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Vietnam Trade Ministry Outlines Textile Industry Growth Plan

Vietnam’s Ministry of Industry and Trade has approved a textile and garment sector development plan for 2020 and up to 2030, an effort expected to boost the industry’s growth.

According to Viet Nam News, under the new plan, Vietnam is aiming to achieve a 55 percent localization rate by 2015, meaning that 55 percent of the raw materials used to make a garment would be sourced in Vietnam. Raising the localization rate is expected to increase the country’s profits and competitiveness, and reduce the need for raw materials imports. By 2020, Vietnam hopes to hit a 65 percent localization rate and 70 percent by 2030.

The plan will bring about a forecast annual production growth rate of 12 to 13 percent between 2013 and 2020 and should draw domestic market growth of 9 to 10 percent between 2013-2015, and 10 to 12 percent in the 2016-2020 period.

Exports are expected to increase by 10 to 11 percent yearly between 2013-2015, by 9 to 10 percent from 2016-2020, and by 6 to 7 percent during the 2021-2030 period.

The Ministry plans to support relocation of the more labor-intensive textile and garment firms to rural areas of the country, while those specializing in fashion production and the supply of related services will be secured placement in urban areas.

“Viet Nam’s textile and garment exports have grown 15 to 17 per cent per year since 2007, said Nguyen Van Tuan, deputy head of the Viet Nam Cotton and Spinning Association and deputy secretary-general of VITAS. The export turnover is estimated to reach $40 billion in the 2020-2025 period, requiring 12 billion square metres of fabric and five million workers,” Viet Nam news reported.

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Textiles and garments made up 13.6% of Vietnam’s total export value in 2013, with the United States being the country’s largest importer accounting for 48 percent of Vietnam’s export revenue.

And textiles could soon account for a greater percentage of the Vietnam’s exports when the country signs pending free trade agreements like the Trans-Pacific Partnership (TPP).

Under the TPP, which is currently being negotiated, Vietnam is expected to benefit considerably from the agreement’s “yarn-forward” rule, which stipulates that any garment must be made of either fabric or yarn supplied by the U.S. or any signatory TPP nations to be eligible for duty-free benefits when shipped back to the U.S.

Countries currently involved in TPP negotiations include: Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.

The TPP could ultimately eliminate tariffs on Vietnam’s garment exports to the U.S., which average about 17.5%. The removal of the tariffs to a major market like the U.S. could prompt Vietnam to enjoy faster export growth and higher GNP growth than other members of the agreement.

If signed into agreement, TPP could drive Vietnam’s economic growth to 13.6% in 2025 and its annual export growth to 37.3%, according to AmCham Vietnam.