Garment producers gear up to prepare for TPP

Dec 17th at 13:15

17-12-2012 13:15:05+07:00

Vietnam exports 7.6 billion dollars worth of garments to the US. And with the current growth rate, the export turnover would be 13 billion dollars by 2020. However, with the Trans – Pacific Partnership agreement TPP, the figure would be as high as 22 billion dollars.

Le Quoc An, Senior Advisor to the Vietnam Textile and Apparel Association (Vitas), was the person who gave the figure, affirming that this is not an “illusion,” if Vietnam can grab the opportunities to be brought by TPP.
The international textile and garment trade fair VTG 2012 which took place in HCM City some days ago, has been described as a miniature picture about the textile industry. The booths of the enterprises from China, Taiwan and South Korea dominated the trade fair. Meanwhile, the number of Vietnamese products was very modest.

According to the General Department of Customs, by November 15, 2012, Vietnam had exported 15,687 billion dollars worth of garments and fibers. However, in order to make such exports, it had to import 10.77 billion dollars worth of materials, including six billion dollars worth of cloth imports.

Also according to the customs agency, China has been the biggest supplier of fabric and materials to Vietnam (3.5 billion dollars in the first 10 months of 2012), followed by South Korea and Taiwan.

Investing in textile industry to prepare for TPP

An from Vinatas said that TPP would bring more opportunities to Vietnam to export 9 billion dollars worth of products to the US by 2020. However, he also said that if Vietnam still heavily depends on the material imports from China, Taiwan and South Korean, it would not be able to obtain the nine billion dollars.

The US, a partner in TPP, has put forward the “yarn forward” principle, i.e. that in order to enjoy the preferential tariff of zero percent, Vietnam’s exports must be made of the fiber and materials made in Vietnam or the TPP countries.

Meanwhile, Vietnam has been insisting that it would enjoy the zero export tariff if its products are made of import cloth and materials. The 15th round of TPP negotiation is taking place in New Zealand, while Vietnam and the US have not found a common voice on the issue.

The yarn-forward principle which is thought to be applied in TPP has prompted investors to inject their money in the textile industry. The textile factories to be set up in the near future, would make out the materials to be provided to Vietnamese garment producers who would export their products to the US and enjoy the zero export tariff.

An said he personally has received at least 10 invitation for cooperation from the companies from Singapore, Hong Kong and China, who said they wanted to look for suitable places to set up textile factories in Vietnam.

TPP is believed to bring not only economic benefits, but social benefits as well. According to Vitas, in order to generate one billion dollars worth of garment exports, Vietnam would need 100,000 workers. As such, if Vietnam can export 22 billion dollars worth of products by 2020 as predicted, this means that millions of new jobs would be created.

However, Le Quang Hung, President of Garmex Saigon, said that everything would still depend on the capability of Vietnamese enterprises. “If we continue doing the outsourcing for foreign partners and cannot export products under FOB (free on board) mode, we would not be able to take full advantage of the TPP,” he said.

He said Garmex Saigon has negotiated with foreign importers and reached a consensus that the company would use a certain proportion of fabric made of Vietnamese fiber, so that the products can enjoy the zero export tariff in the future, when TPP takes effects, instead of the current 17-35 percent.