VietNamNet Bridge - Billions of dollars of foreign direct investment have poured into the textile and garment sector in anticipation of great opportunities to be brought by the TPP Agreement (Trans Pacific Partnership), which analysts warn will put pressure on Vietnamese businesses and the entire economy.

While FDI to Vietnam has fallen significantly in the first six months of 2015, the FDI poured into the textile & garment sector increased sharply. 

At least $1.12 billion out of the $5.58 billion worth of capital registered went into the sector. One of the three largest projects was capitalized at $660 million, the highest ever in the field.

The $660 million project, in a yarn factory in Dong Nai province, was registered by an investor from Turkey. 

The others include a $300 million project registered by a British investor in HCM City and a $160 million project in Tay Ninh province by a Hong Kong investor.

Prior to that, Vietnam licensed three large projects to investors from China, including $400 million textile & garment complex in Nam Dinh province, $300 million in Quang Ninh province and $200 million in Hai Duong.

Smaller projects are capitalized at tens of millions of dollars. Forever Glorious, a subsidiary of Sheico Group from Taiwan, has committed to invest $50 million in a project to make underwater sportswear. 

Gain Lucky Limited belonging to Shenzhou International plans to invest $140 million to develop a fashion design and high-end product development center.

According to the Vietnam Textile and Apparel Association (Vinatas), once Vietnam officially joins TPP, it would enjoy a zero percent tariff when exporting textile & garment to the US instead of 17-30 percent tariff. 

A challenge to Vietnamese businesses

The biggest problem of Vietnam’s textile and garment industry now is the heavy reliance on imported materials. A report showed it needs to import 50 percent of input materials to make finished products, mostly from China.

Meanwhile, only the products using input materials from TPP member countries will be able to enjoy the preferential tariff of zero percent.

Vinatex is the only Vietnamese textile and garment company which has input material factories. 

The corporation has developed 51 fiber production, weaving, dyeing and garment projects since 2013 with total investment capital of VND8 trillion. However, the projects would only be able to satisfy 50-60 percent of the group’s demand.

Le Tien Truong, Vinatex’s general director, said Vietnam, the second biggest textile and garment producer, is a direct competitor to textile and garment producers all over the world, because competing with China, the biggest producer, was an impossible mission.

Tran Thuy