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Vietnam Textile and Garment Industry


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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.

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Vietnam Textile and Garment Industry

  2. 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. 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. 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. 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. 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. 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. 8. Country wise Export Share (in %) US, 40% Japan, 10%South Korea, 9% China, 10% EU, 14% Others, 17%
  9. 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$13.8 billion
  10. 10. Trade Agreements of Vietnam EU-Vietnam FTA This is first-ever FTA between European Union and a developing country. Under this FTA, import tariffs on textile fabrics from Vietnam into the EU will become zero at entry. Duty on Other Vietnamese textile products will be reduced to zero in seven years. Trade deal is likely to come into effect in 2018.
  11. 11. Trade Agreements of Vietnam EAEU FTA Vietnam has signed Eurasian Economic Union trade agreement along with Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan. The agreement came into effect in October 2016. Under the agreement, important tariffs have been reduced from 10 to 0. Vietnam exports apparels worth US$ 320 mn each year to Russia. It might reach around US$ 1 billion in few years.
  12. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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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  25. 25. Why Apparel Resources? Need relevant, in-depth information on the latest happenings and developments in the apparel, textile and fashion industry? You have landed at the right place!  Highlighting the best companies to source from  Delivering real-time industry news that matters  Covering all the industry events for innovation in products  Foretelling the trending apparel products  Tracking emerging markets  Tracking retailers & brands for their growth strategies  Forecasting fashion through street fashion and fashion weeks  Monitoring Trade data and projections  Discovering technology to improve quality and productivity  Interviewing companies for their best manufacturing practices