Monday, March 21, 2011

Vietnam Textile Industry Overview

Vietnam’s textile and garment industry has developed rapidly in recent years and has become a vital activity within the country’s economy. In 2004 it employed 2.1 mn people directly, representing 4.7% of total employment within the country.The industry has a number of leading textile and garment enterprises. One of the largest is the state-owned Vinatex, which accounted for an estimated 22% of Vietnamese textile and garment exports in 2006.
One of Vinatex’s affiliates, Viet Tien Garment Company, has invested more than US$10 mn during the past five years in order to upgrade its production lines. Most of this new equipment has been imported from Japan and Singapore. Also, in 2006 the sector exported textiles and garments to the value of US$5.8 bn, making it Vietnam’s second largest export earner after crude oil. Buyers from a number of the world’s leading textile and apparel companies have sourced apparel from Vietnam including Express, Hucke, Itochu, JC Penney, Jupitar, Kmart, Kowa, Lee Cooper, Li & Fung, Mast Industries, Nichimen, Nissho Iwai, Otto, Sara Lee, Seidensticker, Sumitomo, Tomen, Tommy Hilfiger, Victoria’s Secret, and Wal-Mart.

Three major developments over the past 20 years have led to the industry’s present vibrancy. One was the introduction in 1986 of the so-called Doi Moi economic reforms which notwithstanding the government’s communist leanings gave encouragement to the private sector and allowed market forces to determine the allocation of resources.

A second was the collapse of the Comecon (Council for Mutual Economic Cooperation) bloc in 1990-91 and that of the Soviet Union in 1991. These events caused initial hardship but prompted the country to forge links with the West and enter the international community. The third was the granting by the USA of normal trading relations (NTR) or most favoured nation (MFN) status in December 2001, which led to a dramatic reduction in import tariffs in the US market.

The future for the textile and garment industry in Vietnam looks promising. Vietnam joined the World Trade Organisation (WTO) at the beginning of 2007 and seems set to build upon its recent export success. Moreover, the Vietnamese government is highly supportive of the textile and garment sector, and there are strong incentives to attract foreign investment. The government has outlined ambitious plans for the industry’s development. If these plans are fulfilled, employment and exports in the sector will double by 2010.

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