Vietnamese textile investors will miss out on the benefits of the Trans-Pacific Partnership because they lack the capital and collective power to invest in the required yarn factories.
Vietnamese textile investors are going to lose the chance at tariff cuts from the Trans-Pacific Partnership agreement as they lack money and group power to invest in yarn factories as required.
The TPP is being negotiated between Vietnam and 11 other countries including big economies like the US, Canada, Japan and Australia.
Many expect the overdue agreement to come through soon, lifting tariffs on garments made by TPP members from the yarn stage forward.
Thoi bao Kinh te Saigon Online quoted a local industry insider, Monday, as saying that creating a yarn factory remains beyond the means of local producers, and that as a TPP member, Vietnam will only further enrich the Chinese textile industry.
Vietnam's textiles and garments are mostly made from Chinese yarn.
Many textile businesses in mainland China, Taiwan and Hong Kong have built entire textile systems in Vietnam -- from yarn factories to textile mills to dye plants to garment factories -- to capitalize on TPP.
The treaty will cut import tariffs in the US (the biggest market for Vietnam’s leading export - garment and textiles) from 17-32 percent to zero.
Forever Glorious (a subsidiary of the Taiwanese group Sheico) has committed US$50 million to a production line for quality water-sport clothing in Ho Chi Minh City.
Gain Lucky Limited (a subsidiary of China’s Shenzhou International) has also pledged to invest $140 million in a high-end clothing factory in the city.
Jiangsu Yulun Textile Group of China recently obtained a license for a $68-million textile, dyeing, and yarn plant in an industrial zone in Nam Dinh Province near Hanoi.
Big firms from Japan and South Korea have discussed similar plans.
Meanwhile, investors at home are hanging on the wall.
Nguyen Anh Kiet, a Ho Chi Minh City-based expert with Vietnam National Textile and Garment Group (Vinatex), said a yarn, textile and dyeing project costs many times more than a garment project, without factoring in the cost of training the requisite staff.
A single yarn machine costs nearly $2 million and building a supply chain would require lots of them. Textile and dyeing plants require tens of millions of dollars for waste treatment.
“So foreign investors with deep pockets will have an advantage over local ones,” Kiet said.
He also blamed Vietnamese businesses for failing cooperate toward forming a production line and securing one another’s input and output.
“The connections are too weak. Now that TPP is hitting its finish line, they haven't expressed any interest in building it.”
Kiet said the agreement is rushing in and it’s unlikely that a domestic cooperation will materialize before then.
Vinatex looks like the only Vietnamese firm that will benefit from the deal. It plans to invest a further VND5 trillion (US$237.5 million) into the twelve yarn and nine textile projects that began last year.
The clothing giant is developing a textile, dyeing and garment project in an industrial park near Ho Chi Minh City that is expected to debut cloth in August 2015.
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