A garment worker of Phong Phu Corporation checks the weaving machine in HCM City .— Photo tuoitre.vn

by Minh Huong

HA NOI (Biz Hub) – Development of Viet Nam's textile industry has jumped ahead of the nation's other industrial sectors, according to latest data from the Ministry of Planning and Investment. Textiles saw an increase of nearly 27 per cent in January of this year, compared with an average increase of just 3 per cent across other sectors.

During 2013, the local garment industry achieved its highest ever export turnover of US$20.4 billion.

However, despite the good news, industry leaders say that more needs to be done to take full advantage of the Trans Pacific Partnership agreement, which could remove the existing 17 per cent import tax on textile products from Viet Nam.

Viet Nam has the most to gain among the current 12 nations participating in the agreement, said Chairman of the American Chamber, Steven Winkelman, at the Vietnam Business Forum recently.

While the terms of the TPP are still being negotiated, the member nations – which include the US, New Zealand, Singapore, Australia, Canada and Japan – encompass 800 million people, around one-third of world trade and nearly 40 per cent of the global economy, representing a huge market for the Vietnamese textile industry.

Pham Xuan Trinh is the General Director of the Phong Phu Textile and Garment Corporation – one of very few Vietnamese textile enterprises with a full "yarn-forward" chain in place – as required by TPP regulations. Trinh told Biz Hub that his company has reached $200 million in export turnover and hopes to achieve more during 2014. The corporation is now eagerly waiting for the TPP agreement to be finalised, he said.

Instead of opting to buy less expensive Chinese materials, Trinh's firm carries out all stages of garment production, from dyeing to spinning and weaving. As a result, the Phong Phu Corporation will make the most of the TPP's "yarn forward" or ROO (Rule of Origin) regulation, in which members are required to use a TPP member-produced yarn in textiles in order to receive full duty-free access.

Trinh's company currently produces yarns, towels, denim fabrics, garments and sewing thread of all kinds to serve the local market, and to export to the EU, US and Japan.

Trinh told Biz Hub that his corporation is doing well and is preparing to gain from the possible advantages that the TPP agreement could bring.

The agreement could definitely heat up competition between local and foreign investment (FDI) companies, he added – although in some cases the advantage might be with the foreign investment companies.

Unlike Phong Phu, most of Viet Nam's other 6,000 textile companies do not have the whole chain from yarn to product in place.

Nguyen Ngoc Anh, Director of a textile company in the north of Viet Nam, said that his company, for the most part, uses fabric materials sourced from outside the TPP member countries. Only 5 per cent of the company's materials are sourced from Vietnam, due to a local shortage in materials, he said.

At the same time, according to a report on the TPP by the Viet Capital Securities Company in July, Viet Nam has attracted more foreign makers of yarn, cloth and apparel for new factories to provide materials for Vietnam-based garment and textile firms. This represents an estimated investment of more than $900 million across Viet Nam.

Meanwhile, the local market leader, the Viet Nam Textile and Garment Group (Vinatex), plans to expand production over 42 projects with a total investment of VND6.3trillion ($300 million) – the majority of which will focus on spinning and weaving. The group's revenues recently reached VND45.6 trillion ($2.17 billion), a year-on-year increase of 12 per cent.

Addressing the shortfall in local materials, Vinatex is also studying the possibility of developing an agricultural area of about 60 thousand hectares in the central province of Binh Dinh, which has the potential to produce 30,000 tons of fabric materials per year for the textile industry.

The group also has plans for the development of a VND2.2 trillion ($104million) complex that will implement the full chain of textile production – including weaving, dyeing and finishing. Construction of the plant is expected to start in the An Lao District of Hai Phong in the first quarter.

Once operational, the plant will create jobs for 5,000 workers, and bring in an average yearly revenue of VND3.7trillion ($176 million), Vinatex says. — VNS