Vietnam’s exports grew 16.9 per cent in January-August. The country is on track to become the world's second biggest exporter of textiles and clothing this year. Textiles and clothing are Vietnam’s second biggest export and its leading industrial employer. Despite rising labor costs, the sector remains highly labor intensive, employing 2.7 million workers. That means five per cent of the country's total labor force and 20 per cent of its industrial workforce are engaged in producing textiles and clothing.

A combination of demographic and geographic advantages as well as an openness in trade policy gives Vietnam an edge over its competitors. The prospect of free trade agreements with the EU -- expected to be ratified this year -- and the original Trans-Pacific Partnership led to a jump in foreign investment. About half of the overseas investments in Vietnam's clothing and textile sector since 1998 have been invested in the past five years.

But Vietnam also needs to move up the value chain if it is to diversify into overseas markets. The country currently exports nearly half of all of its textiles and clothing to the US. As the country’s trade surplus with the US balloons, Vietnam will need to move up the value chain by developing homegrown textile manufacturing if it is to diversify into new markets.