Vietnam eyes soaring textile and clothing exports by 2010
Vietnam plans to double the value of its textile and clothing exports from US$4.8bn in 2005 to US$10bn by 2010, according to a new report by Textiles Intelligence. At the same time it hopes to double the number of people working in the industry from 2m to 4m.
Vietnam's textile and clothing industry plans to achieve these targets by streamlining production and thereby reducing unit costs to boost international competitiveness. On the way towards achieving its 2010 objective, the industry has set an export target for 2007
Export growth since 2000 has been steep. It was particularly strong in 2002 at 40% and in 2003 at 33%.
But growth in 2005 slowed to just 9.4%. This was due mainly to the fact that quotas restricting imports from other Asian countries were eliminated at the beginning of the year but imports from Vietnam into the USA - Vietnam's largest export market - were still subject to quotas. US retail buyers therefore turned to countries such as China and India for their clothing.
In 2006, however, the USA implemented safeguard quotas on several categories of Chinese textiles and clothing, with the result that buyers returned to Vietnam. As a result, Vietnamese exports soared by 20.8% to US$5.8bn.
Another milestone was reached on 11 January 2007, when Vietnam joined the World Trade Organization (WTO) and the USA was obliged to remove all quotas on textile and clothing imports from the country.
This removal of quotas is widely expected to boost US demand for Vietnamese clothing, especially for lower-end products.
Exports will have to increase by 20.7% in 2007 to reach the government's interim goal of US$7bn. However, if this is achieved, average growth of just 12-13% per annum between 2007 and 2010 will be enough to reach the government's US$10bn goal.
Investment plans for increased exports
In order to achieve its goal, the Vietnamese government has come up with two main policy objectives.
• One is to shift the focus in garment manufacturing from CMT (cut, make and trim) to FOB (free on board) production.
• The other is to increase the domestic content of garment production by investing in cotton production, and in spinning and weaving facilities.
The government has also identified three other aims for the industry.
• One aim is for the industry to build on its existing reputation for high quality by moving from the lower end of the market to the mid-range and the high end of the market.
• A second aim is for the industry to become more efficient in the sourcing of materials. This is to be achieved by:
- increasing Vietnamese textile production;
- implementing more efficient import sourcing methods; and
- achieving further vertical integration by adding upstream capacity.
• A third aim is to increase the competency and productivity of the industry by enhancing research, training and development.
The government is planning to invest around US$3bn in developing the textile and garment sector during the run-up to 2010. It is envisaged that US$180m will be spent on projects to expand raw material supplies, US$2.27bn on textile and dyeing projects, US$443m on garment projects, and US$200m on trade centres and personnel training.
Meanwhile, state-owned Vinatex plans to invest over US$1bn in 24 key expansion projects from 2006 to 2010. According to Vinatex, these projects aim to develop production and distribution systems, fashion design and infrastructure.
One sector targeted for expansion is raw cotton production. To process the additional cotton produced, Vinatex plans to invest US$26.7m in the construction of five new cotton processing mills during the next two years in a bid to satisfy demand for raw materials from the country's textile producers.
Further down the supply chain, Vinatex expects to produce over 400m square metres of fabric per annum by 2010, including 270m square metres for export.
Vietnam currently relies on substantial imports of fibres, yarns, fabrics and garment accessories to feed its expanding apparel industry. In 2004 the value of imports of these items reached US$4,601m - more than double the US$2,284m worth of imports absorbed in 2000.
Imports of cotton, yarn and fabrics reached US$3,722m in 2006 - more than treble the US$1,089m worth of imports absorbed in 2000.
The most important import item is fabric, upon which Vietnam's garment industry is heavily dependent. In 2006 fabric imports were worth US$2,954m, compared with only US$761.3m in 2000. Thus fabric imports rose in value by 288% over the six-year period.
The government has a clear strategy of increasing the supply of domestically produced inputs such as raw cotton, yarns, fabrics and garment accessories. Its overall aim is to reduce the import content to less than 25% by 2010.
Investment in modern machinery has soared in recent years. During 2006 the industry added 171,720 new spindles and 5,840 open-end rotors. This followed an extended period of expansion during the ten-year period 1997-2006 when 840,132 spindles and 19,784 open-end rotors entered service.
In the weaving sector the industry added 6,012 shuttleless looms during 1997-2006, of which 1,357 alone were added to the industry's capacity in 2006 following the addition of 476 in 2005. This shows convincingly the move towards modern manufacturing technology.
The Vietnamese textile and clothing industry has also managed to attract a substantial amount of foreign investment. The largest foreign investor in the Vietnamese textile and clothing industry is Taiwan, followed by South Korea and Hong Kong.
"Prospects for the Textile and Garment Industry In Vietnam" was published by Textiles Intelligence in Issue No 129 (May-June 2007) of Textile Outlook International.
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