Vietnam's garment industry yet to enjoy benefits from EVFTA

It is anticipated that local textile and apparel firms will not be able to enjoy any immediate benefits from the European Union -Vietnam Free Trade Agreement (EVFTA) once it enters into force due to rules of origin, according to insiders.

garment industry yet to enjoy benefits from evfta hinh 0

A representative from the Thanh Cong Textile Garment - Investment - Trading Joint Stock Company (TCM) stated that the average import duties imposed on the company’s clothing products in the EU market currently stands at approximately 12%.

Once the EVFTA comes into effect, several tariff lines will be slashed to 0%, with the firm aiming to increase the export rate to this market from between 5% and 8% this year to between 12% and 15% next year.

In line with the commitments outlined in the EVFTA, the EU has pledged to exempt import duties on 42.5% of tariff lines for garment and textile products exported to the bloc, while the remaining tariff lines will be gradually reduced to 0% over the course of the next five to seven years.

Garment and textile enterprises are therefore being advised to strictly follow the rules of origin on fabric and other requirements which relate to the outsourcing stage as stipulated by the trade pact in an effort to boost exports to the EU and enjoy the tax reductions set out by the EVFTA.

Accordingly, fabric used when making clothes must be woven within the country, EU member states, or third-party nations that have signed FTAs with the EU.

Tran Nhu Tung, deputy general director of TCM, expressed his belief that the company’s clothing products will be able to enjoy preferential tax from the EVFTA as TMC is also a supplier of yarn and producer of fabric.

Tung therefore predicts that Vietnamese clothing manufacturers will move to increase the purchase of the company’s fabric products in order to enjoy preferential tariffs, rather than simply importing fabric from the Chinese market.

At present, TCM will continue to expand fabric production in an effort to seize opportunities from the EVFTA, Tung noted.

Pham Van Viet, chairman of Viet Thang Jean's board of directors, said the company’s garment exports to the EU are now subject to a tax rate of between 14% and 18%, depending on their respective product category.

Viet emphasied that the trade deal will allow businesses to lower their production costs and move to enhance their competitiveness, while simultaneously increasing the proportion of exports to EU market in the near future due to import duties being slashed to 0%.

The representative from Viet Thang Jean stated that the company has already changed its the supply source of fabric from China to Thailand and the Republic of Korea (RoK), both of which have signed an FTA with EU.

 

Despite this, not all garment enterprises have followed the example of TCM or Viet Thang Jean by making timely preparations in an effort to enjoy the full benefits from the EVFTA. In fact, Vietnam largely imports fabrics from the Chinese market or from countries at the request of foreign customers.

To resolve the shortage of fabric materials and enjoy the incentives of the EVFTA, some firms use imported fabrics from the RoK for sewing in Vietnam. However, the rate of importing fabric from the RoK market still remains low due to local businesses prioritising the import of fabrics from China thanks to lower prices, geographical advantages, and diversification of designs. 

Moreover, it is estimated that 60% of fabrics imported into the country come from either China or Taiwan (China), with prices far lower than those which are imported from the RoK. This has led to difficulties for local companies enjoying preferential tax rates from the EVFTA.

This shortage of fabric materials can also be attributed to the fact that some localities do not grant investment licenses to dyeing and weaving projects due to increasing concerns regarding their impact on the environment.

According to a representative from the Vietnam Textile and Apparel Association (Vitas), some localities have decided to reject projects with investment capital of up to hundreds of millions of US dollars due to worries surrounding their environmental impact.

Vitas stated that this represents a major challenge for the industry as they try to meet regulations whilst enjoying export tax benefits to European markets.

Most notably, the injection of money into the country by foreign investors will contribute to developing supporting industries for the textile sector, thereby helping to boost the localisation rate and avoid a heavy reliance on imports.

Vitas leaders point out that whilst only a few textile and dyeing projects have violated environmental regulations, many localities turn down the majority of projects, causing difficulties for businesses as they are dependent on the supply source of fabric materials from the country.

As such, economic experts have advised localities not to worry much about missing out on opportunities to enjoy preferential tariffs in numerous markets.

Economists underscored the importance of zoning plans for projects and application of advanced technologies in a bid to ensure the environment protection and the supply source of fabric materials within the country. VOV

Vietnamese textile and garment industry: difficulties still ahead

Vietnamese textile and garment industry: difficulties still ahead

With demand decreasing sharply, the textile and garment industry is expected to continue facing difficulties in Q2.

VN textile and garment shares lose appeal

VN textile and garment shares lose appeal

Textile and garment companies are facing double problem: they find it difficult to import input materials and cannot export their goods.

 
 

Other News

.
Coronavirus: Moguls and lobbyists get millions in government aid
Coronavirus: Moguls and lobbyists get millions in government aid
BUSINESSicon  08/07/2020 

Kanye West's apparel brand, Jared Kushner's family and Donald Trump's lawyer were among the recipients.

Vietnam to increase rice exports to EU under EVFTA
Vietnam to increase rice exports to EU under EVFTA
BUSINESSicon  08/07/2020 

Rice quotas for Vietnam under the EVFTA are expected to push Vietnam’s rice exports up from the second half of this year, according to the Ministry of Industry and Trade (MoIT).

Car sales in Vietnam rocket after registration fee cut
Car sales in Vietnam rocket after registration fee cut
BUSINESSicon  08/07/2020 

After the Government’s move to lower car registration fees by half took effect more than a week ago, the domestic car market has picked up.

State budget revenue reaches seven-year record low
State budget revenue reaches seven-year record low
BUSINESSicon  08/07/2020 

The total State budget revenue was estimated to be at VND668,700 billion, equaling 44.2% of the anticipated amount by the end of June, marking a 10.5% drop over the same period last year and the lowest levels since 2013.

EuroCham stresses importance of stimulus packages in Vietnam’s post-pandemic recovery
EuroCham stresses importance of stimulus packages in Vietnam’s post-pandemic recovery
BUSINESSicon  08/07/2020 

State financial support for companies hit hard by the Covid-19 pandemic, regardless of the level they are yet, and subject to the Government’s consideration in terms of budget range and macroeconomic stability, 

Private sector involvement proposed in Chu Lai airport project
Private sector involvement proposed in Chu Lai airport project
BUSINESSicon  07/07/2020 

The authority of Quang Nam Province has proposed that private investors be allowed to participate in the construction, management and operation of Chu Lai airport, similar to the investment model adopted for Van Don airport in Quang Ninh Province.

Fitch Ratings says Vietnam outperforms among Asia’s frontier sovereigns
Fitch Ratings says Vietnam outperforms among Asia’s frontier sovereigns
BUSINESSicon  07/07/2020 

According to Fitch Ratings, Vietnam is positioned to stand out among Asia’s frontier and emerging markets this year as a result of its economic resilience and success in bringing the novel coronavirus pandemic under control.

Vietnam’s bond market posts highest growth in emerging East Asia: ADB
Vietnam’s bond market posts highest growth in emerging East Asia: ADB
BUSINESSicon  07/07/2020 

The local currency (LCY) bond market in Vietnam posted the highest growth in the emerging East Asia region, as authorities took fiscal and monetary policy actions to mitigate the economic fallout from the coronavirus pandemic.

China is largest plywood investor in Vietnam
China is largest plywood investor in Vietnam
BUSINESSicon  07/07/2020 

China has invested in 29 plywood projects worth over US$150 million in Vietnam, becoming the country’s largest plywood investor, according to Ngo Sy Hoai, vice chairman of the Vietnam Timber and Forest Products Association.

Customs authority discovers multiple cases of origin fraud
Customs authority discovers multiple cases of origin fraud
BUSINESSicon  07/07/2020 

Country of origin fraud cases, wherein Chinese products bear Made-in-Vietnam labels, are on the rise, with Vietnam’s customs authority recently inspecting 76 cases

Thai firm buys two wind power farms in Vietnam
Thai firm buys two wind power farms in Vietnam
BUSINESSicon  07/07/2020 

The move aims to take advantage of low interest rates to build projects with a quick return on investment.

FIEs displeased with government demand to license internal websites
FIEs displeased with government demand to license internal websites
BUSINESSicon  07/07/2020 

The new regulations of the MIC may affect the policies and assets of private businesses and foreign-invested enterprises in Vietnam.

Amended law alters funding landscape
Amended law alters funding landscape
BUSINESSicon  07/07/2020 

The Vietnamese National Assembly has adopted the new Law on Investment, with new rules in favour of foreign investment, including from the US, which is expected to surge in Vietnam in the time to come.

New investment wave starts despite COVID-19
New investment wave starts despite COVID-19
BUSINESSicon  07/07/2020 

The new wave of foreign investment triggered by COVID-19 and US-China trade tensions is becoming more visible as outstanding overseas ventures are expanded.

Stronger money policies might be considered to aid economic growth: SBV
Stronger money policies might be considered to aid economic growth: SBV
BUSINESSicon  07/07/2020 

The State Bank of Vietnam could increase credit growth limits for credit institutions this year or even launch stronger monetary policies to aid the country’s post-pandemic growth, Governor Le Minh Hung has said.

Guiding decrees needed to fight with transfer pricing in Vietnam
Guiding decrees needed to fight with transfer pricing in Vietnam
BUSINESSicon  07/07/2020 

Anti-transfer pricing measures were included in the Law on Tax Administration for the first time, but a guiding decree has not yet been written. Experts said this could mean the rules are less effective.

VN corporate bond market to boom in second half
VN corporate bond market to boom in second half
BUSINESSicon  07/07/2020 

Companies are looking to raise debts from bond issuance before the amended Law on Securities takes effect next January.

Experts warn of scorching-hot growth of solar power in Vietnam
Experts warn of scorching-hot growth of solar power in Vietnam
BUSINESSicon  08/07/2020 

The total capacity of solar power projects registered by investors has become nearly 10 times higher than the targeted level.

Vietnam’s labor market: opportunities as well as challenges
Vietnam’s labor market: opportunities as well as challenges
BUSINESSicon  08/07/2020 

The ASEAN Economic Community (AEC) and FTAs have brought more job opportunities to workers but also challenges as Vietnamese workers will have to compete with international staff in the home market.

E-commerce in Vietnam thrives during COVID-19
E-commerce in Vietnam thrives during COVID-19
BUSINESSicon  08/07/2020 

“Covid-19 has given e-commerce a push,” said Nguyen Thuy Anh from the Department of E-commerce and Digital Economy.

 
 
 
Leave your comment on an article

OR QUICK LOGIN