Want to be in the loop?
subscribe to
our notification
Business News
VIETNAM IMPORTS US$6.6 BILLION IN TEXTILE-GARMENT MATERIALS IN H1
Though the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) has been in force for a while, Vietnam has not made much use of the free trade agreement and imported US$6.7 billion worth of materials in the first half of the year.
One central issue to benefit from the deal is finding ways to meet the yarn forward rule of origin, said Truong Van Cam, general secretary of the Vietnam Textile and Apparel Association (VITAS).
The textile and garment industry imported US$12.7 billion worth of fabric last year and some US$6.7 billion in January-June of this year. As VITAS data showed, materials are mainly imported from non-members of the free trade agreements Vietnam has signed, with 55% from China, 20% from South Korea, 16% from Taiwan and 5% from Japan
The CPTPP, which took effect last January, and the EU-Vietnam Free Trade Agreement (EVFTA), which was signed last June, are expected to allow Vietnamese products to approach a market with a billion consumers, which makes up around 40% of global gross domestic product.
Peru, Mexico and Canada are among the CPTPP countries that have no free trade agreements with Vietnam. Given this, Vietnam’s textile and garment exports to Canada have brought US$700-800 million, only trailing Japan.
These two agreements feature fast and deep tax cuts. Vietnam’s textile and garment products are currently taxed 9.6% on average when exported to the European Union. The duties for exports to the CPTPP bloc are varied and depend on the market: 17% to Peru and 20%-35% to Mexico. Both trade deals will soon contribute to cutting tariffs to zero.
Almost all textile and garment products will not be subject to tariffs. The European Union has created a road map for rapid tariff cuts, where over 85% of tariff lines will be cut instantly to 0% and almost 100% of tariff lines will be cut seven years later.
As for the CPTPP, the tax cut road map is longer, reaching up to 16 years in certain markets such as Mexico and Peru as these markets have production and export structures similar to those in Vietnam.
Opportunities will remain undertapped if Vietnam fails to resolve the yarn-forward issue. Clothing brands have their own supply chains, whereas domestic firms have not been able to deeply integrate with these chains and have mainly focused on outsourcing, a stage with the lowest added value of the entire chain. The problems dogging the yarn-forward rule of origin are not easy to resolve, especially if brands keep using materials from partners outside the CPTPP and EVFTA.
Materials from Vietnam are usually 10% higher priced than similar materials from China, noted Ron Dutta of Garan Incorporated, a company with 10 years of operations in Vietnam. He added that Vietnam’s material sources are limited to mostly cotton, and local labor costs are no longer cheap.
China, the supplier of more than half of the materials used by Vietnam, produces materials on a large scale, hence its competitive prices. However, China is not a party to either of the two new-generation trade deals that Vietnam has signed. Vietnam and China are now only members of the ASEAN-China Free Trade Agreement, which became valid in 2010, and the Regional Comprehensive Economic Partnership, which is under negotiation.
According to the VITAS representative, the benefits of the CPTPP and the EVFTA are expected to convince brands to seek local suppliers instead of foreign ones. If the yarn-forward rule is not met, Vietnam’s products will be taxed up to 25%.
However, support from the authorities is essential. The Ministry of Industry and Trade is formulating a textile and garment development strategy, which is expected to be issued this year. If the strategy is approved, large industrial parks will be developed to attract projects to solve the problems of the industry.
“We have high hopes for this strategy,” Cam said.
VITAS hopes that once the textile and garment industrial parks, measuring 400-500 hectares, are built, they will attract projects for fiber, weaving and dyeing. Each industrial park can provide at least one billion meters of fabric per year.
Nonetheless, the construction of industrial parks designated for textile and garment projects to solve environment-related problems is not an easy task in the context of limited land resources.
Source: The Saigon Times
Related News
VIETNAM’S GDP TO GROW 5.5% THIS YEAR – WB
This forecast is based on the assumption of a moderate recovery in manufacturing exports in 2024, fueled by rebound growth of 8.5% year-on-year in the fourth quarter of 2023 and 17.2% year-on-year in the first quarter of 2024, reflecting strengthening global demand, said Dorsati Madani, senior country economist at the WB in Vietnam.
FARE REFUND FOR VISA REJECTION
Cathay Pacific will offer full refunds for cases of visa rejection to provide you with the confidence to explore the world with ease. If you are planning to fly to a destination that requires an entry visa, you can now book with greater peace of mind.
FOUR COMMODITIES POST Q1 EXPORT VALUE OF OVER 5 BILLION USD
The total export turnover of agricultural, forestry, and fisheries products in the first three months of 2024 is estimated to reach 13.53 billion USD, an increase of 21.8% compared to the same period of 2023.
MOIT PROPOSES SCHEME TO BOOST RENEWABLE ENERGY PROCUREMENT
The proposed Direct Power Purchase Agreement (DDPA) mechanism, outlined in the draft decree, targets organisations and individuals consuming electricity from the 22kV power grid or higher, with a monthly consumption averaging 500,000kWh. However, residential households are excluded from direct procurement.
REAL ESTATE BONDS PLACE PRESSURE ON ISSUING FIRMS
The ministry’s recent report underscores concerns within Vietnam’s corporate bond market for 2023 and 2024. It emphasizes the critical need to address hindrances to the real estate sector in line with the objectives provided in Government Resolution No. 33/NQ-CP, which aims to stabilize the industry.
DA NANG CUSTOMS FOCUSES ON DEVELOPING CUSTOMS-BUSINESS PARTNERSHIPS
Da Nang Customs Department issued an action plan for developing customs-business partnership in 2024. One of the new events this year is the workshop on “Settlement reports for enterprises engaged in outsourcing, export production and export processing” held in Da Nang Customs Department on April 16, 2024.