Since accession to WTO, along with signing of numerous trade agreements, Vietnamese textile and garment industry has gained impressive achievements with the average growth rate of nearly 22 percent/year. Vietnam is the second largest textile supplier to the US market, the third to Japan and the fifth to the EU. In addition to promoting and expanding the export market, Vietnam has succeeded in attracting FDI-invested projects in the textile industry.

 

Due to higher labour costs, many countries have been shifting textile production to other developing countries with lower costs including Vietnam. FDI-invested enterprises not only attach importance to investment in factories in Vietnam to take advantage of labour force and other local incentives in the context of increased local garment demand but also lay special focus on accelerating procedures of acquisition of Vietnamese enterprises.

 

In some countries that are interested in the investment in Vietnam's textile and garment industry, Korea is emerging as one of the potential new markets with export growth in 2011 achieving 145 percent against 2010, equivalent to US$905 million which is contributed by 80 percent of wholly Korea-invested enterprises in Vietnam. Especially, while FDI attraction from some countries and territories such as Taiwan and Japan, is getting harder, in late 2011 and early 2012, Korean companies continued to have projects started in Vietnam namely fibre manufacturing factory project of Vietnam Kyung Bang Ltd., Hansae Co. project of Hansae group, export garment factory project in Cau Ngang district (Tra Vinh) of Grace Vina Ltd. In 2007, there was a total of US$5.4 billion of FDI investment in the textile and garment industry. This trend is assumed to continue in the following years. In the period of 2007-2012, as many as 485 FDI projects were invested in the textile and garment industry with total registered capital of over US$2 billion. It is such a dramatic increase in FDI investment in the textile and garment industry that has brought about growth leverage for the whole industry.

 

According to the statistics of General Department of Customs, in the first nine months of 2012, textile exports continue to lead the country’s exports with a total value of US$11.25 billion (excluding exports of textile materials and accessories), up seven percent over the same period last year (US$10.5 billion). However, according to Ms Dang Phuong Dung, General Secretary of the Vietnam Textile and Apparel Association (VITAS), this growth is attributed to the contribution of FDI-invested enterprises rather than domestic ones. Though garment orders are generally rather modest this year, FDI-invested enterprises in Vietnam still obtain orders from the overseas parent companies which undertake marketing task quite successfully. In addition, as there are a number of small enterprises that have been closed, FDI-invested enterprises have no difficulty in recruiting workers as the previous years. According to VITAS, FDI-invested enterprises accounts for around 25 percent of the textile and garment industry in terms of number of enterprises which churn out an export turnover accounting for 60-65 percent of total exports of the industry in 2011.

 

Obviously, FDI-invested enterprises plays a very important role in the growth and development of Vietnamese textile and garment industry. To reduce the competition pressure in the current period, it is essential that Vietnamese textile and garment industry attract more investment, especially FDI source. Mr Le Tien Truong, VITAS’s Vice President and VINATEX’s permanent deputy general director recommends that FDI-invested actively participate in Vietnamese professional associations and call for foreign investment. Moreover, legal environment needs to be developed in a transparent and effective way so as to facilitate FDI-invested enterprises’ operation and development especially for the ones operating in textile and garment industry.

 

(Source: VCCI News)