19:47 (GMT +7) - Thursday 20/07/2017

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Growth to still come

Released at: 08:00, 30/01/2017

Growth to still come

Photo: Mr. Le Tien Truong, CEO of the Vietnam National Textile and Garment Group (Vinatex)

Mr. Le Tien Truong, CEO of the Vietnam National Textile and Garment Group (Vinatex), spoke with VET’s Quynh Nguyen about business performance in 2016 and the future of the textile and garment sector without the TPP.

by Nguyen Quynh

What were the significant results in the textile sector in 2016?

Exports in the industry reached $28.5 billion, up 5.4 per cent year-on-year. 2016 was a year full of difficulties. The 5.4 per cent growth was the lowest since 2010. But growth in absolute value was higher than in previous years. A few years ago growth stood at 12-15 per cent but absolute value was just $1.5 billion, and now, with growth at 5 per cent, absolute value is $2 billion. 

The difficulties stem from the difficulties in the global market. Total global demand in 2016 did not increase. Key markets for Vietnam’s major imports declined: in the US by 4.5 per cent and the EU 3 per cent, while only Japan increased more than 1 per cent. Moreover, many countries who are not in the TPP and wanted to retain market share have already adopted policies to reduce its impact. 

Growth of 5.4 per cent is quite high, however, given our competitors are countries with large and completed textile industries. The greatest achievement amid difficult conditions was our market share improving, especially in the US and Japan. Imports in the US fell 4.5 per cent while Vietnam’s exports to the market grew more than 4 per cent. Imports in Japan rose 1 per cent but Vietnam’s exports to the market rose 5.75 per cent. 

In the US, though it ranks second after China, Vietnam’s position is different. Previously we only held a market share of 6 to 7 per cent, but it’s now 11 per cent. So growth of 5.4 per cent comes in a context of falling global demand and tough competition. 

What percentage of total export turnover were to signatories of the TPP in 2016?

TPP members currently account for 52.3 per cent of the total export value of the textile industry. Of the $28.5 billion in export turnover in 2016, $15 billion was to TPP members. Of this $15 billion, the US and Japan had $11.1 billion and $3.5 billion, respectively. 

What’s in store for Vietnam’s textile and garment without the TPP? 

The TPP provided motivation for better, stronger, and faster growth, but not for all of Vietnam’s textile and garment sector. Vietnam’s textile industry will not grow as fast as it would with the TPP but will still grow, from competitiveness in the industry. Moreover, if there is no TPP, Vietnam’s textile and garment sector will benefit from other FTAs with South Korea, Japan, and especially the agreement with the EU, which is expected to take effect in 2018. In general, the sector has many favorable conditions to grow. So the future is continuing growth, though perhaps not as quickly as with the TPP. 

What about FDI in Vietnam’s textile and garment sector without the TPP? 

The “yarn-forward” rule of origin was a requirement in the TPP that would have attracted foreign investment to Vietnam. Investors understand that it would take a few years for the TPP to come into effect and are investing in Vietnam not just because of the TPP but also because of other factors. The end of the TPP may impact much more on investors in textile and dyeing than those in fashion items. The FTA between Vietnam and the EU to take effect in 2018 has a “fabric forward” rule of origin, which will now become a spotlight of investors. Most investors invest primarily in the weaving and dyeing sections. Without the TPP, the speed of investment in Vietnam may fall but will remain strong in the future thanks to the FTA with the EU. The EU is a larger market than the US. Demand for garments in the EU is about $240 billion; double the figure in the US. Vietnam’s textile exports to the EU remain modest, at about $4 billion per year, so the FTA represents a huge opportunity for foreign investors in Vietnam. 

What are Vinatex’s growth targets for 2017?

Vinatex aims to maintain growth of 13 to 15 per cent with exports worth $4 billion in 2017.

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