The years 2014 and 2015 witnessed the massive landing of foreign textile & garment enterprises in Vietnam. In 2015 alone, $2 billion worth of foreign direct investment (FDI) capital was poured into the textile & garment sector. The three biggest projects alone have registered capital of $1 billion.
Hyosung Dong Nai, a Turkish invested yarn manufacturer, has investment capital of $660 million.
Meanwhile, a textile & garment material factory developed by Polytex Far Eastern from Taiwan has registered capital of $274 million, and Worldon Vietnam, a Hong Kong invested enterprise, $160 million.
However, the wave of FDI pouring into the textile & garment sector has reached a lull this year. According to the Foreign Investment Agency (FIA), the list of large FDI projects registered in the first five months of the year did not include textile & garment projects.
Meanwhile, the projects capitalized at hundreds of millions of dollars were all in paper production, real estate, electronics and wind power.
Pham Xuan Hong, Chair of the HCM City Textile, Clothing, Embroidery and Knitting, commented that foreign investors have decided to delay their projects because they need to waitfor news about TPP (Trans Pacific Partnership Agreement), not because they see problems in Vietnam economy.
Nguyen Hong Giang, deputy chair of the Vietnam Cotton & Yarn Association, commented that though capital flow has slowed, Vietnam is still very attractive to foreign investors.
Giang cited a report of the US Fashion Industry Association as saying that 68.8 percent of foreign retailers and brands want to choose Vietnam as the top-priority destination point if they have to shift orders from China.
In the past, Bangladesh was the priority country. However, with complicated political issues, the country is no longer as popular.
Vietnam has attractive production costs and preferential tariffs.
The production costs in Vietnam, including expenses for land, energy and labor, are much lower than that in China. Vietnam’s exports can enjoy preferential tariffs thanks to FTAs between Vietnam and Japan, Vietnam-South Korea and Vietnam-EU.
Therefore, Giang believes the FDI wave will continue in the time to come, while the information about the election in the US will be a factor in pushing the Chinese second FDI wave in Vietnam.
Commenting about the fact that Vietnam has lost big orders to the hands of its rivals, including Cambodia and Myanmar, Giang said ‘there are problems with world demand’.
He cited a report of a consultancy firm as saying that the number of orders placed with Cambodian producers has dropped by 30 percent.
Photo; CBR Investment AG