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Investing in Vietnam – Getting to know the Vietnamese Garment Industry

10 min read

The Vietnamese Garment Industry – Vietnam is the 3rd largest exporter of textile and garment in the world, after China and Bangladesh. In Vietnam, more than 6.000 factories are specializing in clothing and textiles. This industry employs over 2,3 million workers across the country. Over 70% of factories are placed in Hanoi and Ho Chi Minh city or neighboring provinces.

Investing in Vietnam – Getting to know the Vietnamese Garment Industry
Investing in Vietnam – Getting to know the Vietnamese Garment Industry

As of 2016, the Vietnamese Garment Industry has exported more than 28 billion dollars of clothes and textile to the world, of which the US and EU are among the most important destinations. Vietnam is a stable sourcing destination with the fastest speed in the market, considerable costs, and moderate compliance levels.

In 2019, Vietnam and Bangladesh are the countries with the fastest speed of development in the garment industry. In the upcoming decade, the expected global market shares of the garment industry have China with 30-50%, Vietnam 11-30%, and the rest of the world. The China Plus One model is progressively becoming the China Plus Vietnam, as Vietnam is the world’s preferred alternative sourcing destination.

These numbers have partly proven the strong attraction of Vietnam for foreign investors when they choose to invest in Vietnam.

What kinds of clothing, garments, textile are being produced in Vietnam?

  • Shirt
  • Outerwear (coat, overcoat, etc.)
  • Underwear
  • Sportswear
  • Uniform
  • Long pants
  • Pants
  • Technical fabric
  • Children’s clothing
  • Fabric
  • Label
  • Ready-made garment
  • Woven products

Alongside clothing, the Vietnamese garment industry produces other products:

  • Bag
  • Backpack
  • Schoolbag
  • Hat
  • Cap
  • Sock
  • Footwear

Pros and cons of the Vietnamese garment industry

Pros and cons of the Vietnamese garment industry

Pros of the Vietnamese garment industry

Price

Vietnam is among the countries producing clothing, garments, and textiles with the lowest price without affecting the product’s quality.

Free trade and the tariff advantages

Vietnam has signed the free trade agreement with the whole of Southeast Asia, a part of ASEAN, as well as Japan, Korea, India, and Australia.

High-quality production.

Speaking of the product’s quality, Vietnam is among the 90% of the world producing the highest product quality.

Time

In the instant fashion industry, there is a terminology called Speed to market or Make to Market, which refers to the rate of a product moving from the beginning of its production to the available retail store.

The Vietnamese market is one of the markets having the highest rate of fashion products and clothing in the world. That’s the reason why Vietnam is the biggest supplier of stores like UNIQLO, and Marks & Spencer.

Cons of the Vietnamese garment industry

Cons of the Vietnamese garment industry

Lack of flexibility in the order’s quantity

Vietnamese manufacturers are less willing to fulfill small orders, usually less than 2000 with a small number of samples.

Using many ingredients rooted in China

Although Vietnam has good domestic sources of ingredients, many ingredients such as buttons and zippers are sourced and imported from China. This additional step usually takes an extra month in the overall production time of the product.

The lateness occurring due to delivery from China mainly affects the first order; as in the second one, the supplier can order earlier so you can provide a faster delivery time.

Logistics to transport clothes from Vietnam

Vietnam has a wide port network spreading across the country, it is allowed to transport products to the West coast of America as quickly as 3 weeks, 4-6 weeks to the East coast of America, and 4 weeks to the EU.

It is important to note that the logistics services within the country are less developed than China’s, for example, therefore, there might be lateness in transporting a container from the factory to the port. Ports are usually overloaded, and containers taking a week to arrive at the port is not uncommon.

Logistics to transport clothes from Vietnam

The effect of the Tariff and Free Trade Agreement in Vietnam on the country’s garment industry

Vietnam is considered the most important country to win in the trade war. Since the first tax imposed, manufacturers, including clothes makers, converge on Vietnam, which makes the needs and investment soaring.

The Free Trade Agreement between the EU – Vietnam

The Free Trade between the EU – Vietnam allows Vietnamese manufacturers and EU consumers to trade freely. Moreover, it allows businesses and the EU investors to set an industrial activity without many restrictions in Vietnam

In addition to the agreement with the EU, Vietnam also actively pays efforts on joining in other free trade agreements with other countries. Vietnam is a founding member of the Association of Southeast Asian Nations (ASEAN). The country signed a free trade agreement with Korea, which resulted in the annual production value in Vietnam reaching 58 billion USD with Samsung alone.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)

This agreement offers Vietnam the right to trade freely with 13 countries, including Canada, Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, and Singapore. This agreement allows Vietnam to export freely, as well as receive direct offshore investment from these countries. CPTPP provides a financial boost to increase production massively.

Tariffs applied in China impact powerfully to the Vietnamese garment industry

Garment, clothing, textile are some sectors hit hardest by tariffs. Therefore, these categories are having about 25% additional tax applied in China. Hence, 83% of American manufacturers in China said that they would find another country to produce their products in the future, with Vietnam as the priority.

The Trade Association of Clothing Manufacturers in Vietnam

The Vietnam Textile and Apparel Association

The Vietnam Textile and Apparel Association represents hundreds of manufacturers, suppliers, and other companies related to the Vietnam garment industry

The Vietnam Textile and Apparel Association finds a way to promote the Vietnamese clothing manufacturers to the world, and holds events, trade shows frequently, as well as maintaining the list of manufacturers. It is limited to manufacturers who pay membership fees, so it is not as complete as expected.

The best garment manufacturing trade shows in Vietnam

The International exhibition on the garment industry

The Vietnamese garment industry is growing rapidly and strongly. Vietnam has become one of the most important countries in producing clothing and textile. Hence, this exhibition has become the center of not only clothing manufacturers in Vietnam but also China and Southeast Asian countries.

The Vietnam international exhibition on the garment industry

This trade exhibition focuses on machinery related to textile production, with not so much finished manufactured products. It is a famous event with more than 10.000 participants and hundreds of exhibitors. Although it concentrates on machinery, there is the presence of representatives of big fashion retailers and traders. An exhibition is a great place if you would like to see some major innovations in clothing before they hit the market.

The Vietnam Fabric & Garment Accessories Expo in Hanoi

CP Exhibition Hong Kong organizes the Vietnam Fabric & Garment Accessories Expo in Hanoi (Hanoi Fabric). This expo mainly focuses on machinery, accessories, technology, dyes, and chemicals of the textile and garment industry. Alongside Hanoi Fabric, the last event was successfully held in 2019 with 195 companies from 14 countries and regions including China, Germany, Hong Kong, Italy, Korea, Singapore, Taiwan, Thailand, Turkey, UK, U.S.A., and Vietnam.

The Vietnam Fabric & Garment Accessories Expo in Hanoi

Hanoi Fabric 2020 is held from September 3rd to September 5th, 2020 at the International Centre of Exhibition (I.C.E.), Hanoi, Vietnam

The Vietnam Saigon Textile & Garment Industry Expo (SaigonTex)

SaigonTex the Vietnam Textile & Garment Industry Expo held

by VINATEX – The Vietnam National Textile and Garment Group, the Vietnam Chamber of Commerce and Industry, VCCI Exhibition Service Co., Ltd is the largest and the most important event of the textile and garment industry in Vietnam

Being the only textile and garment industry expo approved by UFI (the international exhibitor assuring the exhibition’s quality; www.ufi.org), this expo is held concurrently with the Vietnam Fabric & Garment Accessories Expo. These two expos arm to provide a one-stop market for all buyers in Vietnam and neighboring countries.

Are Vietnamese clothes more affordable than Chinese ones?

As of 2019, the production of clothes and other similar items in Vietnam is more affordable than in China. The monthly minimum wage of Vietnamese people in 2019 was about 125 – 180 dollars per month, depending on different areas.

In China, it ranges from 150 – 346 dollars per month, and once again, depending on different areas. The wage in both Vietnam and China tends to be double in urban areas when being compared to rural areas.

Are Vietnamese clothes more affordable than Chinese ones?

Both Vietnam and China witness an increase in wages at the same speed. The biggest disadvantage of Vietnam is the limited workforce, which is very close to the maximum working capacity, and might reach suffocating levels in the next few years if demands continue to grow at a quick speed.

Which clothing brands are manufacturing in Vietnam?

Because the Vietnamese garment industry develops strongly, and Vietnam is among the largest clothing manufacturers in the world, there is almost every giant brand’s presence in this country. Some leading brands can be listed as below:

  • MANGO
  • GAP
  • C & A
  • Calvin Klein
  • Columbia
  • Walmart
  • Marks & Spencer
  • Target
  • Decathlon
  • JCPenney
  • The Children Place
  • Patagonia
  • The North Face
  • Columbia
  • Superdry
  • Levi’s
  • Converse
  • Hurley
  • Jordan
  • Nike
  • Under Armour
  • Lacoste
  • Primary
  • V.H.
  • Gap
  • Esprit

5 reasons for investing in Vietnam is very attractive

The stable GDP growth rate

According to the World Bank, the GDP growth rate has grown stably in Vietnam, with an average of 6.46% a year since 2000. Particularly, the success in preventing COVID-19 has highlighted the GDP rate of Vietnam compared to neighboring countries.

Vietnam is one of the countries with the fastest economic growth in the world. GDP growth with economic reform policy makes investing in Vietnam more attractive.

Investment in Vietnam has increased steadily over the years.

5 reasons for investing in Vietnam is very attractive

Investing in Vietnam to get favorable deals

The Vietnamese government is more and more open and facilitates attracting foreign investors. The government issues many incentives for foreign investors to invest in certain geographical areas or areas of particular interest. There are top tax incentives for foreign investors, such as reduction of corporate income tax or tax exemption, exemption from import duty, e.g. raw materials, reduction or exemption from land rent, land use tax, etc.

Young growing population

According to Nielsen, it is estimated that 60% of Vietnamese people are under the age of 35. Along with that, Vietnam ranks 14th in terms of the world’s population. It is forecasted to increase to 105 million people in the next 10 years.

The young and abundant workforce increases the investment from foreign investors in Vietnam. Besides being robust, the Vietnamese workforce is also highly skilled.

Many signed trade agreements promote investment in Vietnam

Vietnam has signed many trade agreements that make doing business in Vietnam easier and more advantageous. Regional agreements and global agreements with countries around the world like the Bilateral Trade Agreements (BTA) with the U.S., Free Trade Agreements with the E.U., are the driving force for economic growth and promote trade with countries around the world.

Strategic location

Vietnam has a long coastline bounded by the South China Sea, and proximity to the world’s major shipping routes. That creates perfect conditions for trading. Sharing borders with countries, the closest of which is China, also makes trading between countries easier.

Moreover, Vietnam is the center of Southeast Asian countries. Moving from Vietnam to key countries, such as Thailand, Singapore is very easy. Vietnam is only a 3-hour flight from the Asian Financial Center – Hong Kong. This is the great advantage of Vietnam compared to other countries in the region.