Despite recording impressive growth figures in recent years, Vietnam’s textile and apparel sector has failed to become deeply involved in the global supply chain. Most domestic businesses in the sector outsource to foreign businesses. Although the nation has recorded a trade surplus in yarn and garments, it has suffered a hefty trade deficit in fabric and fiber. Domestic fabrics meet less than 50 per cent of the sector’s demand, forcing the country to import huge amounts of fabrics every year. Yarn output over the last 20 years has grown 12-fold. Local firms during 2019 produced over 2.5 million tons of yarn, of which exports reached more than 1.5 million tons, while fabric output also soared by six times. In spite of these strong figures, products supporting the garment and textile sector failed to meet demand, especially garment products for exports. The supporting industry has been unable to produce fabrics and raw materials that meet requirements regarding quality and diversification of goods.

If Vietnam is unable to meet the goods origin requirements under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and the EU-Vietnam Free Trade Agreement, then it will face challenges when it comes to enjoying the preferential treatment from these free trade agreements.