T
he Socialist Republic of Vietnam – extending more than 1,500 kilometers from China at its
northern border to the Gulf of Thailand in the south – is located on the Indochina Peninsula in
Southeast Asia, bordered on the west by Laos and Cambodia and on the east by the Gulf of Tonkin and
the South China Sea. Though the country is ruled by the Vietnam Communist Party, its government
instituted a political and economic reform program in 1986 called “doi moi” to set up a
market-based economy run with reduced government interference.
Significant Changes
In 2001, Vietnam’s Congress approved the Strategy for Socio-Economic Development 2001-2010
to enhance the role of the private sector. The overall goal was to accelerate national
industrialization and modernization, and therefore stimulate economic growth, enabling the country
to become an industrialized nation by 2020. Vietnam’s economy began moving from a centrally planned
economy to a socialist-oriented market economy, leading it to become one of the fastest-growing
economies in the world, with recent annual growth rates of more than 7 percent. Vietnam is now
ranked second only to China in terms of economic growth. The government states that one focus of
its 10-year socioeconomic strategy is “to rapidly develop industries capable of promoting their
competitive advantages, taking hold of domestic markets and pushing ahead exports” such as
textiles, apparel and other products.
At the end of 2001, the US-Vietnam Bilateral Trade Agreement went into effect, opening up
Vietnam’s market to US textile investors. The agreement not only caused bilateral trade between the
United States and Vietnam to explode – rising from US$2.91 billion in 2002 to US$12.5 billion in
2007 – but it also paved the way for Vietnam to enter the World Trade Organization (WTO). In 2007,
Vietnam became the organization’s 150th member, further opening its economy to foreign trade and
investment. International trade rules require Vietnam’s textile and apparel producers to compete
fairly and would subject them to penalties if the country granted WTO-prohibited subsidies to
producers; however, the country no longer is subject to textile and apparel import quotas.
Removal Of US Trade Barriers
Shortly after Vietnam became a member of the WTO in January 2007, the US Department of
Commerce commenced a program to monitor Vietnam’s textile and apparel imports to ensure fair trade
practices. If unfair practices were found, the Bush administration would self-initiate anti-dumping
procedures that could restrict imports among other penalties. After an 18-month-long investigation,
the administration concluded there was no evidence of dumping, and the program expired when
President George W. Bush left office in January 2009. The failure to find proof of anti-dumping
conduct is a good sign for the sector’s future export activities.
Current Industry Status
Once Vietnam joined the WTO in 2007, its textile industry was expected to experience
increased pressure from international competition. However, in the first year following accession,
Vietnam overcame challenges in competing with both international and regional markets – its
industry was ranked 16th out of 153 apparel exporters worldwide, reaching a total value of US$7.75
billion – approximately 15 percent of the country’s entire export value. Then in 2008, it became
the 10th-largest apparel exporter in the world, with exports reaching a total value of US$9.05
billion, up by 16.3 percent over 2007. Vietnam’s Ministry of Finance forecasts apparel exports will
reach US$11.5 billion this year.
As of 2008, apparel and textiles comprised Vietnam’s largest industry, with more than two
million workers employed by more than 2,000 textile and apparel enterprises, around half of which
are state-owned, 25 percent foreign-invested and the remainder privately owned. According to The
Vietnam National Textile and Garment Group (VINATEX), the industry annually produces approximately
10,000 tons of cotton fiber; 50,000 tons of man-made fiber; 260,000 tons of short-staple fiber and
yarn; 15,000 tons of knitted fabrics; 680 million square meters of woven fabrics; and more than 1.8
billion textile and apparel products. Approximately 70 percent of this output is exported.
According to Le Quoc An, chairman of the Vietnam Textile and Apparel Association (VITAS), the
United States is the top importer of Vietnamese textile and apparel products, accounting for nearly
60 percent of the country’s total textile and apparel export turnover. Other top export markets are
the European Union, Japan, Russia, South Korea, and Southeast Asia, Canada and a few other markets.
According to the Switzerland-based International Textile Machinery Manufacturers Federation
(ITMF), Vietnam’s investment in short-staple spindles more than tripled in 2007 over 2006, with the
country adding 529,968 spindles to its capacity in 2007, compared with 171,720 in 2006. The German
Engineering Federation (VDMA) Textile Machinery Association reports that Germany has exported a
large amount of textile technology to Vietnam: In 2006, German exports of spinning, weaving,
knitting and finishing technology combined were worth approximately 19.3 million euros; in 2007,
the number had increased to almost 36.7 million euros. For January 2008 through September 2008,
spinning machinery topped the Vietnamese textile industry’s purchase list: the country invested in
spinning machinery worth approximately 19.5 million euros, compared to approximately 9.4 million
euros in the corresponding period of 2007. Vietnam’s investment in weaving machinery also increased
substantially: Germany’s January through September 2008 exports were worth approximately 5.3
million euros, compared to approximately 123,000 euros in the corresponding period of 2007.
Textile Organizations
VINATEX is a conglomerate owned by the Vietnam Textile Garment Group, research and training
centers, and close to 100 joint-stock sub-companies including apparel manufacturers, commercial
services providers, and other companies. It is not only the largest textile and apparel corporation
in Vietnam, but also one of the largest in Asia. It plays multiple roles in the industry, including
as a manufacturer and exporter of yarn, woven and knitted fabrics and apparel; importer of raw
materials, dyestuffs and chemicals, as well as textile machinery and equipment; wholesale and
retail distributor; and representative of Vietnamese textile and apparel companies. VINATEX has a
commercial relationship with more than 400 companies in 65 countries and regions, and supports
opening joint-venture businesses both domestically and abroad. Its export value represents more
then 20 percent of the Vietnamese textile and apparel industry’s total export turnover. Each year,
VINATEX produces 100,000 tons of 100-percent cotton and blended yarns; 3,000 tons of acrylic and
wool/acrylic yarns; 1,500 tons of thread; 250 million square meters of fabric; 50 million knitted
products; 80 million garments; and 150 million towels.
The Vietnamese government has been in the process of “equitizing” state enterprises such as
VINATEX – in other words, converting them into shareholding companies and distributing a portion of
the shares to management, workers, and private and foreign investors. According to Vietnam’s
Ministry of Finance, VINATEX was scheduled to equitize in 2008.
VITAS is a non-governmental, non-profit organization that represents the interests of all
foreign and domestic textile-based apparel businesses in Vietnam. It promotes Vietnamese textile
and apparel products in global markets and acts as an advisor to the government and other related
organizations.
In mid-2008, Vietnamese President Nguyen Minh Triet requested that VINATEX increase the
amount of domestic textile material it uses from 36 percent to a higher amount. “Only by increasing
local content, will the industry earn more from business value chains,” Triet said. The president
also asked the entire apparel and textile sector to focus on fashion design and improving apparel
quality by implementing more advanced production technologies. Triet sees such moves as ways to
help the industry improve its competitive position in the face of the current global financial
crisis.
The Future Of The Industry
In November 2008, the Ministry of Industry and Trade chaired a seminar on the development of
Vietnam’s textile and apparel industry after two years of WTO membership and the actions that need
to be taken to accelerate that development. The Ministry noted that though Vietnam has been in a
favorable position to enable the textile industry to boost the country’s economy and integrate into
the global market – as well as attract foreign investment and strengthen export activities
following the removal of many trade barriers – the country must commit to opening up its markets,
reducing tariffs and breaking down other protection barriers. Bui Xuan Khu, vice minister of the
Ministry of Industry and Trade, declared the primary target for the textile and apparel industry
until 2010 is to achieve an export turnover of US$10 billion to US$12 billion and produce goods
comprising approximately 50-percent domestic content. Other objectives include creating more
domestic jobs; improving competitiveness; integrating Vietnamese textiles and apparel into the
regional and global economy; and helping the sector remain the country’s principal export industry.
In addition, Vietnam’s Prime Minister Nguyen Tan Dung has approved a strategy for the
textile and apparel industry with development up to 2015 and a vision toward 2020 as its objective.
The concentration is on “specialization and modernization, creating a leap in terms of added value
of products,” with the implementation of three programs: cotton planting; high-quality woven
fabrics; and human resources training. To accomplish these goals, the sector plans to develop
40,000 hectares of concentrated cotton-growing areas in the central coastal and highlands
provinces; establish primary supply centers in Hanoi, Ho Chi Minh City, Da Nang and Can Tho; and
move plants from major cities to provinces neighboring the supply centers and establish apparel
factories; and train workers in production management, fabric design, skills analysis and sales
techniques.
Under the development plan, the textile and apparel industry aims to gain an export turnover
of US$12 billion and a 20-percent export growth rate by 2010. The sector appears to be on track to
reach these goals: it already achieved an 18-percent growth rate in 2008. The industry hopes to
gain an export turnover of US$18 billion and 15-percent growth by 2015, and an export turnover of
US$25 billion and 15-percent growth by 2020.
Recently, textile businesses worldwide have been moving some of their China-based operations
to Vietnam, where labor costs are lower in comparison to China, whose wages are on the rise. The
relocation of production facilities to Vietnam – along with government support of the industry,
increasing textile exports, strong renovation and economic reform, improved trade relations and
focused goals – should help Vietnam’s textile and apparel industry continue to expand.
January/February/March 2009