Workers at a garment factory in Ho Chi Minh City. Photo by Diep Duc Minh
The US-led TPP trade pact that will include Vietnam among its signatories is expected to be wrapped up this year, but Vietnamese firms are unsure if they will benefit.
Many are anxious since foreign investors with deep pockets are planning to set up operations in the country to take advantage of the lowering of import taxes by many large economies that will sign up for the trade deal.
For instance, import tariffs in the US, the biggest customer for Vietnam’s leading export, textiles, will be cut from 17-32 percent now to zero.
Many textile and garment companies in the region have already begun to move to Vietnam.
Texhong Corporation of Hong Kong, which set up a dyeing factory in the southern province of Dong Nai in 2006, recently opened another one in the northern province of Quang Ninh with an investment of US$300 million.
One of Hong Kong’s leading textile companies, TAL Apparel, has plans to set up a second textile-dyeing -apparel factory worth hundreds of millions of dollars. It has eight factories worldwide, including one in Vietnam’s northern province of Thai Binh since 2004.
Unisoll Vina, owned by South Korean Hansoll Textile Ltd, has also got a license to build a $50-million factory to make fur and leather clothing and accessories.
According to the Ho Chi Minh City Association of Garment, Textile, Embroidery and Knitting, Japanese companies Toray International and Mitsui, Austria’s Lenzing, and China’s Sunrise are also exploring investment opportunities in the country.
Vietnamese companies are meanwhile trying to enlarge their limited feedstock production capacity to comply with TPP’s regulations on origins – for instance apparel has to be made using yarn and other materials produced in member countries.
The Vietnam National Textile and Garment Group (Vinatex) has opened three yarn factories this year in Hanoi and the central provinces of Ha Tinh and Thua Thien-Hue with an annual capacity of 1,270 tons.
It started work on 11 others in the first half of the year.
Figures from the Vietnam Textile and Apparel Association (Vitas) showed that 70 percent of more than 3,700 textile factories in the country make apparel; only 6 percent produce yarn and 17 percent make cloth while 4 percent dye.
Local producers depend largely on fabric imported from China.
Insiders said a yarn factory costs tens of millions of dollars, a sum most Vietnamese businesses cannot afford.
Pham Xuan Hong, deputy chairman of Vitas, said unless the government helps by making cheap loans available for yarn projects, the industry would not benefit from the TPP at all.
The government also needs to zone certain areas for dyeing plants since they are shunned everywhere due to pollution concerns, Hong said.
The trade deal will cut import tariffs on beer and nonalcoholic beverages from 45 percent and 30 percent to zero, but the benefits will have to be shared around with foreign investors who are major shareholders in local companies.
Hanoi-based Southeast Asia Brewery Ltd. exports its Halida beer to the US, UK, Australia, France, Germany, Russia, Japan, Taiwan, Singapore, Angola, and other countries.
Saigon Beer Company (Sabeco) exports its Saigon beers to Europe, Japan, Taiwan, Australia, and Cambodia.
Hanoi-based Dai Viet Beer also exported its first consignment to the US earlier this year.
Denmark’s Carlsberg owns 55 percent of a brewery set up along with Hanoi Beer Company (Habeco) in Ba Ria-Vung Tau Province as well as 60 percent of Southeast Asia Brewery.
Besides, it owns 17.23 percent in Habeco itself and has announced plans to raise its stake to 30 percent.
Some long-established beverage companies in Vietnam have also been taken over by foreigners.
Tribeco, which exports tea and soft drinks to China, the US, India, Cambodia, and Singapore, was acquired by Taiwan’s Uni President Enterprises.
Interfood, which exports soymilk and tea to the US and Asian markets, has been taken over by Japan’s Kirin Holdings.
Vietnamese entrepreneurs said while there is already competition with foreigners, it would become “intense” when the TPP kicks in.
Nguyen Dang Hien, director of Ho Chi Minh City-based beverage company Bidrico which exports to 15 countries and territories, said: “If Vietnamese companies are not prepared with strategies, they can easily lose right on their home turf.”
Experts warned that the TPP is even worse news for agricultural products since many technical barriers related to labels, packaging, and chemical traces need to be surmounted to enjoy the tax breaks.
Van Duc Muoi, chairman of the Ho Chi Minh City Food Association, said the barriers could leave a lot of Vietnamese agricultural produce with no actual benefit.
“We will face difficulties in exporting animal products to the US, Australia, and New Zealand… We are not competitive in this area due to limited technologies and frequent disease outbreaks,” he said.
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By Mai Phuong – Nguyen Nga, Thanh Nien News (The story can be found in the October 18 issue of our print edition, Vietweek)