The most significant impediments to Vietnam’s textile and garment industry growth are a lack of support industries and a large reliance on material imports. It’s critical to make the required investments in supporting industries. With 65 percent imported inputs, Vietnam’s businesses continue to outsource to overseas partners. Vietnam businesses benefit from favorable tariffs and a competitive advantage in member markets thanks to free trade agreements. One of the industries that have benefited the most from these agreements is textile and garment manufacturing. The advantages, however, are only realized if Vietnam is able to comply with the norms of origin. Vietnam’s products, for example, must comply with the yarn forward rule to qualify for favorable tariffs under the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership). The fabric forward rule governs the EVFTA (EU-Vietnam Free Trade Agreement). This implies that the yarn used to make the fabric, as well as the fabric used to make textile and apparel items, must be sourced from Vietnam or FTA members. However, Vietnam’s ability to produce yarn and fabric is limited, and these resources are largely imported.
One method is to create a chronology for the development of the weaving and dyeing businesses. Establishing textile and garment clusters, which include not just yarn, textile, dyeing, and garment industries, but also downstream businesses is another option.