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Statistics from the Ministry of Industry and Trade show that Vietnam earned an estimated US$25 billion in revenue from apparel exports over the first 10 months of 2018, up 17.1% year-on-year. Meanwhile, footwear exports rose by 9.7% to US$12.9 billion in the 10-month period.
Orders of textiles, garments and footwear have mainly been made by major markets that have participated in the signing of bilateral and multilateral free trade agreements (FTAs) with Vietnam, including the United States, Europe, South Korea, China and member countries of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). This year, the country’s exports of textiles and garments are expected to generate US$35 billion in revenue, US$1 billion above the initial target.
The commitments to opening markets under the European Union-Vietnam Free Trade Agreement and CPTPP will result in a possible boom of apparel exports in 2018-2022 as exporters are subject to a zero tax.
Capital flows into the apparel and footwear sectors will grow strongly due to benefits from FTAs and Vietnam’s manufacturing potential, according to the ministry. Also, U.S.-China trade tensions may lead to a shift of orders from China to Vietnam.
Nguyen Phuc Nam, a representative from the Department of Asia-Africa Markets, under the Ministry of Industry and Trade, said the ASEAN-Australia-New Zealand Free Trade Agreement and the upcoming CPTPP will give Vietnamese exporters a 5% reduction in export tax in the 2019-2021 period and zero tax for years thereafter. As a result, Vietnamese apparel will best capitalize on this.
In addition, Australian firms tend to enhance apparel imports from Vietnam.
The recent appearance of major apparel and footwear brands at Vietnam expositions is evidence of the strong appeal of the two sectors.
FTAs, however, also present multiple challenges, including compulsory requirements of origin traceability to the Vietnamese business community.
Truong Van Cam, general secretary of the Vietnam Textile and Apparel Association, remarked that 80% of materials for producing apparel comes from imports, adding that before they can enjoy a zero-percent tax rate, apparel exporters must meet the strict requirements for material origins.
Experts from Australia-based The Woolmark pointed out that Vietnam will surely be eligible for entering selective markets if apparel producers focus on restructuring and enhancing the quality of products, turning out textiles and garments that have not been treated with chemicals.
Thai Binh Duong, director of Bac Ninh Province-based Yen Duong Company, said that materials for the apparel sector should be imported from new markets such as Australia, which can supply high-quality fiber.
Boosting fiber imports from Australia will diversify sources of materials for the sector and ensure the quality of products, Duong added.
The apparel and footwear sectors are facing risks, as the United States can conduct origin traceability checks and impose an additional tax on Vietnamese textiles and garments that are made of Chinese materials, according to the Ministry of Industry and Trade.
Therefore, the ministry urged enterprises to use domestic materials or fabrics from other countries besides China when manufacturing apparel and footwear.