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12.12.2017

ETHIOPIA FOCUSES ON CLOTHING AND TEXTILE EXPORTS

  • Industrial parks should enable a quantum leap
  • Progress in infrastructure, Deficits in foreign exchange provision

The Ethiopian textile, clothing and leather industry scores not only with comparatively low wages and high-performing personnel, but also with modern industrial parks. In the meantime the technology has to be fully imported and the supply of materials needs to be greatly expanded. There is a great progress in logistics, but unfortunately not in foreign exchange procurement. German suppliers of relevant equipment should definitely consider Ethiopia in their acquisition.

  • Industrial parks should enable a quantum leap
  • Progress in infrastructure, Deficits in foreign exchange provision

The Ethiopian textile, clothing and leather industry scores not only with comparatively low wages and high-performing personnel, but also with modern industrial parks. In the meantime the technology has to be fully imported and the supply of materials needs to be greatly expanded. There is a great progress in logistics, but unfortunately not in foreign exchange procurement. German suppliers of relevant equipment should definitely consider Ethiopia in their acquisition.

So far, only Mauritius has made a name for itself as a producer of high-quality clothing south of the Sahara. Attempts to locate textile and clothing companies in Namibia and Lesotho in a larger style have not been very successful. Meanwhile Kenya and Ghana have far too expensive production conditions. "Clothing companies are nomadic,” says a consultant, who is specializing in the trade, "they go where it's cheapest for them."

Meanwhile, Ethiopia offers several advantages: Wages and additional costs are far below the Chinese ones. A worker in the Ethiopian factories earns an average of USD 909 a year, according to a survey by the US Center for Global Development, compared to USD 835 in Bangladesh, USD 1,776 in Tanzania, and USD 2,118 in Kenya. Another advantage is appreciated by employees: Ethiopia has a long tradition of textile and clothing production as well as in leather processing and thus at least an expandable base of skilled workers.

The supply of native cotton and leather meanwhile is considered strongly expandable. In times of drought, such as in 2016 and partly in 2017, the supply of cotton is insufficient. However, the government is cooperative and increasingly open to the needs of producers. Thus, the infrastructure has been currently sustainably improved, in particular the transport routes to the seaport Djibouti, from where Europe is much faster to reach than from the Far East. In addition, the Ethiopian capital Addis Ababa has a capable aviation hub with a dozen direct flights to the EU, including Frankfurt and Vienna. There is also a modern air freight center.

Modern industrial parks as a game changer

Just as important as the delivery routes are the "modern" production conditions in the emerging industrial centers all over the country, Made by China: pothole-free roads, guaranteed electricity and water supply, proper waste and wastewater disposal, workers' settlements in the vicinity. From the Ethiopian point of view, a great many jobs are created, families are fed and foreign exchange is earned.

According to its government, Ethiopia is in a transformation process away from an agrarian economy and towards an industrialized state. By 2025, the country should reach a "middle-income status" and become the largest industrial production hub in Africa. To achieve this, Ethiopia is investing heavily in roads, railways and power generation, in health and education, in urban and rural development, and in the creation of industrial clusters.

Ambitious export specifications

In July 2016 the Hawassa Industrial Park was officially opened, dedicated to the export of textiles and clothing, and is the largest industrial park in sub-Saharan Africa. As early as 2018, the park is expected to employ 60,000 workers and generate USD 1 billion in exports of clothing and textiles - a steep target given in a view of the current export figures. As early as 2030, Ethiopia wants to reach a total of USD 30 billion by exporting textiles and clothing - but it's still a long way off. At present, 15 in-ternational companies are already investing in Hawassa, including the US PVH Corporation (formerly Phillips-Van Heusen Corporation, prominent brands: Calvin Klein and Tommy Hilfinger) and Epic Group (Hong Kong), a supplier of, among others, Walmart , JC Penny, Levi Strauss, VF Corporation, Tesco, Sansbury's, Marks & Spencer and C & A. Epic wanted to go to Kenya first, but then decided for Ethiopia at the last minute, which, according to Epic boss Ranjan Mahtani, is "still unpolished," but has the most potential.

The challenges are considered to be high: "Our seam-stresses have never got a job before and have never seen a sewing machine," Mahtani says training therefore is a top priority. At the same time, however, his company also relies on state-of-the-art automatic machines, for example for attaching bags. The production halls are also all around computerized with RFID technology. The current efficiency Mahtani estimates at 25 to 30 percent. After experience with other production sites, results of 75 to 80 percent are possible after about ten years.

Wide range of new industrial parks under construction

In July 2017, another industrial park was opened in Kombolcha City. A whole range of other parks are in various stages of realization and all are focused on the apparel, textile, pharmaceutical and medical device manufacturing sectors. According to the Ethiopian Government, there is no shortage of interested investors from the PR of China, India, Turkey, the US, Hong Kong and South Korea. Ethiopia benefits from the African Growth and Opportunity Act of the United States, which, for example, reduces its import duties by 16.8 per cent on cotton pants and 30 per cent on synthetic shirts. In addition, Ethiopia has a duty-free access to the EU market under the Everything-but-Arms initiative.

Ethiopian exports of textiles, clothing and leather goods (including shoes), in USD mio
SITC- product group 2014 2015 2016
61 Leather and leather goods  97.51 98.20 78.63
65 Yarn, fabrics finished textiles and re-lated products 39.34 39.12 29.61
84 Clothing and clothing accessories 55.53 77.94 68.25
85 Shoes   33.88 37.69 43.80
Total      226.26 252.95 220.29

Source: Comtrade, as of 18 October 2017

Ethiopian imports of machinery and equipment for the textile and leather industry and parts thereof (SITC 724, in USD mio, change in%)
Supplying country 2014 2015 2016
Total      131.30

170.51

111.10
PR China 43.87 42.40 62.07
Italy 6.38 11.75 11.72
Japan 4.40 10.11 6.89
Turkey 4.86 19.14 4.92
other Asian countries, not specified 1.85 1.87 4.11
India 6.07 6.49 3.06
Germany 9.22 9.08 2.44

Note: The import figures mentioned above are based on Ethiopian data, which for various reasons are not considered particularly reliable. Equally not reliable are often the relevant export data of the partner countries, because all sea transports go via Djibouti and deliveries statistically are recorded often as exports to Djibouti.
Source: UN Comtrade, as of 18 October 2017

German exports expandable

German exporters of technology for the textile, clothing and leather industries are not yet well positioned in Ethiopia. According to the preliminary figures of the Federal Statistical Office (SITCM 724), in 2016 only EUR 1.06 mio of relevant technology went to Ethiopia, compared to EUR 1.05 mio in the previous year and EUR 5.02 mio in 2015.

More information:
Ethiopia Export Textilindustrie
Source:

Martin Böll, Nairobi (GTAI)

 Ethiopia is considered as investment tip in Sub-Saharan Africa © Pixabay
07.11.2017

ETHIOPIA IS CONSIDERED AS INVESTMENT TIP IN SUB-SAHARAN AFRICA

  • International companies have confidence in government work
  • Chinese set the tone

Nairobi (GTAI) - Foreign companies are flowing into Ethiopia and investing in the textile, clothing and leather sectors. Ethiopia is also interesting for companies that assembling simple technical devices. The country does not look good in various international indices, but that does not have to be a contradiction. For some sectors Ethiopia is highly interesting and hope for improvement is always to be hoped for.

Ethiopia is one of the poorest countries in the world and one of many typical developing countries, as there are many on the African continent. The big difference is: Ethiopia is controlled by a regime that is not satisfied with what it has achieved, but is more ambitious: to become a leading, if not the leading, industrialized nation in sub-Saharan Africa.

Model China

  • International companies have confidence in government work
  • Chinese set the tone

Nairobi (GTAI) - Foreign companies are flowing into Ethiopia and investing in the textile, clothing and leather sectors. Ethiopia is also interesting for companies that assembling simple technical devices. The country does not look good in various international indices, but that does not have to be a contradiction. For some sectors Ethiopia is highly interesting and hope for improvement is always to be hoped for.

Ethiopia is one of the poorest countries in the world and one of many typical developing countries, as there are many on the African continent. The big difference is: Ethiopia is controlled by a regime that is not satisfied with what it has achieved, but is more ambitious: to become a leading, if not the leading, industrialized nation in sub-Saharan Africa.

Model China

Despite its geographical location in Africa, large parts of the country's historical and cultural development are strongly influenced from the Middle East. The big role models are therefore not more successful states in Africa but are coming as the United Arab Emirates and China from the East. Thirty years ago, the economic march that Ethiopia is undergoing today, began there: cheap labor, interesting natural resources, enough free land and rivers for energy and irrigation.

The country is thus attractive for labor-intensive industries, especially the textile, clothing and leather industry. A worker in an Ethiopian sweatshop earns an average of USD 909 a year, based on a survey by the US Center for Global Development, compared to USD 835 in Bangladesh, USD 1,776 in Tanzania, and USD 2,118 in Kenya. Another advantage appreciated by employers: In the African context Ethiopian women are considered to be well-educated and less willing to strike.

Special zones of industrial oases

Another location advantage are the industrial zones, which are mostly built by Chinese companies: fencing, strict access controls, no-hole roads, guaranteed electricity and water supply, proper waste and garbage disposal, workers' housing in the area or nearby, shops, banks, medical care. From a European point of view, it may look like exploitation and "big brother", but from an Ethiopian point of view jobs are created, families are fed and foreign exchange is earned.

In July 2016, the Hawassa Industrial Park was officially opened, the largest in sub-Saharan Africa. From here, textiles and clothing are to be exported. By 2018, the park will employ 60,000 workers and generate USD 1 billion in exports. As early as 2030, Ethiopia wants to earn USD 30 billion in this segment. Even if one should not take the last number too seriously, the ambitions are clear and unambiguous.

Another industrial park was inaugurated in July 2017 in the city of Kombolcha. Meanwhile, a whole range of other parks are in various stages of realization, focusing on apparel, textiles, pharmaceuticals and medical equipment, as well as the agro-industry. According to the Ethiopian Government, there is no shortage of interested investors, primarily from China, India, Turkey, the US, Hong Kong and South Korea.

Cheap electricity soon abound

While some of the industrial parks still have to rely on standby generators and the connection to roads and railways leaves much to be desired, long-term remedies are in sight: several large hydropower plants are under construction nationwide, especially the Grand Ethiopian-Renaissance Dam project, which will start up the first generators in the current financial year (July 8th 2017 to July 7th 2018). Upon final completion, the capacity should reach 6,450 megawatts. It would then be Africa's largest power plant - and one of the cheapest electricity suppliers.

There are notable successes in road construction also: since August 2016, Ethiopia has got a first fully commissioned 85-kilometer three-lane highway from the capital Addis Ababa to Adama. Further sections are under construction. And also with the railway there is something to celebrate with a new, 756 kilometers long and continuously electrified route between the outskirts of Addis Ababa and the container port in neighboring Djibouti.

Foreign exchange shortage a big hurdle

This positive development cannot hide the fact that large parts of the country are not yet connected to the electricity net, that the road network is inadequate and the railway line is only a small start. Moreover, the bureaucracy is inflated and inefficient and lacks a functioning constitutional state. Currently, an acute lack of foreign exchange hinders imports and profit transfers, as the ambitious infrastructure projects absorb every available dollar in the country.

Investors, however, are speculating on tomorrow: because the country is on the right track and wants to maintain its course. A steady influx of foreign direct investment shows that international companies have sufficient confidence and want to be among the first. In addition next to the low wages, they are interested above all in the underdeveloped and untapped consumer market of 105 million people. For the South African Rand Merchant Bank, Ethiopia is therefore the fourth most attractive investment destination in Africa after Egypt, South Africa and Morocco (Where to Invest in Africa 2018).

Poor placement in international rankings

Even if Ethiopia is predicted to get a bright future, current negative assessments may not be ignored: in the Global Competitiveness Index 2017 - 2018 of the World Economic Forum, Ethiopia ranks 108th (out of 137). In the Index of the Economic Freedom of the World Heritage Foundation Ethiopia belongs to the group of largely unfree countries in 2017 ranked 142 (out of 180). And in the Doing Business Ranking of the World Bank (2017), Ethiopia is in a poor position with 159 (out of 190). By contrast, in 2016 in the Transparency International's Corruption Perceptions Index Ethiopia ranked 108 (out of 175), making it a lighthouse in an otherwise corrupt region (last place: Somalia 176, South Sudan 175, Sudan 170, Eritrea 164, Uganda 151, Kenya 145, Djibouti 123).

In the Fragile States Index 2017 of the Fund for Peace, Ethiopia ranks 15th, ranking among the most fragile states in the world (lowest rank 1 = South Sudan, best rank 178 = Finland). Ethiopia also scored poorly on press freedom and the rule of law: ranked 150th out of 178 in the Press Freedom Index in 2017 and 107th in the Rule of Law Index in 2016 (out of 113).

Economic data in a regional context
  2016 20171) 20181)
Gross domestic product, in USD billion      
..Kenya 70,5 80,7 88,2
..Ethiopia 70,3 72,1 75,3
..Tansania 47,7 50,5 52,5
GDP growth, real, in %        
..Kenya 5,8 5,1 6,1
..Ethiopia 7,6 6,1 5,7
..Tansania 7,0 6,4 6,0
Import of goods, in USD billion, fob      
..Kenya 13,62) 14,5 15,1
..Ethiopia 16,02) 16,8 17,0
..Tansania 8,52) 8,6 9,0

1) Prognosis
2) Estimation
Source: Economist Intelligence Unit

More Investment in the Kazakhstan Light Industry © Nikolai Fokscha/ pixelio.de
26.04.2016

MORE INVESTMENT IN THE KAZAKHSTAN LIGHT INDUSTRY

  • Special Economic Zone (SEZ) Ontustik becomes important Sector Center

Almaty (GTAI) - Although the Kazakhstan textile industry is far away from the production figures in earlier Soviet times, increases have been achieved in recent years. Against the general trend, imports of textile machinery have grown strongly in 2015. The lack of skilled workers and the small domestic market has a negative effect on the development of the sector. The Special Economic Zone (SEZ) Ontustik in Shymkent could become an important center of the light industry.

  • Special Economic Zone (SEZ) Ontustik becomes important Sector Center

Almaty (GTAI) - Although the Kazakhstan textile industry is far away from the production figures in earlier Soviet times, increases have been achieved in recent years. Against the general trend, imports of textile machinery have grown strongly in 2015. The lack of skilled workers and the small domestic market has a negative effect on the development of the sector. The Special Economic Zone (SEZ) Ontustik in Shymkent could become an important center of the light industry.

The textile, clothing and leather goods industry used to be one of the most important economic sectors in Kazakhstan. After the collapse of the Soviet Union, these three sectors, identified as light industry in the country, have however lost much of its importance. In 2015 they contributed only 1.2% of the total output of the manufacturing sector. Compared to 2008 (0.9%), the proportion rose at last slightly again.

Hand in hand with the devaluation the output of the industry, measured in USD, pointed significantly down. The overall output amounted to USD 320 million in 2015. In reality in 2014 (+ 4.0%) and in 2015 (+ 3.4%) a production growth could be achieved.  

Development of production in the light industry (USD millions) 1)
  2013 2014 2015 Change 2015/14 2)
Manufacturing, thereunder 38,471 33,999 25,936 0.2
Light industry, thereof 427 353 320 3.4
Textile industry 208 148 155 0.5
Clothing industry 193 166 136 6.1
Leather goods industry 27 39 29 3.1

1) Change at the respective annual exchange rate; 2) real change in %
Source: Agency for Statistics, Astana

Investments in the light industry rise

Gross fixed investments in the light industry show an upward trend in recent years.  According to the Kazakhstan Statistics Agency the investments grew from 2012 to 2015 from USD 18.5 million to USD 45.6 million. A role hereby played the support of modernization projects by government subsidies. 

Gross fixed investments in the light industry (USD millions)*)
  2013 2014 2015
Manufacturing, thereunder 4,514.9  4,065.8 3,491.8
Light industry, thereof 32.6 23.0 21.7
Textile industry 4.6 4.1 23.2
Clothing industry 0.4 11.3 0.8

 *) Change at the respective annual exchange rate  
Source: Agency for Statistics, Astana

The recent increase in investments is reflected in imports of machinery and equipment for the sector. Against the general trend the import of textile machinery (HS positions 8444-8453, without 8450) increased nominally by 28.3% to USD 35.2 million in 2015. However, one reason for the strong growth are the weak prior years (2013: USD 40.3 million; 2014: USD 27.5 million) also. The imports however develop well above the level of 2010 and 2011 with average imports totaling nearly USD 16 million. Most important supplier of textile machinery is the PR of China. According to the Federal Statistical Office exports from Germany numbered to EUR 4.3 million in 2015, (2014: EUR 4.4 million).

The light industry suffers less from the economic crisis than other sectors

Currently the Kazakhstan economy is suffering from the slump in commodity prices and the consumers had to endure enormous losses in their purchasing power due to the devaluation. The light industry however is less affected by the negative economic situation. An advantage is the price increase of imported textiles and a gain in competitiveness due to the lower wages. Nevertheless - the sector is highly dependent on imports of both machinery and primary products.

According to the latest available information provided by the Bureau of Statistics, the average income in the textile industry in 2014 was 52,800 Tenge (T) per month, equivalent to a value of USD 294. Converted to the current exchange rate however, the amount - excluding wage increases - has shrunk to USD 150.

Hand in hand with the increased purchasing power Kazakhstan’s import of textile products had multiplied from 2006 to 2014 from USD 332 million to just under USD 2.1 billion. In 2015 the upward trend was halted. Imports broke nominally by 38.6% to USD 1.3 billion, they came down to a level of 91% of the market volume in 2014 and 2015.

Kazakhstan’s import of textile products (USD million)1)
2006 2008 2010 2012 2014 2015 Change 2015/14 2)
332 429 394 1.458 2.087 1.281 -38,6

1) HS tariff positions 50 - 67; 2) nominal Change %
Sources: UN Comtrade, Customs Committee of the Republic of Kazakhstan, Eurasian Economic Commission

Market volume for textile products (in Mio. US$; nominal change in %)
  2014 2015 Change 2015/14
Imports 1) 2,087 1,281 -38.6
Exports 1)   147 186 26.5
Local production 2) 353 320 -9.3
Market Volume 2,293 1,415 -38.3

1) HS tariff positions 50 - 67; 2) nominal Change %
Sources: UN Comtrade, Customs Committee of the Republic of Kazakhstan, Eurasian Economic Commission

The light industry offers potential for development

Preconditions for a greater development of the light industry are given in Kazakhstan, but weak points remain. According to information of Lyubov Chudowa, president of the association of the light industry enterprises, these include the great shortage of skilled labor. In addition there are the small size of Kazakhstan's local market and the great distances in the country.

On the other hand the steppe republic has a great potential in the livestock farming sector, that can provide resources like leather and wool. In addition there is the cultivation of cotton in the territory of South Kazakhstan. Though - on the global scale in these areas Kazakhstan is a small player only.
The processing of crude products is still weak. According to information provided by the regional administration of South Kazakhstan, 90% of the in the country produced cotton is being exported. At the same time the sector companies need to import most of their primary products.

SEZ Ontustik in Shymkent

The in 2005 in Shymkent (South Kazakhstan region) founded Special Economic Zone (SEZ) Ontustik, could become an important center of the light industry. Key aspect of the SEZ is presently the light and paper industry.

As in the other SEZs in Kazakhstan for the settled companies a variety of reductions in custom duties and taxes and simplifications for the employment of foreign workers applies. In addition there are tariffs for electricity, water and gas, which are 35% below the local level.

In the SEZ so far eight companies have started to operate, USD 144 million were invested in the buildings. According to the company which runs UK SEZ Ontustik, until 2020 twelve more companies are expected to come. With the establishment of the Eurasian Economic Union the interest of foreign companies in manufacturing settlements has increased. The management of the park aims to expand the profile of SEZ to other areas of the manufacturing sector, such as for example the pharmaceutical industry.      

Concentration process in light industry

From 2010 to 2014 the number of sector companies has declined from 565 to 455.  An overview of the most important companies is available on the website of the association of light industry enterprises.

Internet addresses
Special Economic Zone Ontustik
Internet: http://www.sez-ontustik.kz
Association of Light Industry Enterprises of the Republic of Kazakhstan
Internet: http://www.aplp.kz

Vietnam´s Grament Industry experiences Investment Boom ©Beckmann Agency
12.04.2016

VIETNAM'S GARMENT INDUSTRY EXPERIENCES INVESTMENT BOOM

  • FTA attracts Manufacturers
  • Proportion of local added Value should rise

Hong Kong (gtai) - Vietnam is one of the main production sites of the clothing industry. Already in recent years the country had attracted buyers from around the world. In 2014 textiles and clothing shared 22% of the total merchandise exports. According to the state owned VINATX in 2015 Vietnam was the fourth largest apparel exporter in the world. The through the FTA with the EU and the Pacific neighbors expected growth requires investment in the supply industry.

  • FTA attracts Manufacturers
  • Proportion of local added Value should rise

Hong Kong (gtai) - Vietnam is one of the main production sites of the clothing industry. Already in recent years the country had attracted buyers from around the world. In 2014 textiles and clothing shared 22% of the total merchandise exports. According to the state owned VINATX in 2015 Vietnam was the fourth largest apparel exporter in the world. The through the FTA with the EU and the Pacific neighbors expected growth requires investment in the supply industry.

In 2015 the Vietnamese garment exports amounted to about USD 27 billion. Estimates of the Vietnam National Textile and Garment Group (Vinatex) show they will increase by 8% in 2016. Nearly USD 30 billion of sector products would then be exported and assure Vietnam a ranking among the four largest exporting countries. The world market however is stagnating. The sector contributes nearly 10% to the industrial added value of the country, 2.5 million people are employed.

As the most important export market remains the United States. According to Vinatex the export to the US rose by 13% in 2015. The group dominates the textile production in the country, including companies like Garment 10, Phong Phu Textile and Garment Corporation, Viet Tien Garment and Hoa Tho Textile and Garment. Vinatex itself exported products worth of USD 3.5 billion, representing an increase of 10%.

TPP promises benefits

The sector has high hopes on the in February 2016 signed FTA Trans-Pacific Partnership (TPP), in which next to the USA, Japan and Vietnam and eleven Pacific Room states arranged added tariff reductions and improved market access. If the ratification process in all countries will be successful, the agreement would enter into force in February 2018. Analysts show that Vietnam would become one of the main winners, among others due to the lowest labor cost in comparison of all other involved countries. The agreement therefore is welcomed by the majority of the population.

Pre-products have to be imported

According to experts the competitiveness of Vietnam will be increased especially in the area of textiles and clothing. About 70% of the textile exports will be delivered to TPP member countries. Despite the annual growth rates of 15 to 20% the value adding in the country remained low. Imports of raw materials and accessories are high and totaled to USD 16.5 billion in 2015. 90% of the 5,028 textile factories in Vietnam (end of 2013) are apparel manufacturers, that mean sewing operations. By contrast there are just four cotton-processing and two synthetic fibers producing companies.   

Imports of textile industry (in USD million, annual change in %)
  2014 2015 Change
Cotton 1,443 1,623 12.5
Fibers 1,559 1,515 -2.8
Fabrics 9,428 10,197 8.2
Accessories 3,031 3,193 5.3
Total 15,461 16,528 6.9

Source: Vietnam Textile and Apparel Association (Vitas)

The sector is facing a challenge: TPP offers the free imports only if 55% of the value is provided in the member states. For the textile sector this is called the "Yarn Forward Rule", that means everything following the yarn. In Vietnam the proportion of the added value currently stands at 25%.

The text of the agreement is online available: (http://www.tpp.mfat.govt.nz/text). Chapter 4 deals with the textile and clothing sector and contains important annexes to the rules of origin. TPP is expected to attract investments into the country, as the value supply chain is incomplete: yarns and fabrics are mostly imported from East Asian countries.

Value adding rules require investment

Also the free trade agreement between the EU and Vietnam, agreed on August 4th 2015, should push the exchange of commodities. The share of the EU clothing imports from Vietnam is only 3%. Thus the country ranks as the sixth supplier. In the United States, Japan and South Korea Vietnam, however, is the second largest clothing supplier.

Following ratification of TPP an abolishment of 99% of all tariffs would follow.  Textiles from Vietnam would then be duty-free within a maximum period of seven years. For that TPP
defines clear rules of origin: (http://trade.ec.europa.eu/doclib/press/index.cfm?id=1437).

If investments would flow into the country and strengthen the supply chain, the value of clothing exports from Vietnam could be doubled until 2020 - so bold estimates.   Then the annual production of yarns should reach 2 million tons, the amount of fabrics 2 billion square meters and that of clothing 6 billion pieces. Following the Vietnam Textile and Apparel Association (VITAS)  the export value then should be between USD 45 to 50 billion. This requires new textile machinery. So far, mainly Chinese products were in demand, but also for German suppliers the opportunities emerge.

Production capacity of the Vietnamese textile industry
Sector Annual capacity
Cotton ginning (1,000 t) 70
Synthetic fibers (1,000 t) 400
Filament yarn (1,000 t) 182
Spinning (1,000 t) 900
Weaving (Mio. m²) 800
Knitting (1,000 t) 110
Nonwovens (1,000 t) 16
Dyeing and finishing (Mio. m²) 1200
Toweling (1,000 t) 62
Clothing(Mio. Stück)  4000

Source: Vitas

However, many sector representatives in Vietnam see TPP also critical, because by the agreement large new market participants could intensify competition. The small and medium companies are hardly competitive due to their outdated technology, lack of capital and low know-how. They demand government aid in the form of tax breaks and subsidies for land. The Bank for Investment and Development of Vietnam has already provided USD 2 billion for the support of the industry for the next five years.    

Investment in regional centers

Large investments are happening already now: The TAL Group from Hong Kong, one of the largest owner-managed apparel producers, has invested USD 600 million in factories in the Dai An Industry Zone in Hai Duong Province, especially for yarn dyeing and finishing. Haputex Development, which is also from Hong Kong, has built with up to USD 120 million in the province of Binh Duong on a twelve hectare site a Weaving mill which should go into operation 2016.  There also the South Korean company Kyungbang is building a spinning mill for USD 40 million. The Texhong Textile and Garment Group is building with USD 300 million a yarn factory in Quang Ninh. And in Nam Dinh the Yulun Jiangsu Textile Group, a state-owned company from China, is building with USD 68 million a factory for the manufacturing and dyeing of yarn.

Investments are mainly attracted by the regions Ninh Binh, Hue, Binh Duong and Ham Dinh, as well as the cost favorable  Mekong Delta. New target regions are at the borders with Laos and Cambodia, such as the area Tay Nguyen. As the largest Vietnamese group also Vinatex invests in new capacities and announces in convincing interviews to reach by 2020 a local added value part of 65% in final finished products.

Target markets of Vietnamese apparel exports (in USD million, annual change in %)
  2014 2015 Change
USA 9.841 10.984 11,6
EU 2.261 3.325 47,1
Japan 2.092 2.163 3,4
Korea (Rep.) 2.092 2.163 3,4
Total 24.692 27.021 9,4

Source: Vietnam Textile and Apparel Association (VITAS)

Contact address:
Vietnam Textile and Apparel Association (VITAS)
2nd Floor, 32 Trang Tien Str., Hoan Kiem District, Hanoi, Vietnam
Tel.: 0084 4/39 36 41 34; Fax: -39 34 98 42
Email: info@vietnamtextile.org.vn; Internet: http://www.vietnamtextile.org.vn