Quotas on textile and garments exported from Vietnam to the European Union are to be removed from 1 January 2005 after an agreement was signed between the two countries on Friday.

Vice Trade Minister Luong Van Tu and ambassador Markus Cornaro, who is heading the EU delegation to Vietnam, signed the deal in Hanoi, although it still needs final approval from both sides before coming into effect.

The EU is Vietnam's second biggest textile and garment export market after the US, with exports this year totalling US$633 million. 

Minister Truong Dinh Tuyen said: "The agreement will create favourable conditions for our garment enterprises to develop on their own accord and actively enter the EU market."

Vietnam's garment industry has recently been troubled with allegations that the country's officials took bribes from businesses in return for quota allocations on exports to the US.

Over a dozen people, including Vice Trade Minister Mai Van Dau, have so far been arrested in connection with the accusations.

Quotas were imposed on Vietnam when it first signed a textile and garment agreement with the EU in 1992. The removal of EU quotas will help the country to retain its competitive edge as it prepares to join the World Trade Organisation. WTO members will be able to trade quota-free from 1 January 2005.