Opportunities and challenges await Vietnam’s apparel industry after TPP deal

Thursday, 22 October 2015
The Trans Pacific Partnership (TPP) has successfully concluded in Atlanta (United States) after over five years of negotiations. Vietnamese businesses, including those in textile and garment sector, will enter a wider playground which creates opportunities but also poses challenges.


Great opportunities

Garment and textile sector is viewed as one of the industries which will benefit the most from TPP.


According to the industry’s insiders, Vietnam’s garment and textile export turnover to countries joining the TPP agreement was expected to double in the time to come.


Pham Xuan Hong, vice chairman of Vietnam Textile and Apparel Association (Vitas), told Nguoi Lao Dong (The Labourers) newspaper that the conclusion of TPP negotiations was a good news for Vietnam's economy in general and the textile and garment sector in particular.


By participating in the TPP’s negotiations, Vietnam hoped to gain many benefits thanks to growing demand for apparels and footwear in the agreement’s member countries, Hong said.


He took the US market, the largest importer of Vietnam’s garment products as a good example.  When the TPP came into effect, the tariffs on Vietnamese garment products could be lowered to nearly zero from the current 17.5%.


Meanwhile, other experts predicted that the TPP would likely to raise Vietnam’s garment and textile exports to the US to US$55 billion by 2025.


Than Duc Viet, Deputy General Director of Garment 10 Company said that garment orders from his company’s overseas customers such as the US and Japan have increased over past three years. With this trend, Viet said he hoped that his company would archive annual growth rates of 15-20% as the TPP took effect. 


According Hai Quan (Customs) newspaper, US Fashion Industry Association President Julia K Hughes said many US companies were willing to seek supply sources from nations joining the TPP agreement once it took effect.  Vietnam was ranked highest in terms of its ability to draw new businesses, Hughes said, so she advised Vietnam utilize its new opportunities.

The countries joined TPP (Source: Internet)

Challenges ahead

However, domestic agreed that it was not easy for them to effectively utilize opportunities to be brought by the TPP. 


One of the provisions in the TPP, known as the “yarn forward” rule, would require a member country that exports apparel to other TPP markets to use textile that was either made locally or imported from other TPP member countries.


Signing on to the TPP meant that Vietnamese garment exporters would technically no longer be able to import their materials if they hoped to benefit from lower tariffs under the TPP.


According to experts, Vietnam’s apparel industry has for some time been concerned that it would face difficulties in complying with the rules of origin in the TPP, given that this would require the industry make significant capital and technological investments up front.


Ngo Duc Hoa, chairman Thang Loi International Garment JSC said though the TPP required businesses to meet many criteria on social policy, labor, safety or intellectual property, the origin of raw materials remained a leading concern.


Meanwhile, Dang Phuong Dung, Vitas deputy chairwoman called for ministries, society and the Government to help attract foreign investment, and encourage relationships between domestic producers and raw material producers.


Only by doing those things could Vietnam satisfy the requirements on goods' origins, she told Hai Quannewspaper.


Earlier, Vitas forecasts that the country's textile and garment export turnover could reach US$27.5 to US$28 billion this year./.

Van Hai (Source: vietrade.gov.vn)

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