Department store chain JC Penney may abandon plans to invest in Vietnam if an agreement on US-set quotas is not finalised by later this month.

The Texas-based retailer reached an agreement with Thai Binh Province and the Financial Business Solutions Corporation in November, to house five JC Penney garment-producing apparel plants in the latter body's 100-hectare Cau Nghin industrial park.

However, the validity of the agreement now rests upon the local Ministry of Trade (MoT) granting the required quota.

Under existing quota allocation mechanisms, only 2 per cent of the total quota for the US market can be allocated to new garment plants.

Five per cent of the total quota, meanwhile, is reserved for big purchasers from the US, including JC Penney.

The MoT said it would consider dipping into the quota reserve fund, which makes up one per cent of the total quota, if it decided to green-light the project.

Unfortunately for JC Penney, though, insiders speculate that about 90 per cent of next year's quota has already been allocated.

In 2003, Vietnam's quota for the US market was capped at $1.7 billion.

JC Penney, which currently imports $200 million worth of garments and textile from Vietnam each year, is hoping to increase imports to $500m a year by 2005 if the new agreement is finalised.