Vietnam’s exports in 2016 rose 8.6 per cent over the year before. However, 70 per cent of the export turnover belonged to foreign owned enterprises. Which meant Vietnamese enterprises contribution was modest to the export turnover. The biggest problem for Vietnam’s garment producers is that they have to import input materials. Since Vietnam’s fashion design industry is still weak, Vietnam’s products cannot attract customers. And since Vietnamese companies are involved only in outsourced work, they cannot earn big money.
The country’s enterprises face the danger of falling into the outsourcing trap of low added value if the situation does not improve. As Vietnam tries to integrate more deeply into global economy, avoiding the outsourcing trap when joining value chains will be a great challenge. The country is the world’s fifth largest garment exporter. It has maintained double-digit growth, ranging on average from 10 per cent to 36 per cent, since 2001.
However, a strong Vietnamese dong and sluggish demand from key markets damped textile exports in 2016. Garment exporters are also faced with increasingly intense competition from outsourcing hubs Cambodia and Bangladesh, which get tariff preferences in the US market. Market access for Vietnam’s clothing in the US is limited by an average tariff of about 11.1 per cent, with tariffs on some textile and apparel products nearing 30 per cent.