Vietnam is one of the world’s top apparel exporters. But 70 per cent of its textile makers are working as sub-contractors on medium and small scales and are still weak in fiber manufacturing, weaving and dyeing. Almost all input materials come from China and Korea. The rate of locally-made products in the sector stands at a mere 55 per cent due to the weak weaving and dyeing capability.

Weaving and dyeing projects fail to receive licenses due to their high risk of environmental pollution. What’s needed is zoning off regions and areas exclusively designed for weaving and dyeing and equipped with infrastructure and waste treatment facilities.

Vietnam faces another challenge. Once the Trans-Pacific Partnership (TPP) comes into force, regulations on the origin of goods will follow. Vietnam must follow TPP’s yarn-forward rule of origin which requires that only textile and apparel products using the US and other TPP countries’ yarns and fabrics qualify for the benefit of the agreement.

The strength of Vietnam’s textile and garment industry is that only a small capital investment is called for. The payback period is quick because of a short capital turnover. The industry gets preferential policies. Greater product differentiation and specialisation can boost margins.