Vietnam Textile Industry is changing
It is no coincidence that the Đổi mới, the economic reform undertaken in Vietnam in 1986, means “renewal” in Vietnamese. Since its establishment, Vietnam has evolved in a dazzling way and its economy is now one of the most open in the world. In fact, exports now account for more than two-thirds of GDP and international trade accounts for more than 100% of GDP, twice as much as China.
By lifting their embargo, the United States has also become Vietnam’s largest trading partner, with 16% of Vietnam’s exports taking over the US in 2014.
Moreover, in recent years, free trade agreements are flourishing between Vietnam and the developed countries. Important treaties enter into their final phase of negotiation and promise a good future in Vietnam especially as a destination for sourcing …
Producing clothing line in Vietnam
Since 2005, the textile and garment industry has been growing very strongly, with the potential to achieve an export turnover of more than $ 28 billion in 2015, an increase of 16% compared to 2014. The textile and apparel sector is also the 2nd largest export post after the oil industry and also accounts for 25% of Vietnam’s total industrial employment. Regarding the footwear market, Vietnam has nothing to envy to its neighbors since it is the 3rd world producer with more than 800 million pairs produced each year.
Openness to international trade has been a key factor in development, but Vietnam has already benefited from a number of assets: a skilled and cheap labor force, a stable socio-political environment, factories with experience in Subcontracting and craftsmanship developed.
Moreover, it should be stressed that the Vietnamese textile industry does much more than attract buyers of the major western brands, it diverts them from China … Although China remains the first textile producer, its role ” World “is more and more contested, which benefits the countries of South East Asia, and especially in Vietnam. China has long been attracted by its complete supply chain, which has limited subcontracting, but in 10 years China’s average wage has increased five-fold, which is challenging the functioning of Chinese factories, which are also constrained by Under treatment in South East Asia and especially in Vietnam, which has the most developed textile industry in the region. As a result, Vietnam is widely recognized as China’s main competitor for textiles with low added value.
In addition to benefiting from an abundant and cheap labor force, as well as its neighbors, Vietnam seeks to differentiate itself by setting up a real social dialogue. The government realized that low labor costs were not enough to attract buyers in search of new sourcing destinations. Western brands are now very attentive to the working conditions of their suppliers, so Vietnamese companies are creating a good working environment to attract international buyers and be more competitive than their competitors from the border countries.
The only black spot in the Vietnamese factories is that, up to now, they have been doing mainly “CMT” (cutting, sewing and finishing), that is to say, no technical textiles or fabrics or accessories. Modernize little by little and incorporate processes allowing the making of more complex and technical garments. In the next few years Vietnam should improve the quality of the clothes it produces. For now, for small scale production, Thailand is still the best place to produce apparel in asia.
Strong Apparel Manufacturing Advantages
Despite a challenging global economic environment in recent years, Vietnam has continued to expand into the world’s largest markets and this phenomenon is expected to continue. Indeed, behind the recent popularity of Vietnam as an apparel sourcing destination, there is a growing interest in the free trade agreements that will be concluded by Vietnam in the coming months:
– The Trans-Pacific Partnership Agreement (TPP): 12 signatory countries including Vietnam, the United States and Japan
– Free Trade Agreement between the EU and Vietnam
These agreements will benefit both the importing countries, which will be able to import their products from Vietnam without being taxed; And Vietnam, which will see its exports increase significantly in volume and value.
Experts believe that the textile and factory clothing sector will benefit most from free trade agreements. The majority of Vietnamese textile products will be exempt from customs duties, which is not insignificant when it is known that they now face a customs duty of 12% in the EU and 18% in the United States. This gives additional reasons for textile importing countries to turn to Vietnam for their sourcing. Moreover, with a cheaper labor force than in China and so favorable tariffs, transfers from China to Vietnam should continue and even grow.
The TPP is the agreement that is expected to have the most impact on the Vietnamese clothing industry as it is signed with the United States and Japan, Vietnam’s two largest textile outlets . As for the free trade agreement between the EU and Vietnam, it will strongly encourage European brands to embark on “Made in Vietnam”.
However, these agreements are not made without some sacrifices on the part of Vietnam. Indeed, they are subject to the rule of origin … the TPP stipulates, for example, that “exporting companies shall be exempt from any tax provided that the raw materials originate in Vietnam or in one of the signatory countries, agreement”. This will become a problem for Vietnam if it continues to import most of its raw materials from China.
Nevertheless, with the signing of these agreements, Vietnam becomes the only developing country to be part of both the TPP, the ASEAN and the EU’s Generalized System of Preferences. The agreements only reinforce the many advantages of Vietnamese sourcing for the ready-to-wear brands of the signatory countries.