FDI inflow in Vietnam textile & garment sector declines

20 Jul '12

2 min read

There has been a decline in Foreign Direct Investment (FDI) flowing in into the textile and garment sector of Vietnam over the past few years, Vietnam Textile and Apparel Association (VITAS) has said.

From 2000 to 2008, FDI in Vietnam’s garment and textile sector had peak annual average of US$ 460 million. However, the investment declined in the past three years.

Vietnamese apparel and textile attracted foreign investment worth US$ 185 million and US$ 169 million during 2009 and 2010, respectively, while last year it attracted around US$ 450 million.

VITAS attributed the low FDI inflow to the global financial slump. It added that foreign investors paid more attention to garment making, which necessitates lesser investment capital and could do with obsolete technologies.

The focus on production of raw inputs like fabrics and processing such as dyeing that requires high capital investment and high-tech technologies and extends no assurance of immediate returns on investment, remained low, VITAS said.

According to Le Quoc An, former Chairman of VITAS, the situation is mainly attributable to the fact that Vietnam still lacks industrial zones specializing in fibre and textile production and dyeing activities on a scale large enough that it can draw leading overseas firms for investment.

Vietnam earned US$ 14 billion in textile and apparel exports during last year, but was required to spend about US$ 9 billion to import raw inputs and accessories.

Heavy dependence on imported raw inputs and accessories is the biggest weakness of Vietnamese clothing industry, said Mr. An. However, he added that it is now the good time for the industry to decide its investment priorities and strategise for ensuring firm growth in times to come.

Once the sector gets its priorities right, big foreign investors would automatically get attracted to the country, he added.

Mr. An said that entry of foreign players in the country’s garment sector, particularly since adoption of more liberal economic policies by the country, has helped the country to establish itself as a major apparel exporter. Vietnam now occupies eighth position amongst world’s apparel exporting countries, and is the fourth biggest apparel exporter catering to the US market.

Hong Kong, South Korea, Japan, Taiwan, Germany and Thailand are the leading investors in the Vietnamese textile and garment sectors.

Fibre2fashion News Desk - India

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