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Vietnam's firms need to restructure to grow exports

Vietnam's garment and textile industry is facing challenges. A shortage of capital and backward technology, along with weak management capacities, has created difficulties for businesses.

Vietnam has some 5,000 businesses in the sector. Most of them are small- and medium sized enterprises. They work with machines purchased 20 years ago. In the first half of the year, Vietnam’s garment exports to markets participating in the Trans Pacific Partnership accounted for 70 per cent of its total export value. But domestic garment and textile companies have not been able to invest in modern technology lines to enjoy benefits of the free trade agreement.

There are just a few enterprises engaged in all stages of manufacturing, from cotton to finished product. Local firms depend a lot on imported materials, and this in combination with low productivity makes it difficult for them to enjoy the benefits from FTAs. The value added in garment exports is still limited, despite high growth rates of 15 to 20 per cent a year. Domestic garment and textile companies have not been able to develop their own markets and products.

Businesses need to restructure to improve their competitiveness. Experts point out that the Trans Pacific Partnership would bring a wave of foreign investment in the garment and textile industry in Vietnam. The country would have a wider market and investors would gradually shift their production to the country.

 
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