Foreign textilers moving ahead of FTAs with their production facilities in Vietnam

Foreign textile and garment firms to enjoy a zero percent import tax rate under the commitments of free trade agreements (FTA) such as the Trans-Pacific Partnership Agreement, the EU-Vietnam FTA, and the South Korea-Vietnam FTA are moving is full swing with plans to build production facilities in ahead of FTAs in Vietnam.

Nguyen Duc Tiep, deputy head of the Quang Ninh Provincial Investment Promotion Agency’s Investment Promotion Division, said that Hong Kong’s Texhong Group is nearing completion of its second production factory worth over $200 million located within the $953.6 million, 3,300 hectare Hai Ha Industrial Park,. It is also under the group’s construction.

With the park and factory likely to come into operation within the coming months. Texhong is calling upon many fabric and textile investors from Hong Kong to invest into the park and supply materials for its two factories, Tiep said

Texhong’s first textile factory was worth over $200 million, has already been operating at the province’s Hai Yen Industrial Park for several years. The Group plans to build a power plant at the park to supply sufficient power to the textile and garment factories there.

Another Hong Kong-backed firm, Black Peony, is plans to build a $100 million worth jean cloth production facility in this park.

Under the Trans-Pacific Partnership agreement (TPP), apparel tariffs are likely to be eliminated over the course of five to eight years. However, some tariffs will be eliminated immediately.

In addition, Hong Kong’s Luenthai has also co-operated with Vietnam National Textile and Garment Group and China’s Jialida to build a $400 million industrial textile and garment park in the northern province of Nam Dinh on a 1,500ha site.

Last month, Hong Kong-backed Huafa’s $136 million project to build a 20ha textile factory was approved by the Mekong Delta province of Long An.
In the meantime, Singapore’s Huntsman will inaugurate a new bonded warehouse with the capacity of 250 tonnes of dyes and chemicals near Ho Chi Minh City later this month.

Paul Hulme, president of Huntsman Textile Effects said that Vietnam’s market is moving fast and there are a lot of investments being made in anticipation of the potential TPP. The company has a vision to thrive within the market, making Vietnam one of their biggest investments and an important market in their global business plan.

Another major investor in this sector is Hyosung Dongnai Company, which was granted an investment certificate last week to develop a $600 million fibre production project in the southern province of Dong Nai’s Nhon Trach 5 Industrial Zone.

The facility will be built on a 22ha site, bringing the company’s total area up to 90ha. Hyosung has been operating in Dong Nai for over seven years with two projects worth $995 million, namely Hyosung Dong Nai and Hyosung Vietnam.

Nguyen Viet Ha, managing director of US-backed investment consultant BowerGroupAsia Inc, said that many South Korean and Thai enterprises were also eagerly scampering for a share in Vietnam’s textile and garment industry, thanks to upcoming benefits from the FTAs.

Thailand, one of the region’s garment and textile leaders, with its main export markets in Europe and North America. The Thailand Garment Manufacturers’ Association in March this year sent a business mission both Hanoi and Ho Chi Minh City, Ha said.

South Korea’s Nobland recently announced that it would invest additional $18 million in its $61 million garment factory in Ho Chi Minh City’s Tan Thoi Hiep Industrial Park. Nobland has grown in leaps and bounds since its arrival in Vietnam in 2002 when it started out with a $3-million garment plant equipped with 15 production lines.

According to the Ministry of Industry and Trade, this year Vietnam’s garment and textile export is likely to reach $28.36 billion. This year’s four-month figure was $6.55 billion, up 10.2 per cent on-year. Last year the garment and textile exports turnover hit $24.5 billion, up 19 percent on-year.

The textiles, clothing, and footwear sectors is likely to benefit immensely from the EU-Vietnam FTA when the import tariff is reduced to zero percent, down from the existing 10 percent. They currently comprise 30 percent of Vietnam’s overall merchandise exports, and a massive 50 per cent of Vietnam’s overall exports to the EU.