TPP continues to attract foreign companies in Vietnam’s textile manufacturing industry

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TPP continues to attract foreign companies in Vietnam’s textile manufacturing industry

Last month in June, U.S. president Barack Obama’s visit to Vietnam made global headlines. The official state visit by Obama was aimed to raise bilateral relations through the Trans-Pacific Partnership, a trade agreement involving 12 Asian countries as well as the United States and the European Union.

Estimates of the TPP on Vietnam’s GDP vary from 8 per cent to about 30 per cent, and strategy consulting firm Solidiance suggests it could add about USD 68 billion to its exports by 2025. Last year, Vietnamese exports stood at USD 162 billion.

The recently signed TPP will yield significant benefits among member countries, especially to Vietnam. The country is set to be a major beneficiary due to increased investment in its manufacturing sector, a deepening supply chain, and export-driven growth.

Effects of the TPP on Vietnam’s fast-growing manufacturing sector will particularly be felt across the textile & apparel and electronics industry. According to Solidiance’s white paper, current tariff rates for textile, garments, and apparel exports from Vietnam to the U.S. (7.9% on average for textiles and 11.4% for clothing) will be gradually reduced to zero once TPP goes into effect, expanding market access to the U.S. and Japan for Vietnam-based companies.

Vietnam is increasingly becoming a much-preferred textile manufacturing destination for companies worldwide with foreign companies providing machinery and technology solutions to the Vietnamese textile manufacturing industry.

Taking advantage of the expected growth trajectory in Vietnam, a French company, Lectra, which provides technology solutions for technical textiles, announced the opening of its subsidiary Lectra Vietnam last month.

Lectra is not alone in its quest to bank on Vietnam’s growing apparel manufacturing industry. New Zealand company ShapeShifter, which provides software to optimise production for industrial users of textiles, leather, and metal, announced that it is finally setting up its customer support team in Vietnam this year.

Meanwhile, the German Textile Machinery Association (VDMA) has been in talks with Vietnamese companies recently in the textile and apparel industries in Hanoi and Ho Chi Minh City recently to introduce the latest German technologies. Managing director of the VDMA, Thomas Waldmann, said that the TPP is a key reason for the association’s interest in providing machinery to the Vietnamese textile manufacturing industry.
Indeed, the TPP is already showing positive economic growth in Vietnam with disbursed FDI reaching record high in 2015 at USD ~14 billion. Key export manufacturing like textile & garment, footwear and fishery, etc, will further enjoy rapid outsized growth due to the trade agreement.

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