Processing garment products at the Tien Hung Garment Joint Stock Company in Hung Yen province (Photo: VNA) Hanoi (VNS/VNA) - A shortage of rawmaterials remained an obstacle that needed to be removed ifVietnamese textiles and garment enterprises want to seize exportopportunities in the European Union (EU) under the EU-Vietnam FreeTrade Agreement (EVFTA), according to experts.
TheMinistry of Industry and Trade (MoIT) said the EU had the largest demandfor textiles and garments in the world with an import value of about 250billion USD per year.
In2019, Vietnam's export value to the EU reached 4.3 billion USD, 3.8 percenthigher than 2018. However, Vietnam accounted for only about 2 percent ofthis market which was very small compared to the demand.
TheEVFTA, effective from August 2020, was expected to help Vietnam’s textile andgarment industry to increase its exports to the EU by about 67 percent by2025 compared to the scenario without this agreement, according to the MoIT.
However,according to the commitments of the EVFTA, besides meeting strictquality criteria, to enjoy preferential tariffs local businesses must implementstrict origin requirements. Specifically, the EVFTA requires rules of origin toapply from fabric onwards, meaning that exports to the EU must use fabricproduced in Vietnam or the EU. The agreement also allows firms to use fabricfrom countries which have FTAs with both Vietnam and the EU.
Thisissue is still a weakness for the local textile and garment industrybecause most raw materials are imported from countries that have not signedFTAs with the EU.
Accordingly,local textile and garment producers should use local material for productsthat were going to be exported to the EU, but many of them were stillunaware of the origin of the raw materials they were using, said Vu Duc Giang, Chairmanof the Vietnam Textile and Apparel Association.
Meanwhile,new-generation FTAs such as the Comprehensive and Progressive Agreement forTrans-Pacific Partnership (CPTPP) and EVFTA had very strictregulations on materials and manufacturing processes.
BuiKim Thuy, a former member of Vietnam's negotiation delegation for FTAs andcountry representative on the US-ASEAN Business Council, said to solvethis issue, the textile and garment industry could initially use fabricsimported from countries that had FTAs with the EU such as South Korea toenjoy the preferential tax rates of the EVFTA.
Butthe amount of fabric imported from the Republic of Korea was low due todistance and price. Therefore, in the long term, Vietnam needed acomprehensive strategy to seize opportunities provided by the EU market,Thuy said.
Toenter the EU, many businesses have invested in factories, technology,machinery and the implementation of technical standards forthis export market.
TranNhu Tung, a member of the Thanh Cong Textile and Investment Joint Stock Company(TCM)’s board of directors, said with benefits from the EVFTA, the companyaimed to increase its exports to the EU by 30-50 percent. It hadalso built a fabric dyeing factory to meet the demand for production.
Inthe long term, the company planned to open another fabric dyeing factory in thesouthwest region. That would help to provide enough raw materialsfor production, Tung said.
Chairmanof the Viet Thang Jean Company’s board of directors Pham Van Viet said tomeet the EVFTA’s origin requirements, Viet Thang Jean had signed contractsto purchase raw materials from partners in the Republic of Korea and Turkeyinstead of China.
Besidesthese efforts from businesses, according to experts, the Government shouldissue a development plan for industry sectors until 2040, includingtextiles, garments, leather and footwear, to produce raw materials for thetextile and garment sector according to the rules of origin set out inthe FTAs.
Atpresent, the MoIT is completing a development plan for the textile andgarment industry until 2040 to develop large-scale textile and dyeingindustrial parks with wastewater treatment systems thatreach international standards to attract investors.
Giangsaid this plan must focus on building textile industrial zones with modernwastewater treatment to encourage investment and complete the cycle of weaving- dyeing - sewing.
Thatwould help the domestic textile and garment industry join the global supplychain and reduce the dependence on imported materials as well as take fulladvantage of the EVFTA and other FTAs, he said.
TheState also needed to adjust tax policies on imported goods and rawmaterials imported for production of export goods, creating more favourableconditions for businesses.
TranThanh Hai, Deputy Director of the MoIT’s Import and Export Department, saidboth the Government and local businesses need to act at the same time to takefull advantage of the EVFTA.
Accordingly,the Government needed to develop support industries to meet the localdemand for raw materials and to increase the localisation rate so exportgoods met the rules of origin. Initially, Vietnam should lookat attracting investment projects in the textile and dyeing industry,especially projects that used advanced technological equipment andenvironmentally friendly wastewater treatment processes.
Forlocal businesses, Hai said they needed to study the tariffs and rules oforigin outlined in the EVFTA and adjust their production processesand sources of raw materials accordingly.
Inrecent years, the MoIT has implemented policies to develop thesupport industries for various sectors, including textiles and apparel. Ithas also opened a database on the support industry, including information about1,400 enterprises in the textile and garment industry./.
TheMinistry of Industry and Trade (MoIT) said the EU had the largest demandfor textiles and garments in the world with an import value of about 250billion USD per year.
In2019, Vietnam's export value to the EU reached 4.3 billion USD, 3.8 percenthigher than 2018. However, Vietnam accounted for only about 2 percent ofthis market which was very small compared to the demand.
TheEVFTA, effective from August 2020, was expected to help Vietnam’s textile andgarment industry to increase its exports to the EU by about 67 percent by2025 compared to the scenario without this agreement, according to the MoIT.
However,according to the commitments of the EVFTA, besides meeting strictquality criteria, to enjoy preferential tariffs local businesses must implementstrict origin requirements. Specifically, the EVFTA requires rules of origin toapply from fabric onwards, meaning that exports to the EU must use fabricproduced in Vietnam or the EU. The agreement also allows firms to use fabricfrom countries which have FTAs with both Vietnam and the EU.
Thisissue is still a weakness for the local textile and garment industrybecause most raw materials are imported from countries that have not signedFTAs with the EU.
Accordingly,local textile and garment producers should use local material for productsthat were going to be exported to the EU, but many of them were stillunaware of the origin of the raw materials they were using, said Vu Duc Giang, Chairmanof the Vietnam Textile and Apparel Association.
Meanwhile,new-generation FTAs such as the Comprehensive and Progressive Agreement forTrans-Pacific Partnership (CPTPP) and EVFTA had very strictregulations on materials and manufacturing processes.
BuiKim Thuy, a former member of Vietnam's negotiation delegation for FTAs andcountry representative on the US-ASEAN Business Council, said to solvethis issue, the textile and garment industry could initially use fabricsimported from countries that had FTAs with the EU such as South Korea toenjoy the preferential tax rates of the EVFTA.
Butthe amount of fabric imported from the Republic of Korea was low due todistance and price. Therefore, in the long term, Vietnam needed acomprehensive strategy to seize opportunities provided by the EU market,Thuy said.
Toenter the EU, many businesses have invested in factories, technology,machinery and the implementation of technical standards forthis export market.
TranNhu Tung, a member of the Thanh Cong Textile and Investment Joint Stock Company(TCM)’s board of directors, said with benefits from the EVFTA, the companyaimed to increase its exports to the EU by 30-50 percent. It hadalso built a fabric dyeing factory to meet the demand for production.
Inthe long term, the company planned to open another fabric dyeing factory in thesouthwest region. That would help to provide enough raw materialsfor production, Tung said.
Chairmanof the Viet Thang Jean Company’s board of directors Pham Van Viet said tomeet the EVFTA’s origin requirements, Viet Thang Jean had signed contractsto purchase raw materials from partners in the Republic of Korea and Turkeyinstead of China.
Besidesthese efforts from businesses, according to experts, the Government shouldissue a development plan for industry sectors until 2040, includingtextiles, garments, leather and footwear, to produce raw materials for thetextile and garment sector according to the rules of origin set out inthe FTAs.
Atpresent, the MoIT is completing a development plan for the textile andgarment industry until 2040 to develop large-scale textile and dyeingindustrial parks with wastewater treatment systems thatreach international standards to attract investors.
Giangsaid this plan must focus on building textile industrial zones with modernwastewater treatment to encourage investment and complete the cycle of weaving- dyeing - sewing.
Thatwould help the domestic textile and garment industry join the global supplychain and reduce the dependence on imported materials as well as take fulladvantage of the EVFTA and other FTAs, he said.
TheState also needed to adjust tax policies on imported goods and rawmaterials imported for production of export goods, creating more favourableconditions for businesses.
TranThanh Hai, Deputy Director of the MoIT’s Import and Export Department, saidboth the Government and local businesses need to act at the same time to takefull advantage of the EVFTA.
Accordingly,the Government needed to develop support industries to meet the localdemand for raw materials and to increase the localisation rate so exportgoods met the rules of origin. Initially, Vietnam should lookat attracting investment projects in the textile and dyeing industry,especially projects that used advanced technological equipment andenvironmentally friendly wastewater treatment processes.
Forlocal businesses, Hai said they needed to study the tariffs and rules oforigin outlined in the EVFTA and adjust their production processesand sources of raw materials accordingly.
Inrecent years, the MoIT has implemented policies to develop thesupport industries for various sectors, including textiles and apparel. Ithas also opened a database on the support industry, including information about1,400 enterprises in the textile and garment industry./.
VNA
