OPPORTUNITIES FOR THE VIETNAMESE GARMENT INDUSTRY FROM THE CPTPP AGREEMENT
The Vietnamese garment export is currently among the top 3 in the world in terms of value, which is expected to continue to accelerate after the Comprehensive Partnership Agreement and Trans-Pacific Progress (CPTPP).
The Vietnam’s export growth has been associated with free trade agreements over the years, especially with the garment and textile industry. Back in 2001, the Vietnam garment and textile export value was marked at only 2 billion USD. However, thanks to the US-Vietnam Bilateral Trade Agreement (BTA) which came into effect in December 2001, Vietnam had generated in average one billion USD per year in the next 6 years. By joining the WTO in 2007, ASEAN – Japan FTA in 2008 and the ASEAN – Korea FTA in 2009, Vietnam managed to boost this figure to an average of 2 billion USD per year. Until end of 2018, Vietnam’s garment exported value reached 36 billion USD, with a 16.01% increase as compared to 2017.
Following this success, the CPTPP is expected to be the next golden opportunity for the Vietnam’s textile and apparel industry. This is because the agreement will abolish import duties on textiles and garments originating from Vietnam when exported to partner countries (either immediately or on schedule). The agreement is crucial for countries where Vietnam has not yet had FTAs because import duties on textiles and garments in those countries are often much higher than that of the other industrial products.
For example, with the Canadian market, all of Vietnam’s major textile and garment exports will be tax-abolished as soon as the Agreement comes into effect or after 3 years. In more specific, 42.9% of the garment export turnover to Canada will enjoy 0% tax in the first year and the remaining 57.1% will have tax removed in the fourth year. The import tax on garment and textiles from Vietnam to Mexico and Peru will be completely eliminated in the 16th year.
The
agreement is also likely to create a force that attracts foreign investors into
Vietnam. According to the Vietnam Textile and Apparel Association (VITAS), the
flow of investment from FDI and the domestic sector tends to increase recently.
Specifically, US enterprises invested in Hung Yen province while enterprises
from Israel invested in Phu Cat, Binh Dinh and German enterprises invested in
Da Lat to produce textile threads and accessories.
It is estimated that with the effect of CPTPP, the Vietnam’s textile and
garment exports will accelerate its growth and will reach 60 billion USD in
2025.