Once Vietnam joins free trade agreements like TPP and Vietnam EU FTA, it will face new challenges in the textile and garment firms. Their use of outdated technology, shortage of capital and weak management capacities will raise quite a lot of competitive pressure from the large global companies was highlighted by Tran Quang Nghi, chairman of National Garment and Textile Group(Vinatex) at a conference on “Garment and Textile – Opportunities and Challenges.”
Also, Truong Thi Thanh Ha, general director of Dong Xuan Knitting Company said that domestic textile and garment companies have not invested in modern technology in recent times. Seeing this, the question arises for Vietnamese government as to whether they will support domestic business or not because it seems they have more challenges than opportunities from the upcoming trade pacts. Vietnamese companies depend to a great extent on imported materials which along with low productivity will make it more difficult to take advantage of FTAs.
Phan Chi Dung, head of the Light Industry Department, said that despite high growth rates in recent years, the value added to garment imports is still limited. Vietnam would have access to wider market once the TPP is in place, but investors will gradually prefer to shift their manufacturing base there. This would require businesses to restructure to enhance their competitiveness. Bank for Investment and Development of Vietnam (BIDV) has already committed to provide loans of $2 million to support garment and textiles firms for the next 5-year period.
There are mostly small and medium sized enterprises in Vietnamese textiles, and the 12 countries part of TPP account for 70% of total value of garment export made by Vietnam. Therefore, Government of Vietnam has targeted to increase Vietnam’s textile and clothing exports to $35 billion by 2020 and further to $60 billion by 2030.