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Reliance on imports hinders Vietnam’s textile and garment industry

Weak support industries and the heavy reliance on material imports are the biggest obstacles for Vietnam’s textile and garment industry development. It is necessary to make appropriate investments in supporting industries. Vietnam’s enterprises are still doing outsourcing for foreign partners, with 65 per cent imported inputs.

Free trade agreements allows Vietnam enterprises to enjoy preferential tariffs and a competitive edge to enter member markets. The textile and garment sector is one of the industries enjoying the most benefits from these agreements. However, the benefits only occur if Vietnam can satisfy rules of origin. Under the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership), for example, Vietnam’s products must satisfy the yarn forward rule to be able to enjoy preferential tariffs. For EVFTA (EU-Vietnam Free Trade Agreement), it is the fabric forward rule. This means that the yarn used to form the fabric and the fabric used to produce textile and garment products must originate from Vietnam or FTA member countries. However, Vietnam is weak at producing yarn and fabric and these input materials are mostly imports.

One way is to establish a timeline for developing weaving and dyeing industries. Another way is establishing textile and garment clusters, which not only comprise yarn, textile, dyeing and garment companies, but also downstream enterprises.