The latest official statistics state reveal in the seven months leading up to August, Vietnam’s textile industry has attracted inward foreign direct investment (FDI) and continues to do so. Out of the estimated $5.85 billion pledged investment for the January-July period, at least $1.12 billion was designated for manufacturing and processing projects in the textile industry.
Foreign-invested transnational companies, particularly those related to yarn manufacturing, are rushing to shore up their supply chains in anticipation of free trade agreements in the offing, say experts. Reduced tariffs of the proposed Trans Pacific Partnership (TPP) do not allow Vietnam-based textile, garment or footwear manufacturers because of the yarn forward rules of origin. It would benefit Vietnam only if all yarn is manufactured in Vietnam or another of the 11 other TPP nations.
Other free trade agreements also fall under such provisions and the experts suggest that the complex rules of origin provisions are driving higher levels of inward FDI into the yarn industry in the country. Thus, if yarn from China was imported by a Vietnam based textile company, it could not avail itself of reduced tariffs for product shipments to the US or any of the other TPP member nations.
Once the TPP is fully implemented, Vietnam based manufacturers would enjoy tariff free exports when exporting textile and garment to other TPP member nations in lieu of the current 17-30 per cent tariff, subject to the rules of origin limits, as per the Vietnam Textile and Apparel Association (VITAA).
