FOREIGN INVESTMENT IN TEXTILE & GARMENT SECTOR FALLS

[02-10-2016] Unlike two years ago, when Vietnam witnessed a wave of foreign direct investment (FDI) in textile & garment projects, the capital flow into the sector has slowed down. A series of huge projects with investment capital of billions of dollars were registered in 2014 and 2015.

Experts described the investors as ‘early birds waiting to catch worms’ who believed that if they arrived in Vietnam soon, they would be able to take full advantage of the TPP (Trans Pacific Partnership) agreement, of which Vietnam is a member.

However, there has been no more information about the investment in the field so far this year.

Nguyen Hong Giang, deputy chair of the Vietnam Cotton and Spinning Association (Vcosa), attributes this to the news about the presidential election in the US.

Some experts said they anticipate roadblocks to TPP as both the US presidential candidates, Hillary Clinton of the Democratic Party and Donald Trump of the Republican Party, oppose the agreement.

Giang commented that foreign investors were not making decisions at this moment.

According to Giang, foreign investment into the textile & garment sector can be divided into three groups.

The first comprises large enterprises, mostly Chinese or enterprises operating in China. They came to Vietnam in recent years in anticipation of the big benefits to be brought by TPP.

The second comprises enterprises which also have large operation scale, but don’t have much experience in making outward investment or are still cautious investing in another country.

The enterprises would make investment right now if they see favorable conditions. However, with the news about TPP, they are keeping a ‘wait and see’ attitude and would make investment if Chinese enterprises succeed in Vietnam.

The third group comprises smaller enterprises, which would come after the second group.

Pham Xuan Hong, chair of the HCMC Association of HCMC Knitting, Embroidery and Textile, also commented that there has been not much information about FDI in the textile & garment sector this year.

He predicted that the investment projects’ implementation may be delayed as investors are awaiting information about the election in the US.

However, Giang affirmed that the Vietnamese investment environment is still very attractive to foreign investors.

Besides TPP, Vietnam also has free trade agreements (FTAs) signed with other partners, such as Japan, the Republic of Korea and the Europe. The production cost in Vietnam is also competitive compared with other countries.

Vietnam exported US$18.7 billion worth of textile & garment products in the first eight months of the year.

Source: VIR