VietNamNet Bridge - Many merger and acquisition (M&A) deals have concluded recently, after which Vietnamese companies joined Chinese textile & garment production chains.


Pham Xuan Hong, chair of Agtek, the HCM City association of textile, garment and embroidery companies, told Dat Viet on December 16 that many Vietnamese companies had ‘sold themselves’ to Chinese. 

The Vietnamese companies are mostly enterprises with small & medium scale, limited capability and less competitive. They cannot exist as separate enterprises in the context of global integration.

The M&A mostly occurs among enterprises in the same localities with advantageous transport conditions. Enterprises in Binh Duong province, for example, would prefer cooperating with enterprises in the neighboring province of Dong Nai. 

Vietnamese enterprises still seriously lack materials. It is estimated that only 20-30 percent of domestic companies can control their input material supply.

Meanwhile, the enterprises which make the same kinds of products will join forces to take full advantage of their machines and equipment.

Besides, some small & medium enterprises were sold shortly after they were built. In some other cases, they cooperate with foreign enterprises or lease workshops to foreign companies. By doing this, foreign companies can dodge current regulations set by local authorities on restricting investments in textile and dyeing, while they still can ensure production scale.

Hong commented that the cooperation between Vietnamese and foreign enterprises will create networks of enterprises which do outsourcing for foreign partners.

He went on to say that cooperation was inevitable as Vietnamese enterprises still seriously lack materials. It is estimated that only 20-30 percent of domestic companies can control their input material supply. 

The Agtek chair thinks one should not be worried about cooperation between Vietnamese and Chinese enterprises, if Vietnamese enterprises can find suitable partners.

Some analysts have shown their big concern about the wave of Chinese and Taiwanese investors coming to Vietnam to set up textile and garment production bases, warning that the benefits Vietnam expects from TPP may fall into Chinese hands. 

“I usually told businesses that they should cooperate with Vietnamese businesses before thinking of foreign ones. However, if necessary, they can join forces with capable foreign companies to do business for mutual benefit,” he said.

He said that Vietnamese enterprises’ capability is still weak, while foreign manufacturers have big capital and large production scale.

However, he said that there was no need to attract a lot of investment into the textile sector.

“It would be better to exclude the garment sector from the list of business fields to attract foreign direct investment (FDI),” he said.

An analyst commented that foreign invested enterprises (FIEs) in the field have been enjoying many preferences, but they have not made a great contribution to the economy.

Dat Viet