AUSTRALIAN Wool Innovation identifying Vietnam as one of the fastest growing exporters of textile products, to set up a new wool supply chain and get a step closer to its ultimate goal of selling greasy wool to Vietnam's fledgling wool manufacturing industry.

According to AWI general manager of product development and commercialisation Jimmy Jackson, they are focusing on Vietnam as it is politically stable, having skilled textile workers although they use synthetics rather than wool, pending free trade agreements which have now been signed with Japan, Korea, the European Union, the European Union Satellite Countries, and close to signing the Trans-Pacific Partnership.

It also has low labour costs - about one-third that of China.

AWU aim is to create new business opportunities in different geographical areas, and reduce Australia's heavy reliance on China.

Jackson said that the ultimate objective is to get more people in our auction room. The more buyers you have the greater chance the price will lift.

AWI has so far partnered with 91 manufacturers, mainly knitters, teaching them to produce quality clothing from Australian wool. Of them, 43 are technically competent, making products from Australian wool and sending most of them into Japan and Korea.

AWI is in the second stage of the supply chain, working with three companies to teach them how to produce wool yarns from Australian wool for the knitting sector. They are going to launch small ranges with them in different colours, around 20 common colours at first so they can supply the local spinning industry.

As scouring and top-making plant costs $US40 million and it is wool specific, Mr Jackson said that AWI had chosen a front-end approach as knitters had the flexibility to use their machines to make any fibre.

AWI's presence in Vietnam has been a new market for Australian Merino garments as they thought it was a manufacturing base and it would all be exported. But it was an unexpected spin-off as in North Vietnam there are a couple of months around Christmas and Tet (Vietnamese new year) when it does get quite cold and there are more than 45 million people living there, a good domestic market.