VietNamNet Bridge – Foreign textile and garment firms are reeling out new investments in anticipation of upcoming free trade agreements.

As several FTAs are scheduled for the months ahead, many textilers are setting up shop here to reap the benefits

Nguyen Duc Tiep, deputy head of the Quang Ninh Provincial Investment Promotion Agency’s Investment Promotion Division, told VIR that Hong Kong’s Texhong Group is nearing completion of its second production factory which is worth over $200 million. The complex is located within the $953.6 million, 3,300 hectare Hai Ha Industrial Park, which is also under the group’s construction.

“The park and factory will likely come into operation within the coming months. Texhong is calling upon many fabric and textile investors from Hong Kong to invest into the park and supply materials for its two factories,” Tiep said, adding that Texhong would build a power plant at the park to supply sufficient power to the textile and garment factories there.

The group’s first textile factory, also worth over $200 million, has already been operating at the province’s Hai Yen Industrial Park for several years.

Another Hong Kong-backed firm, Black Peony, is planning to build a $100 million jean cloth production facility in this park.

“Foreign textile and garment firms want to enjoy a zero per cent import tax rate under the commitments of free trade agreements (FTA) such as the Trans-Pacific Partnership Agreement, the EU-Vietnam FTA, and the South Korea-Vietnam FTA,” Tiep said.

The textiles, clothing, and footwear sectors will benefit hugely from the EU-Vietnam FTA when the import tariff is reduced to zero per cent, down from the existing 10 per cent. They currently comprise 30 per cent of Vietnam’s overall merchandise exports, and a massive 50 per cent of Vietnam’s overall exports to the EU.

Under the Trans-Pacific Partnership agreement (TPP), apparel tariffs are likely to be eliminated over the course of five to eight years. However, some tariffs will be eliminated immediately.

In another instance of the snowballing interest by foreign investors in Vietnam’s garment industry, last month, Hong Kong-backed Huafa’s $136 million project to build a 20ha textile factory was approved by the Mekong Delta province of Long An.

In addition, Hong Kong’s Luenthai has also co-operated with Vietnam National Textile and Garment Group and China’s Jialida to build a $400 million industrial textile and garment park in the northern province of Nam Dinh on a 1,500ha site.

In the meantime, Singapore’s Huntsman will inaugurate a new bonded warehouse with the capacity of 250 tonnes of dyes and chemicals near Ho Chi Minh City later this month.

“We see that Vietnam’s market is moving fast and there are a lot of investments being made in anticipation of the potential TPP. The company has a vision to thrive within the market, making Vietnam one of our biggest investments and an important market in our global business plan,” said Paul Hulme, president of Huntsman Textile Effects.

Another major investor in this sector is Hyosung Dongnai Company, which was granted an investment certificate last week to develop a $600 million fibre production project in the southern province of Dong Nai’s Nhon Trach 5 Industrial Zone.

The facility will be built on a 22ha site, bringing the company’s total area up to 90ha.  Hyosung has been operating in Dong Nai for over seven years with two projects worth $995 million, namely Hyosung Dong Nai and Hyosung Vietnam.

Nguyen Viet Ha, managing director of US-backed investment consultant BowerGroupAsia Inc, told VIR that many South Korean and Thai enterprises were also eagerly scampering for a share in Vietnam’s textile and garment industry, thanks to upcoming benefits from the FTAs.

“For example, Thailand Garment Manufacturers’ Association sent a business mission to Ho Chi Minh City last August, and again in March this year to both Hanoi and Ho Chi Minh City,” Ha said. “Thailand is one of the region’s garment and textile leaders, with its main export markets in Europe and North America.”

South Korea’s Nobland recently announced that it would invest additional $18 million in its $61 million garment factory in Ho Chi Minh City’s Tan Thoi Hiep Industrial Park. Nobland has grown in leaps and bounds since its arrival in Vietnam in 2002 when it started out with a $3-million garment plant equipped with 15 production lines.

According to the Ministry of Industry and Trade, Vietnam’s garment and textile export turnover last year hit $24.5 billion, up 19 per cent on-year. This year, it is expected to reach $28.36 billion. This year’s four-month figure was $6.55 billion, up 10.2 per cent on-year.

VIR