Outsourcing has emerged as a pivotal strategy to enhance profitability while maintaining production quality. The textile sector has undergone global expansion, with the establishment of manufacturing facilities in developing countries contributing significantly to business growth. Key considerations for manufacturing units when expanding to other countries encompass geographical convenience, political stability, labor costs, technological advancements, and trade policies. Against this backdrop, countries like the U.S.A. and the United Kingdom are increasingly inclined toward exploring textile opportunities in Vietnam. Vietnam's textile sector has played a pivotal role in bolstering the local economy, exporting products to over fifty countries, with the U.S.A. being the primary importer of Vietnamese textile products. With rising labor costs in China and a lack of technological advancement in countries like Bangladesh and Myanmar, Vietnam presents itself as a prudent choice. Even recent upheavals in Vietnam are unlikely to deter these prospects.

Vietnam recently experienced anti-China riots that caused significant damage to numerous garment manufacturing plants owned by foreign investors. However, the unrest has subsided, and the situation is returning to normal. Textile investors who had planned to establish units in the country are not inclined to withdraw their investments. Vietnam's Ministry of Industry and Trade is committed to fostering the steady growth of the textile industry. A detailed development plan has been outlined for the period from 2020 to 2030. According to this plan, the annual production growth rate for textiles will be maintained at 12 to 13 percent until 2020. Export growth targets have been set at 10 to 11 percent for 2015, increasing to 19 to 21 percent for 2016-2020 and 25 to 28 percent for 2021-2030. With this growth trajectory, textile export turnover is projected to reach U.S. $40 billion between 2020 and 2025. Domestic market growth for textiles is estimated to be around 9 to 10 percent through the end of 2015 and 10 to 12 percent from 2016 to 2020. In addition to setting growth targets, the ministry plans to comprehensively develop the textile sector. Labor-intensive textile and garment production firms will be relocated to rural areas, while firms engaged in fashion production and related services will be shifted to urban areas.

Vietnam's textile sector's projected targets reflect an ambitious government plan, requiring an estimated investment capital of approximately $25 billion by 2020. The government is also working on improving infrastructure, including transportation systems, power and water supply, and upgrading drainage and wastewater treatment facilities.

The textile figures for 2013 are also encouraging for Vietnam, with an 18 percent increase in export revenues for the garment and textile industries, reaching $20.4 billion. The export revenue target for the current year has been set at $25 billion. A survey by the Hong Kong and Shanghai Banking Corporation (HSBC) earlier this year indicated that demand from the U.S. and EU, accounting for 18 percent and 14 percent of the country's exports, respectively, is expected to grow by approximately 20 percent this year.

However, the country needs to get over certain stumbling blocks that may create problems for the otherwise flourishing Vietnamese textile sector. Though, it is being largely predicted by the textile industry aficionados that the recent riots would not hamper the future investments in textile, but, the country needs to ensure peace and stability to encourage and attract more investors. The enterprises in Vietnam are mostly medium and small sized, which can impact the production. Also, Vietnam's textile industries depend on imports for at least half of the total raw material. This dependency on imports has to be curtailed. The overall production management and marketing of the country is laid back, which has to be altered for good, if Vietnam wants to compete at global level.


The comforting part is that the country has strong export figures and a domestic market, which is growing by leaps and bounds, to back the further investment by foreign countries. The availability of ample skilled labour at low cost, up-to-date technology and supportive policies will surely strengthen the Vietnamese textile industry.


Vietnam is one of the twelve countries negotiating the trade pact of the Trans-Pacific Partnership (TPP), as per which, Vietnam will benefit the most. The TPP includes a clause that would cut tariffs on textiles and apparel, which are among the nation's top exports. The foreign investors are shifting the factories to Vietnam, with view of taking advantage of the tax reduction.


Vietnam's biggest competitors are China and India, but despite of the tough competition, the future of the Vietnamese textile industry is particularly promising. Vietnam has been keen on improving its technical know-how regarding the textile industry and this is one of the biggest strengths of the Vietnamese textile sector.



References:


1. Vinatex.com

2. Textileworld.com

3. Vietnam-briefing.com

4. Voanews.com