VietNamNet Bridge - Developing closed supply chains appears to be the only solution for Vietnamese businesses to take full advantage of the preferences to be brought by free trade agreements (FTAs).

Textile & garment and footwear are believed to be the biggest beneficiaries from TPP as the tariff will be cut from 12-17 percent to zero percent. However, in order to be able to enjoy the preferential tax rate, Vietnamese companies have to meet the ‘yarn-forward’ principle.

This is the reason why Phong Phu Textile JSC decided to increase its yarn-weaving-dyeing-garment closed chain. According to Phong Phu’s general director Pham Xuan Trinh, the company plans to start a production line that makes multicolor denim for the domestic market and exports would be put into operation in December.

Phong Phu would invest VND400-600 billion more in 2016-2018 on fiber production and VND600-800 billion on garments.

Developing closed supply chains appears to be the only solution for Vietnamese businesses to take full advantage of the preferences to be brought by free trade agreements

Trinh said many businesses had big difficulties in 2015, when China devalued the reminbi, the oil price fell and the world economy slowed down, but Phong Phu was not hurt thanks to its flexible supply chain of polyester, cotton and knitting yarn factories.

“We boost exports when conditions are favorable. If export markets get narrow, we use the fiber to make cloth and towels to sell domestically,” he explained.

Rang Dong Plastics JSC is building a $23 million factory in Long An province in a plan to expand the supply chain. 

Eighty five percent of Rang Dong’s products are consumed domestically, while 15 percent are for export. In the near future, with the support of Sojitz Pla-Net, a partner from Japan which has advantages in distribution and technology, it plans to boost exports to Japan and some other countries.

Minh Nguyen JSC has invested $71 million to build the Phuoc Thanh high-tech research and production center, focusing on making products and components to supply to the Samsung complex.

Minh Nguyen is one of very few Vietnamese enterprises which can join Samsung’s global supply chain.

According to Chang Bok Sang of CJ Group, of the $60 million worth of chili imports, 50 percent is from Vietnam. The company has set up a chili farm in Ninh Thuan province  to control the material supply for the group.

Though understanding the big benefits closed supply chains can bring, Vietnamese have still found it difficult to squeeze into the chains. 

“Technique is not a problem for us. The bigger problem is finding the way to join supply chains,” said Trinh Chi Cuong, CEO of Dai Dong Tien Plastics.

“Vietnamese enterprises are quite capable of joining supply chains, but they are not sure about product consumption,” he said.

Dai Dong Tien has been asked to supply some plastic components, but it turned down the cooperation because the order was small.


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