment

Statistics compiled by the Ministry of Planning and Investment indicate that the apparel and textile sector had attracted 2,787 valid FDI projects capitalised at US$31.3 billion as of May 18.

Garment experts say FDI projects have contributed to increasing the production capacity and export scale of the sector, with its export turnover rising from over US$36 billion in 2018 to US$40.3 billion in 2021, making up around 60% of the overall export value.

However, several think tanks emphasise the necessity of directing capital flows into the production of fabric, yarn, and accessories as a way of taking full advantage of tariff incentives from the 15 FTAs Vietnam has signed with partners​.

Nguyen Anh Tuan, deputy director of the Foreign Investment Agency, points out that the textile and garment sector is currently lacking linkages along the value chain, and that though the country enjoys a trade surplus in yarns and garments, it has recorded a huge deficit in fabrics.

Domestic fabrics have only met some 50% of demand, a factor which has prompted Vietnam to import more than US$10 billion of the material each year, and this shortage can be considered a promising market segment in attracting more foreign investment in fabric and yarn production in the market, says Tuan.

The General Department of Vietnam Customs reports that the import of raw fabrics last year surged by 20.6% to US$14.3 billion compared to 2020, accounting for 60.0% of the total import value of raw materials and accessories of the sector, mainly from such markets as China, the Republic of Korea, Taiwan (China), and Thailand.

The textile and garment sector should select quality FDI sources, with priority given to advanced textile and dyeing technologies that will not have an adverse impact on the environment, suggests Tuan, adding the sector should strengthen connectivity among domestic garment enterprises to support the value chain.

The United States, the EU, the Republic of Korea (RoK), and China make up the four major markets which imported nearly US$24 billion of textiles and fibers from the Vietnamese market last year. At present, these markets are enforcing several new regulations relating to imported garments by requiring products to be green, chemical-free, and recyclable.

Sharing this perspective, Truong Van Cam, vice president of the Vietnam Textile and Apparel Association (Vitas), notes that production technology used by the yarn, textile, and dyeing industry must meet green standards. Indeed, it should also strive to reduce fuel and water consumption in order to ensure transparent connectivity throughout the supply chain.

According to the executive, the majority of Vietnamese enterprises in the supply chain are currently outsourcing for major brands and have exerted great efforts in order to meet the requirements of "greening" the production chain by implementing social and environmental responsibilities. New generation FTAs ​​which Vietnam has signed have commitments relating to environmental protection and achieving low carbon emissions.

During a recent meeting between the Prime Minister and local businesses, Cam suggested that the Government approve a strategy for the greater development of the garment and textile sector and establish a large textile industrial park in order to deal with issues related to fabric, dyeing, and chemicals, so as to attract more foreign businesses to invest in fabric production.