Vietnam’s Textile Industry Draws Over $37 Billion in Foreign Investment
Vietnam’s textile and garment sector continues to be a magnet for foreign direct investment (FDI), with over $37 billion pouring into the industry, according to the Vietnam Textile and Apparel Association (VITAS). The country currently hosts approximately 3,500 foreign-invested textile and garment projects, significantly enhancing production capacity and boosting export performance.
Foreign Investment: A Driving Force for Growth
Foreign-invested enterprises contribute an impressive 65% to the sector’s total export turnover. Key investors hail from South Korea, Taiwan, Hong Kong, and China, with South Korea leading as the largest foreign investor. Their capital injections have helped modernize manufacturing facilities, improve efficiency, and strengthen Vietnam’s position in the global textile supply chain.
Vietnam has strategically positioned itself as a hub for textile and garment production thanks to its competitive labor costs, extensive free trade agreements (FTAs), and a strong commitment to sustainability. These factors have made the country an attractive destination for global brands looking to diversify their supply chains and reduce reliance on China.
Additionally, the government has implemented several incentives, including tax breaks and streamlined administrative procedures, to encourage foreign investment in the sector. These efforts have not only drawn capital but also facilitated technology transfers, fostering innovation and sustainability initiatives among local manufacturers.
Vietnam’s Position in the Global Market
Despite economic fluctuations, Vietnam remains the world’s third-largest textile and garment exporter, trailing only China and Bangladesh. The industry saw remarkable growth over the past two decades, with export turnover surging from $2 billion in 2000 to over $44 billion in 2022. However, challenges in global demand led to a decline in 2023, with total exports reaching $40.3 billion—a 10% drop compared to the previous year.
“Vietnam’s textile industry has proven its resilience and adaptability in the face of global economic shifts, continuously strengthening its foothold in the international market”
A key factor behind Vietnam’s sustained success in textile exports is its strong relationships with major international markets. The United States continues to be the largest buyer of Vietnamese textile and garment products, followed by the European Union, South Korea, China, and Japan. With multiple trade agreements in place, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA), Vietnam enjoys preferential tariffs that give it a competitive advantage over other manufacturing nations.
Recovery Signs in 2024
The first four months of 2024 have shown encouraging signs of recovery. Vietnam’s textile and garment exports reached $10.3 billion, marking a 6.3% increase year-on-year. The industry has benefited from stabilizing consumer demand in key markets and the adoption of digital technologies in production, which has improved operational efficiency.
Moreover, Vietnam's textile industry is increasingly shifting towards sustainable and eco-friendly practices. Many manufacturers are investing in green production technologies, such as waterless dyeing and organic fabrics, to meet the stringent environmental standards set by international buyers. This transition not only enhances Vietnam’s reputation as a responsible manufacturing hub but also attracts eco-conscious brands looking for sustainable sourcing options.
Despite its strong manufacturing base, Vietnam imports nearly all of its cotton and spends billions on raw fabric annually. Between January and April 2024, cotton imports exceeded $1 billion, reflecting a 20.2% increase. Fabric imports rose by 6.5% to $4.34 billion, while textile yarn imports climbed 22.5% to $833 million. The country also spent $2.24 billion on raw materials for textiles, garments, and footwear, an 18.9% rise compared to the same period last year.
To reduce reliance on imported materials, Vietnam has been encouraging domestic textile production and investment in local supply chains. Some companies have started developing large-scale fabric production facilities to cater to domestic and export markets, aiming to improve self-sufficiency and reduce costs for garment manufacturers.
FDI Hotspots in the Textile Sector
Several provinces have emerged as key hubs for FDI in the textile and garment industry. Dong Nai, Binh Duong, Tay Ninh, Long An, Nam Dinh, Hai Duong, and Binh Phuoc have attracted significant investment, leveraging their strategic locations, developed infrastructure, and skilled workforce. These regions offer modern industrial parks with specialized facilities, making them ideal for textile and garment production.
Furthermore, logistics and supply chain infrastructure in these areas have been improving, with new highways, seaports, and rail connections making it easier for manufacturers to transport goods domestically and internationally. This has significantly contributed to reducing lead times and improving efficiency, which are crucial factors for global fashion brands operating on fast production cycles.
The Road Ahead
As Vietnam’s textile industry navigates global economic shifts, foreign investment remains a critical pillar of its growth. With increasing orders, rising exports, and ongoing investments in technology and sustainability, Vietnam is well-positioned to maintain its competitive edge in the international textile market. However, challenges remain, including increasing labor costs, the need for skilled workers, and environmental concerns.
To address these issues, industry stakeholders are focusing on automation, training programs, and sustainable development. By investing in innovation and strengthening local supply chains, Vietnam’s textile sector is poised for long-term success, ensuring its role as a key player in the global fashion and garment industry.
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