FDI pouring capital into Vietnamese textile-garment industry growing quickly

The number of foreign-invested enterprises (FDI) pouring capital into the textile industry is growing quickly. This year, in the past 10 months local governments have given approval for almost 20 new projects of FDI firms, according to the Ministry of Planning and Investment.

However, the Vietnam Textile and Apparel Association (Vitas) has warned of the expanding gap between FDI and domestic firms in the textile-garment sector.

The number of FDI textile-garment firms although small, but their scale is very large. Vietnam’s annual textile-garment export revenue is more than $20 billion and FDI enterprises hold up to $12 billion.

In early October, Hong Kong’s TAL Group was licenced to invest $600 million to build a fiber production, knitting and fabric dyeing factory at the Dai An Industrial Zone in Hai Duong province.

TAL has invested in the garment industry in Vietnam since 2004 with a plant in Thai Binh Province. Its products have been exported to the US.
TAL Apparel Limited of Singapore on November 4 received an investment certificate from local authorities of the northern province of Vinh Phuc, paving the way for the Singaporean giant to construct a US$50 million textile plant.

Local officials approved for the plant to be constructed at Ba Thien 2 Industrial Park in Binh Xuyen commune. It is the largest foreign invested project that has received approval to date in the province and, on completion which is expected by September of next year, it is anticipated to generate 3,500 jobs and contribute VND40 billion to the national budget annually.

Previously, Nam Dinh licenced a $68 million fibre-weaving-dyeing project in the Bao Minh Industrial Zone of a Chinese corporation, Yulun Jiangsu Textile Group. This project is expected to go into operation in mid-2016.

In early October, Haputex Development Limited (Hong Kong) and Viet Huong Investment and Development JSC of Vietnam formed a $120 million joint venture named Nam Phuong Textile Limited in Binh Duong Province, specialized in weaving.

This project will be put into operation in early 2016, employing about 3,000 workers. Each year, this factory will supply 96 million meters of fabric, 15,000 tons of fibers and 10 million of garment products to the US and European markets .

In the Southeast Cu Chi District Industrial Zone, HCM City, two projects with a total investment of nearly $200 million of two foreign companies are being implemented.

Worldon Vietnam Co. has invested in a luxury garment factory, which can produce 80 million of products per year, with $140 million of investment capital. The factory is expected to open in June 2015.

Sheico Vietnam Co., Ltd. is building a fabric weaving and garment project with a total investment of $50 million. The project is expected to be completed this month.

According to Nikkei Asian Review, trading firm Itochu will invest in the Vietnam National Textile and Garment Group (Vinatex).

Itochu will soon acquire about five percent of Vinatex’s stock for more than 1 billion yen ($9.25 million), making it Japan’s first leading non-financial company to buy into a Vietnamese State-owned firm. This information was confirmed by Chairman of Vinatex’s executive board Tran Quang Nghi.
Itochu had purchased some Vinatex shares through a normal transaction, not as a strategic shareholder of Vinatex. As Viet Nam’s largest state-owned textile company, Vinatex operates about 200 factories around the country, of which about 30 are involved in sewing garments for Itochu under a contract.

Itochu currently does business with about 100 Vietnamese textile companies. It deals in everything, from the procurement of raw materials to sewing, and supplies suits, shirts and other products to Japan, the United States and Europe. It is the largest Japanese firm in the country’s textile industry.

Phong Phu Corporation – one of the biggest enterprises in the Vietnamese industry – has been also eyed by many foreign investors. In late April, Phong Phu Corporation and Japan’s Hirose Shokai Company Ltd signed an agreement to establish a joint venture firm called Linen Supply Services Company Ltd (LSS).

The new company will produce textile products such as cotton towels, pillows, blankets and curtains, and offer high-quality laundry services for five-star hotels and high-class apartments in HCM City and its surrounding areas.

It will be located in the Giang Dien Industrial Zone in the southern province of Dong Nai and will have a total investment of over US$3 million in the first phase. Its factory covers an area of 3,168 square metres and is equipped with modern equipment from Japan.

It has a laundry capacity of handling 18 tonnes of material every day. In the second phase, the project will increase its capacity to 50 tonnes of material per day, mainly serving HCM City and its nearby provinces. It will focus on producing table cloth, uniforms and items for hospitals.

Keitaro Hirose, chairman of the management board of Hirose Shokai Company Ltd, said that cooperation with Phong Phu in its investment project in Vietnam meant that they would work with the Vietnamese company and the textile industry in Viet Nam for a long-term period.

Hirose also hope to spread LSS’s presence in many cities in Vietnam in the future by implementing investment studies in Ha Noi, Da Nang and Nha Trang.

Pham Xuan Trinh, General Director of Phong Phu Corporation, acknowledged that the increasing flow of foreign capital into the textile-garment sector aims to wait for the TPP (Trans-Pacific Partnership).

While Pham Xuan Hong, Vitas Vice President sees inflow of foreign capital as a opportunity for Vietnamese enterprises to develop their technology and buy materials at low prices.

Apart from building factories, many foreign corporations have bought shares or cooperated with Vietnamese partners. In the south, many corporations of Taiwan and Hong Kong have also strengthened their investment in the textile-garment industry.

Currently, investment in China is facing difficulty and Vietnam has become a good place for investment. But this also can create major concern for Vietnamese enterprises.