Foreign textile and garment manufacturers rushing to set up factories in Vietnam are being turned away.
According to VietNamNet, local authorities in the Ba Ria and Binh Duong provinces in the south and the Hai Duong province in the north have been restricting what they call “labor-intensive” and “low-added value” textile and garment projects from overseas investors.
In November, a Vietnam Textile and Apparel Association (Vitas) representative said that foreign enterprises hold up to $12 billion of the country’s $20 billion annual textile-garment export revenue. In the past year alone, nearly 20 international firms invested in the country’s garment industry.
Analysts say this flurry of foreign capital comes in anticipation of a duty-free agreement with the United States pending the passing of the Trans-Pacific Partnership (TPP). The U.S. is the largest market for Vietnam’s textile and garment exports, and companies based in China, Japan, Hong Kong, South Korea, Taiwan, Austria and Australia have set up or expanded production in Vietnam of late.
For example, South Korean spandex maker Hyosung Corp. recently upped its production capabilities in the country, while Japanese trading firm Itochu teamed up with the Vietnam National Textile and Garment Group (Vinatex) to support a number of dyeing and materials production projects there.
Some economists argue that if this trend continues, it could lead to oversupply and negative consequences, hence why Vietnamese authorities have put the skids on foreign investment in the sector, while calling for financing in 41 projects in such fields as healthcare, education, transport and construction.