Vietnam’s textiles, garments yet to fully tap FTAs’ advantages and potential

Vietnam’s textile and garment industry has not been able to fully capitalise on the advantages and potential of FTAs, according to the Ministry of Industry and Trade (MoIT).
Vietnam’s textiles, garments yet to fully tap FTAs’ advantages and potential ảnh 1Workers at a textile and garment factory in the northern province of Bac Ninh. (Photo: VNA)
Hanoi (VNS/VNA) – Vietnam’s textile and garmentindustry has not been able to fully capitalise on the advantages and potentialof FTAs, according to the Ministry of Industry and Trade (MoIT). 

To address this issue, the MoIT, as the leading agency for FTA negotiation andenforcement, has been enhancing connections with ministries, localities,associations, and stakeholders to establish a collaborative ecosystem to helpthe textile industry effectively leverage FTAs.

According to Ngo Chung Khanh, deputy head of the multilateral trade policydepartment under the MoIT, the Vietnamese government has signed various FTAswith many markets around the world, with a key focus on reducing tariffs to thelowest and quickest levels and simpler rules of origin for Vietnamese goods,especially in the textile and garment sector. 

In a recent survey by the Vietnam Chamber of Commerce and Industry (VCCI),while most enterprises had some understanding of the FTAs, only about 8%possessed a clear understanding. 
According to the ministry, Vietnam’s trade balance has beensignificantly in deficit in the East Asian markets, amounting to nearly 129billion USD in 2022, with 60.5 billion USD in trade with China, 37.9 billion USDwith the Republic of Korea, and 13.42 billion USD with ASEAN. 

Meanwhile, the Southeast Asian economy registered a substantialsurplus with the US and the EU last year, 95 billion USD in surplus with theUS, 31.4 billion USD with the EU, and 5.2 billion USD with the UK. 

However, the market share of Vietnamese textiles in FTA markets has notincreased in the past 4 years and remained relatively modest. In the EU,Vietnamese textiles account for only 4% in the UK, 2% in Canada, and 13% inMexico.

The proportion of raw processing in Vietnamese enterprises is still too large,with cut-make-trim (CMT) accounting for about 65%, OEM production about 30%,and ODM production about 5%.

Difficulty in accessing capital remained a major challenge for enterprises inmaking further investments and improving competitiveness. The VCCI's surveyshowed the percentage of enterprises concerned about credit access has beenincreasing over time. In 2020, only 40.7% of enterprises were concerned, in2021, this figure increased to 46.9%, and in 2022, it reached 55.6%.

In addition, Vietnamese businesses have yet to embrace development and lackcollaboration.

However, Khanh said sustainable development was not only a requirement of foreignmanagement agencies but also of consumers. Failing to meet consumers' demandswould likely result in losing orders. 

He said in the FTA implementation plan, the government had set up a frameworkfor Vietnamese and FDI businesses to enhance collaboration but so far, it hadnot been able to minimise unhealthy competition within the industry.
Tran Hoang Phu Xuan, CEO of HCM City-based FASLINK Fashion, saidthere were still few Vietnamese businesses that actively participate ininternational trade fairs to understand end-users and target markets,preferring to receive orders directly in Vietnam through intermediarycompanies. 

Factors that have been hindering stronger growth include a globaleconomic slowdown, resulting in fewer orders being placed.

The MoIT proposed a number of solutions, aiming to widen the search for newpartners and seek new customers.

However, the ministry said the long-term plan was to build an ecosystem for theindustry, one that would connect farmers to manufacturers, exporters,associations, regulatory agencies, consulting companies, logistics, andimporters.

The Prime Minister's Office has also instructed the ministry to coordinate withministries, localities, and associations to develop a plan for each province todevelop key product lines. 

Khanh said Vietnamese businesses must start positioning FTA markets as keys intheir export strategy. To enter these markets, enterprises needed to researchand understand the market information and policies, devising an access andbrand-building strategy./. 
VNA

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