Vietnamese Textile and Garment Industry Would Invest More in Yarn and Fabric Production

In order to take full advantage of the proposed Trans-Pacific Partnership (TPP) agreement, which is likely to be finalized this year, Vietnamese textile and garment industry would have to invest more in domestic yarn and fabric production.

It is because the TPP is likely to incorporate the ‘yarn forward’ principle, wherein Vietnamese garments made using yarn and fabric made in any of the 12 TPP member countries would be able to enjoy lower tariffs for exporting to the other TPP members, including the US.

However, at present, most of the yarn and fabric imported by Vietnam comes from China, which is not a member of the TPP. This requires that Vietnamese firms make heavy investments in textile manufacturing, processing and dyeing sectors.

But, such projects do not get quick environmental clearance for the fear of pollution, and hence these projects would also need to set up waste water treatment plants, which shoot up the cost of constructing the textile plants.

Meanwhile, some foreign companies have moved ahead with their plans of setting up textile manufacturing units in Vietnam. Among them is China’s Jiangsu Yulun Textile Group, which is constructing a plant in Nam Dinh province at a cost of US$ 68 million. On completion by mid-2016, it would annually produce 9,816 tons of yarn and 21.6 million metres of fabric and would have capacity to dye 24 million metres.

But, Vietnam would need more such investments in order to take full benefit of the TPP, which is expected to reduce the tariff on Vietnamese garments for the US, Canada and other markets to zero from the current rate of 17-32 percent.