Foreign direct invested (FDI) firms account for 60 per cent of Vietnam’s total garment and textile export revenue. There are 3,000 garment and textile firms in Vietnam, 25 per cent of which are FDI firms. Foreign firms are expected to continue ramping up their investments throughout the year in anticipation of forthcoming free trade agreements. Vietnam is currently negotiating entry in the Trans-Pacific Partnership agreement. If the trade negotiations are successful, Vietnam would be able to either halve or nullify the 17 per cent duty the US levies on Vietnam’s garment exports. In expectation of this, foreign firms are implementing major investment projects in the textile and garment sector throughout the country.
To secure duty-free status, Vietnam must agree that all manufacturing processes, including yarn spinning, knitting and dyeing, will be carried out in TPP member countries. If Vietnam obtains duty-free status, that would help fuel further inflows of FDI into Vietnam. Currently, the major players in the Vietnamese garment and textile industry are China, Hong Kong, and Taiwan. However, South Korea, Japan, Australia, and the US are also looking for larger investment opportunities due to investors’ anticipation of Vietnam fully opening its market in line with World Trade Organization commitments and the signing of the TTP agreement.