The textile and clothing (T&C) exports from Vietnam are rapidly touching heights. Over the years, it has shown promising growth in the T&C exports and the last year only it surpassed Bangladesh to become the 2nd largest garment exporter in the world after China. Team Apparel Resources has made the presentation for its readers to let them know about the T&C industry of this South East Asian country.

1. AN OVERVIEW OF VIETNAM
TEXTILE & GARMENT INDUSTRY
Prepared by:

2. Content
1. Country Overview
2. Glimpse onVietnam’sT&C Industry
3. Facts aboutVietnam’sT&C Exports
4.Year wiseT&C Exports fromVietnam
5. Country wiseT&C Exports fromVietnam
6. Country wise Export Share (in %)
7.Trade Agreements ofVietnam
8. Investment Procedure inVietnamT&C Industry
7. Logistics Scenario inVietnam
8. Growth prospects of the Industry
9. Challenges faced by the Industry
10. Initiatives taken by the Government

3. Region
Population
96 million
(as of July 2017)
Surface
Area
Capital
Hanoi
GDP
47th rank in the world
with 6.81% GDP
growth in 2017
South-Eastern Asia
331,210 square kms
Country Overview

4.  Around 6000 textile and
garment manufacturing
companies are situated
in country. Out of them
84% are privately
owned.
 The textile and clothing
industry employs around 2.5
million people in Vietnam.
 Minimum wages for garment
workers in the country varies
from US$ 180 to 220.
 Vietnam is the 2nd largest
garment exporter to the USA
as well as to the world. It beat
Bangladesh to climb up the
garment supplier tally in 2017.
 The major garmenting hubs of
Vietnam are Hanoi, Ho Chi
Minh and Da Nang.
VIETNAM
GARMENT
INDUSTRY
Glimpse on Vietnam’s T&C Industry

5. Facts about Vietnam’s T&C Exports
Vietnam’s textiles and apparels go to 180 countries and territories.
Main export markets for Vietnam are US, Europe, Japan and South Korea.
Despite the closure of TPP agreement with the US and the post-Brexit of
the UK, the total T&C exports valued at US$ 31 bn in 2017.
The export value in 2017 was 10.23% higher than the year 2016.
In 2017, apparel exports were 16% of the country’s total exports.
FACTS

6. Year wise T&C exports from Vietnam
17.9
20.9
22.8
23.8
31
34
2013 2014 2015 2016 2017 2018E
Export value in US$ billion

7. Country wise T&C Exports from Vietnam
10.8
11.56
2.9 3.2
2.28
2.73 3.23.5
4.2
0
2
4
6
8
10
12
14
2016 2017
INBILLIONUSD
US Japan South Korea China EU

8. Country wise Export Share (in %)
US, 40%
Japan, 10%South Korea,
9%
China, 10%
EU, 14%
Others, 17%

9. Vietnam T&C Exports
(Current Scenario & Expectations)
Expected
target for 2018:
US$ 34 billion
Export value of
T&C exports
during Jan-Mar
‘18:
US$ 7.62 billion
The industry
has achieved
22.4% of target
in
Q1 ’18.
Export revenue
generated with
the US in Q1 is
US$ 3.14
billion
Expected T&C
exports to US
in 2018:
US$13.8 billion

10. Trade Agreements of Vietnam
EU-Vietnam
FTA
This is first-ever
FTA between
European Union
and a developing
country.
Under this FTA,
import tariffs on
textile fabrics from
Vietnam into the
EU will become
zero at entry.
Duty on Other
Vietnamese textile
products will be
reduced to zero in
seven years.
Trade deal is likely
to come into effect
in 2018.

11. Trade Agreements of Vietnam
EAEU FTA
Vietnam has signed
Eurasian Economic
Union trade
agreement along
with Russia, Belarus,
Kazakhstan, Armenia
and Kyrgyzstan.
The agreement
came into effect in
October 2016.
Under the
agreement,
important tariffs
have been reduced
from 10 to 0.
Vietnam exports
apparels worth US$
320 mn each year to
Russia. It might
reach around US$ 1
billion in few years.

12. Trade Agreements of Vietnam
CPTPP
Comprehensive
and Progressive
Agreement for
Trans-Pacific
Partnership
(CPTPP), is also
known as TPP11.
It came into
effect formally on
March 8, 2018 in
Chile.
CPTPP accounts
for 13.5% of total
global economy
and 15.2% of
total global trade. Under CPTPP,
Vietnam’s
exports is
expected to
surge by 4.2%.
Vietnamese
enterprises now
shall become
free from trade
restrictions.

13. Investment procedure in Vietnam
Establishment of a new
enterprise:
• The investor must register
an ‘investment project’,
which is defined as a set of
proposals for the
expenditure of medium and
long-term capital in order to
carry out investment
activities in a specified
geographical area and for a
specified duration.
Acquisition of, and
investment in existing
enterprise:
• By acquiring shares / capital
of an existing Vietnamese
enterprise. Precise
procedure for this route
depends upon the form of
target entity and foreign
ownership ratio, etc.
Public Private
Partnership or Business
Cooperation Contract
route:
• Investors may receive
certain incentives from the
Government when investing
in projects under PPP route,
such as fixed input prices
and output consumption
guarantees, a flexible
foreign exchange regime,
and tax breaks. Business
cooperation contract (BCC)
is a written contract
between investors, agreeing
to cooperate to undertake
certain business activities
and to share the profits or
products arising from such
activities.

14. • From Investment
Registration Division
of provincial
Department of
Planning and
Investment (DPI)
OR
• From Management
Board of special
purpose zones
Apply for
Investment
Registration
Certificate
(IRC)
From Business
registrar division
of provincial DPI
after obtaining
IRC
Apply for
Enterprise
Registration
Certificate
(ERC)
Investment by way of establishment of a new legal Entity
Investment procedure in Vietnam

15. Investment by way of Contractual Arrangements
Business Cooperation Contract route
• Apply for an IRC from Investment Registration Division of provincial DPI; or
Management Board of special purpose zones, then
• Apply for Certificate of Operation Registration (COR) for the foreign investors’ project
offices from Business Registration Division of provincial DPI
PPP (public private partnership)
• Apply for an IRC from Ministry of Planning and Investment; or Local People’s
Committee, then
• Apply for ERC from Business Registration Division of provincial DPI
Investment procedure in Vietnam

16. Apply for approval
for share/capital
acquisition to
Investment
Registration
Division of
provincial DPI
Apply for updating
the new
shareholding
members to
Business
Registration
Division of
provincial DPI
Apply for updating
the new investor
from Investment
Registration
Division of
provincial DPI
Investment by acquisitions of shares/capital
Investment procedure in Vietnam

17. Logistics scenario in Vietnam
 Vietnam’s Liner shipping
connectivity Index (LSCI) is 46.4.
It is higher than some neighbors
such as Cambodia, Indonesia,
Philippines
and Thailand.
 There are around 100 ports
throughout the country. Major
ones are located in Hai Phong,
Da Nang and Ho Chi Minh City.

18. Logistics scenario in Vietnam
New Ports Coming in
1. A mega port at
Hon Khoai in Ca
Mau province is
being built and will
be completed by
2020.
2. The port will
accommodate ships
with a capacity of up
to 250,000 DWT
(Dead Weight
Tonnage).
A
1. Long Thanh
airport at southern
province of Dong Nai
is also coming up.
2. This airport will
become the largest
airport in Vietnam
accommodating up
to 1.2 million of
cargo a year.
B

19. Growth prospects of the industry
 The rapid rise of FDI in Vietnam’s textile and cpparel industry makes it an attractive
destination in Asia for textile investment. The FDI in this sector accounts for 21% of
the country’s total FDI.
 Around 123 investment projects have been registered in Vietnam by Chinese
investors in initial months of 2017. Out of them, one of the largest is of US$ 220
million i.e. a Vietnam polyester synthetic fiber plant in central Tay Ninh province.
 In early 2017, South Korea has committed an amount of US$ 2 billion capital
investment in Vietnam’s textile and garment industry.
 Vietnam has upper hand in high-value products and exports of these products are
continuously rising.

20. Challenges faced by the T&C Industry
 As most of the Vietnamese manufacturers produce for foreign brands, their
production and profits are affected by global economic fluctuations.
 The industry depends highly on the import of machinery equipment, raw materials
and accessories. As a result, their profit margins are reduced and their
manufacturers become vulnerable to foreign cost fluctuations.
 Rising cost of electricity, transportations and an increase in minimum wages are
leading to an increase in textile production cost in the industry.

21. Challenges faced by the T&C Industry
 The country faces tough competition from Cambodia and Bangladesh, as their
labour wages are lower than that of Vietnam.
 A large number of garment manufacturing factories works as OEM/ODM
enterprises for foreign players. These are all established manufacturers and big
brands prefer them only.
As a result, the industry becomes tough for the new entrants especially for small-
scale enterprises.
 The technological advancement and capital richness of foreign companies in
Vietnam makes the locals suffer.

22. Initiatives taken by the Government
 To overcome the high cost of raw materials, the government had started investment
plans in this segment long back. As a result, in 2006-2015, the country was the
second biggest investor in the development of shuttle less looms and the biggest
investor in ring spindles and open-end rotors, amongst the ASEAN countries.
 The Government has given a push to enhance value-adding capabilities of the
apparel manufacturers, develop their own brands, become original design
manufacturers (ODMs) rather than function only as subcontractors.
 With the establishment of cotton manufacturing units in “Rang Dong Industrial Park”
having a production value of US $3 billion on an annual basis, the country has
shown a remarkable growth in knitting sector.

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