Vietnam Textile Industry & Fabric Production Without

TPPPresented by: Mr. Nguyen Binh An - Secretary General

The Vietnam Cotton and Spinning Association (VCOSA) 1

Content

I. Vietnam Textile and Garment Industry in overview

II. Industry Growth Seen From Free Trade Agreements

III. Vietnam Textile and Garment industry after US withdrawal from TPP

IV. Fabric production in Vietnam – Advantages and Challenges

V. Think about Vietnam - China Textile Supply Chain

VI. Opportunity for relocation of fabric production to Vietnam

2

I. Vietnam Textile Industry 2016 in overviewVietnam Textile and Garment industry at a glance

1. Nearly 6,000 enterprises, among that 30% are FDI.

2. Recruit more than 2.5 million workers.

3. Contribute 10% of total industrial manufacturing value and 8% of GDP.

4. Export turnover reached over 28 billion USD in 2016, accounted for 15-16% of total export turnover of Vietnam, increased by 4% compared with 2015.

5. Top 5 of world leading garment exporters.

6. Total import turnover reached 16.97 billion USD in 2016, increased by 2.7% compared with 2015.

3

Source: VITAS

I. Vietnam Textile Industry 2016 in overview

Bil. USD

Industry’s export 2000 - 2016

4

I. Vietnam Textile Industry 2016 in overviewExport structure 2016

2016 2015 5

(Source: VITAS)

I. Vietnam Textile Industry 2016 in overviewProduction Structure of Vietnam Textile and Garment

6

I. Vietnam Textile Industry 2016 in overview

7

T&G supply chain structure

Fiber Yarn Fabric Garment•Cotton•Polyester•Viscose

•Filament•Staple yarn

•Weaving/ Knitting

•Dyeing / Finishing

•T-Shirts, Shirts

•Jacket•Sportwear, activewear

I. Vietnam Textile Industry 2016 in overviewProduction capacity

Materials

• Cotton: demand 1,000,000 MT/year; imported: 99.9%

• PSF & other fibers: demand 400,000 MT/year; produced 250,000 MT/year

Spinning

• Spindles quantity: 7.2 million• Spun yarn: 1,250,000 MT/year• Filament yarn: 182,000 MT/year

Weaving&Knitting

• Output: 2.5 billion m2/year

Dyeing & Finishing

• Capacity: 2.5 billion m2/year

Garment

• Produced: 5 billion units/year

• Fabric use: 9 billion m2 in which 6.5 billion m2 imported

8

I. Vietnam Textile Industry 2016 in overviewVietnam T&G Export and Import Turnover

9

I. Vietnam Textile Industry 2016 in overviewComment for Vietnam’s textile industry

ü Depend on imported materials

ü Strong in spinning and garment

ü Weak in dyeing and finishing

ü FTA is important factor in market access

ü FDIs play key role in the industry

ü Advantage in production cost

10

II. Industry Growth Seen From Free Trade Agreements

Vietnam

ATIGA

ASEAN – Australia, New Zealand

RCEP

ASEAN - China

ASEAN - Korea

ASEAN - India

ASEAN - Japan

Vietnam - Japan

VN – EurasianEconomic Union

Vietnam - Chile

Vietnam - Korea

VN– EU FTA

TPP

VN - Cuba

ASEAN - Hongkong VN - Israel

Signed and effective

Signed and

effective

Conclude negotiation –

await ratification

On going negotiation

FTAs Vietnam joined

11

II. Industry Growth Seen From Free Trade Agreements

By 6/2016, there are totally 1,865 projects registed to Vietnam in textile with the value was about 14.4 billion USD.

12

II. Industry Growth Seen From Free Trade Agreements

13

II. Industry Growth Seen From Free Trade Agreements

Among above, Far Eastern has increased investment capital of nearly $ 400 million to complete the supply chain in Vietnam. 14

II. Industry Growth Seen From Free Trade Agreements

From 2000 to 31/12/2013: 8.2 billion USD;

From 01/2014 to 31/12/2015: 5.8 billion USD

1/2000 – 31/12/2013 1/2014 – 31/12/2015

Spinning 2.0 1.0

Fabric production 1.2 3.3

Garment 5.0 1.5

Total 8.2 5.8

In the first two months of 2017, China is the largest investor with $ 608 million registered to invest in Vietnam, accounting for 30% of the total new registered capital. For textiles, the project of the Billion Group is worth $ 220 million.

15

II. Industry Growth seen from Free Trade Agreements

US-VNBTA

Textile Agreement VN - US

WTO

VN – KoreaFTA

VN – JapanFTA

VN – EUFTA

16

III. Vietnam Textile and Garment industry after US withdrawal from TPP

Item UnitQuantity

+ / -Current 2025

Worker Mil. people 2.6 5 + 2.4

Spinning Mil. spindles 7.2 17.9 + 10.7

Fabrics Bil. m2 2.85 12 + 9.15

Export Bil. USD 28 50 +22

Perspective by 2025

17

III. Vietnam Textile and Garment industry after US withdrawal from TPP

a) RecognitionReview the wave of FDI to welcome TPP

§ Investors are mostly big businesses§ The projects are at large scale and divided into 02 or 03

stages§ The investment segment is focused on fabric production§ Purpose of investment to build up their own full supply

chain in Vietnam.b) Investment’s situation§ Phase 1 investment is completed.§ Waiting for the next evolution of post TPP.§ Surveys show that without either TPP or another

alternatives, investing for the next phase would be unlikely.18

III. Vietnam Textile and Garment industry after US withdrawal from TPP

The development directions in the context without TPP

§ Try to maintain the annual growing rate of 6 – 8% during the period of 2017 – 2025.

§ In order for Vietnam's textile and garment to develop in a stable and sustainable manner, the task of the industry is to promote domestic fabric production, meeting the needs of the industry.

§ If the fabric produced domestically meets the demand, Vietnam's textile and garment industry will not only increase its share in the value of exports and domestic consumption, contribute to the growth of GDP but also create more jobs, build a firm foundation for the development of the industry in a stable and sustainable manner that is precondition for the development of the fashion industry.

§ The solution to this objective is to increase the attractiveness of foreign investment combined with the promotion and support of domestic firms involved in fabric production.

Goals of the industry

19

No. Subject Nationality Reasons

1 Yarn manufacturers Vietnam

- Inability to invest abroad- Export markets are shrinking and competed fiercely,

especially from India and Pakistan.- The demand for fabric in the country is very large

and stable.- Absolutely capable of producing grey fabrics- The difficulties are technology, dyeing and finishing

techniques but those can be searched in the market

2The small and medium fabric manufacturers

Korea

- Production cost in Korea is too high- Vietnam meets the conditions for production from

materials, labor, land, …- Fabric demand in Vietnam is large and stable.- Korea has FTA with both The US and EU

3

The small and medium weaving, knitting, dyeing producers

China

- High production costs and strict environmental protection policy in China.

- Vietnam meets the conditions for production from materials, labor, land, …

- Fabric demand in Vietnam is large and stable

III. Vietnam Textile and Garment industry after US withdrawal from TPP

Main subjects are also interested in investing in fabric production in Vietnam without TPP

20

III. Vietnam Textile and Garment industry after US withdrawal from TPPInvestment Opportunities

Item Unit Quantity

Materials (Cotton, VSF, PSF, filament fiber) MT 2.7 million

Spinning Spindles 10.7 million

Fabrics m2 9.15 billion

In which, FDI in fabric production is of high appreciation and support by the Government of Vietnam

21

III. Vietnam Textile and Garment industry after US withdrawal from TPP

Solutions for FDI attracting

v To set up large-scale industrial zones specializing in fabrics production in suitable locations in Vietnam with complete infrastructure system.

v The government has preferential policies and supportive solutions for each investor.

v Especially create conditions for domestic enterprises to develop, in which promotes the launching of the model of "Vietnam Textile Village".

v Enhance the role of associations to increase investment connections between domestic and foreign enterprises.

v Study on the possibility of promoting the negotiation on the Vietnam-US Bilateral Trade Agreement.

22

IV. Fabric production in Vietnam - Advantages and challenges Advantages

Cheap Labor force

Souce: JETRO12/2013

23

IV. Fabric production in Vietnam - Advantages and challenges Advantages

24

Average minimum wage 2009 – 2017 (USD/month)

IV. Fabric production in Vietnam - Advantages and challenges Advantages

Low product cost and corporate tax incentive

- Electricity

- Land leasing price

- Encouraging and priveledge policies for investment

o Corporate tax 20%

o Subject to the size and location of investment, corporate tax will be exampted 2 years and 50% reduced for the next 4 years or 4 years and 50% reduced for the next 9 years

o VAT for machine importation will be refunded

25

IV. Fabric production in Vietnam - Advantages and challenges Challenges

ü Vietnam is in a period of change and improvement of policy

ü There are about 300 IPs in Vietnam

ü The average size is about 200 ha

ü Occupancy rate 60 – 70%

ü Not have waste water treatment plant or the plant fails to meet the wastewater treatment requirements

ü There are no specialized industrial zones with large size for textiles while the demand for investment in the industry is huge.

26

V. Think about Vietnam - China Textile Supply Chain

Yarn producers Fabrics makers

Garment Manufacturer

Yarn

Fabrics

27

VI. Opportunity for relocation of fabric production to Vietnam

Why Vietnam?§ Advantages production cost§ Human resource§ Incentives Policies§ Already huge IP for textile§ Infra structure§ Logistic§ Sea Ports§ …

Cost structure of yarn

28

For further information, please contact:annguyenvsa@gmail.com

THANK YOU FOR YOUR ATTENTION

29