Vietnam’s garment and textile industry has been a cornerstone of the country’s rapid economic development. Despite global challenges, the sector has proven somewhat resilient and still presents a wealth of opportunities for foreign firms.
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The garment and textile industry is one of the key industries in Vietnam.
In 2022, the industry’s export value topped US$36.9 billion
In 2023, from January to September, export value topped US$24.6 billion
These huge export numbers have been driven by a number of factors, including:
+low labor costs – 358$/month
+free trade agreements (FTAs) with key export markets that have in many cases eliminated tariffs on garments and textiles altogether: CPTPP (Vietnam and 12 others), EVFTA (Vietnam and EU), UKVFTA (Vietnam and UK)
- Notably, however, there has been a marked decline in production on the back of lower demand in key export markets this year
- S&P’s Purchasing Manager’s Index has consistently found itself below the 50-point mark indicating production in Vietnam is in a contraction.
- Furthermore, there have been layoffs around the country in the apparel sector on the back of lower-than-expected orders. Taiwanese footwear manufacturer Pou Yuen, for example, has reduced its workforce by almost 10,000 workers across three rounds of job cuts.
- This downturn, however, may be only temporary as signs of a recovery are starting to take shape
- Vietnam’s GDP growth, for example, has increased all three quarters of this year, and as the economy recovers, the garment and textiles industry should too.
- With this in mind, here’s what Vietnam’s garment and textile sector looks like at the back end of 2023.
Garment and textiles in Vietnam: Overview
Vietnam’s garment and textile industry consists of 3 sub-sectors:
+the upstream sector (fiber production)
+the midstream sector (fabric production and dyeing)
+the downstream sector (garment manufacturing).
Sub-sectors that produce fibers or fabric are mainly used for domestic consumption because they are often of a lower quality. The downstream sector of garment manufacturing accounts for the bulk of the apparel and textile sector in Vietnam with cut-make-trim (CMT) models being their main activities. CMT accounts for about 70 percent of the output of domestic garment and manufacturing firms, while the more advanced business models, like original equipment manufacturing (OEM) and original design manufacturing (ODM) account for around 30 percent.
The US, Europe, Japan, and South Korea are the main export destinations of Vietnam’s textile and garment products.
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