Vietnam will increase its capacity to produce cotton in order to satisfy the rising demand from garment exporters. Vietnam needs about 8.5 billion sq. mt. of fabric. The capacity to produce domestic fabric is about three billion sq. mt.
Local garment exporters need to use locally made cotton, or cotton produced by other member countries of the Trans Pacific Partnership free trade agreement, to be entitled to tax cuts when shipping products to other TPP markets. Countries have to abide by the yarn forward rule of origin, which means all items in a garment from the yarn stage onward must be made in one of the nations that are party to the TPP accord.
The TPP deal, which aims to liberalise commerce in 40 per cent of the world’s economy, was reached earlier this month. Vietnam last year produced over 9,00,000 metric tons of fiber types, but two-thirds were shipped overseas. In order to fully meet the demand for fabric, and comply with the requirements of the TPP and Vietnam-EU deals, there needs to be more incentive for business in the form of infrastructure and land use in industrial parks, improvement in sewage, and environmental management capacity.