Vietnam ranks as one of the five largest apparel exporters globally

Vietnam ranks as one of the five largest apparel exporters globally

Vietnam's apparel exports in 2016 are expected to hit targets of US$29bn, although manufacturers are being urged to look at ways to offset competition and rising costs if this figure is to be surpassed next year.

The 2016 export value is higher than the $27.5bn achieved in 2015, but is lower than an initial export target of $31m. 

"The problem for the textile industry is labour cost increases, which have led to increased costs," says Nguyen Thi Tuyet Mai, deputy secretary general of the Vietnam Textile and Apparel Association (VITAS). "This is also the cause of a recent trend to shift orders from Vietnam to Cambodia and Myanmar."

Vietnam ranks as one of the five largest apparel exporters globally. Textiles accounts for around 10% of the country's total industrial production value, with apparel at around 20%. The latter sector employs around 2.5m people across 2,500 factories. 

According to the Association, China remained the industry's largest export market in 2016, accounting for more than half of its export value. Exports to the US are estimated at $11.4bn, up 4% against last year; while the EU, Japan, India, Brazil, Russia and Canada were also large importers of Vietnam's apparel in 2016.

In a bid to boost exports, however, VITAS is calling on Vietnam's garment firms to improve design, production management skills, increase labour productivity, change production from pure outsourcing to FOB, and offer more added value to brands. 

Vietnam had been widely expected to be one of the biggest beneficiaries of the Trans-Pacific Partnership (TPP) trade agreement, but this is now in doubt after US president-elect Donald Trump said he will take steps to withdraw from the pact on his first day in the White House in January. 

Trump to pull US from TPP on first day in office

Vietnam does, however, stand to gain from improved access to the EU import market once the EU-Vietnam free trade agreement comes into force in 2018. The agreement will eliminate 99.8% of duties on European products gradually over a ten year period. 

Upcoming Vietnam FTA set to boost EU retailers

Garments and textile exports to the EU rose 4.2% year-on-year in the first eight months of 2016 to $15.5bn, and footwear climbed 8.1% to $8.6bn. 

Given the sensitivity of the sector, the full elimination of the tariffs under the EU-Vietnam FTA will be staged over seven years. Rules of origin conditions for garments will require the use of fabrics produced in Vietnam, with the only exception being of fabrics produced in South Korea, another FTA partner of the EU.

A separate article published on just-style this week looks at the likely impact that the loss of the TPP will have on Vietnam:

Business as usual for Vietnam sourcing without TPP