Strength of Vietnam Textile and Garment Industry

VIETTRADE - Vietnam’s textile and garment sector has seen fast and sustainable growth over the past years, playing an important role in national socio-economic development. Demand for labor in the sector is huge. Every year, the sector gives employment for 2.2 million people, generating income for the workers. Export value of textile and garment products in recent years has been ranking number two in the country’s total export revenue, earning a major source of foreign exchange and contributing significantly to Vietnam’s gross national product and budget.
Vietnam has advantages: only small investment capital required; a quick playback period because of short capital turnover; lots of preferential policies from the State because of providing much employment; and large domestic consumption - Vietnam is home to a population of almost 90 million. Related to the latter, there is a vast pool of young, skilled Vietnamese workers more than willing to work for low wages.
Vietnam’s joining the WTO in 2007 provided it tremendous opportunity to develop. Vietnam receives equal treatment and benefits in preferential trade just like other members of WTO; further, it can access world markets conveniently. Right away, the textile and garment sector took strong and stable development steps. Vietnam is a top 10 country in textile and garment exports. Despite the recent global economic downturn, the sector is seeing impressive export performance. Export revenue exceeded US$11 billion in 2010, up 24% against 2009, US$14 billion in 2011, accounting for 16.5% of the country's total export revenue and up 38% against 2010.
Vietnam can be proud of this commendable performance. Consider that its textile industry was the only sector in the country to maintain its overall growth and export earnings compared to the previous year. This resulted largely from the sector’s maintaining its traditional export markets (the US, EU, Japan), and expanding to new export markets (Korea, Taiwan, the Middle East, and Singapore) as well as marketing to the domestic market.  The sector targets to ship US$15 billion in 2012, an increase of 11% against 2011.
Such achievements are attributable to enterprises' competency in building up and consolidating partnership with major importers throughout the world, while taking advantage of Vietnam’s abundant low-cost but skilled labor force. There are promising signs for the garment and textile industry as the global economy is bouncing back.
The Vietnam Textile and Garment Association (VITAS) notes the strategy for Vietnam Textile and Garment Industry development for 2015-2020 is: (i) production growth from 12-14% a year, (ii) export growth at 15% a year, (iii) providing employment to 2.75 million people in 2015 and 3.0 million people in 2020, and (iv) export revenue attaining US $18 billion dollars in 2015 and US $25 billion dollars in 2020.

< Source: VITAS >

Strengths of the Vietnam textile and garment industry
* Vietnam Textile:
- Plentiful competitively-priced labor - Vietnamese salaries are lower than those in China, giving the country a distinct cost advantage; and
- Supportive government policies, including incentives to attract foreign direct investment.
- Main opportunity will be provided by the expected export-based recovery of the local garment sector that kicked in from 2011, which boosts demand for textile inputs; and
- Industry restructuring over the next two years that should result in attracting new investment and boosting productivity.
* Vietnam Apparel:
- A generally supportive government policy, allowing, for example, duty-free imports of raw materials on the condition they are re-exported as clothing products within 90-120 days; and
- The Vietnamese industry has shown capacity to react quickly and flexibly to new orders.
- Development of ‘non-traditional’ markets for Vietnamese clothing products holds out promise: the industry is looking at the Middle East and Russia as important new opportunities in this regard; and
- Greater product differentiation and specialization may boost margins – for example in functional work-wear, home furnishings, and other niche markets.