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Country Profiles

Country Profile: Vietnam

Vietnam's textile industry is set to expand rapidly, with a doubling of export value and workforce by 2010.

By Jim Phillips, Contributing Editor

vietnam T he textile industry in Vietnam has become one of the fastest-growing in Asia, thanks in large part to the country's recent entry into the World Trade Organization (WTO).

The nation historically has been strong in cut-and-sew operations, but it is now investing heavily in spinning and weaving. In fact, just recently the Burlington WorldWide business unit of International Textile Group Inc., a US-based company of WL Ross & Co. LLC , has partnered with Phong Phu Corp., a state-owned, Vietnam-based cotton textile and apparel manufacturer, to build an $80 million cotton fabric and apparel manufacturing complex in Da Nang. Additionally, WL Ross has signed memoranda of understanding with Phong Phu to explore opportunities to expand their joint-venture operations and strategic investments in Vietnam.

According to a company release, WL Ross and Phong Phu will team to explore real-estate-related joint ventures, and a possible investment and privatization assistance by WL Ross in Phong Phu as the latter privatizes through an initial public offering.

"Vietnam is among the most rapidly growing countries in the world, and we are delighted to have the opportunity to commit additional capital to support that growth," said Wilbur L. Ross Jr., chairman, WL Ross. "We are especially eager to broaden and deepen our relationship with Phong Phu and are committed to help that management to change from being a state-owned enterprise to becoming a privatized business. The memoranda of understanding that we have just signed with President Nguyen Minh Triet provides for the basis for expanding our mutual relationship."

The new joint venture in Da Nang includes weaving, dyeing and finishing, cut-and-sew and laundering, with a focus on cotton and cotton blends. The facility should be totally operational by April 2008. It will have the potential of producing 60 million yards of cotton and cotton-blended products, and 20 million garments.

With its recent - Jan. 11, 2007 - entry into the WTO, Vietnam is now in a position to rapidly expand the value of its textile and apparel exports. The country plans to more than double its 2005 export total of US$4.8 billion to US$10 billion by 2010, according textile researcher Textiles Intelligence. Correspondingly, the nation plans to double the number of textile employees to 4 million over the same period of time. Vietnam's textile and clothing industry plans to achieve these targets by streamlining production and thereby reducing unit costs to boost international competitiveness. Vietnam, as part of its drive to double exports by 2010, has set an export target for 2007 of US$7 billion.

As of the end of October 2007, the textile industry became, for the first time, Vietnam's largest exporter. In the first nine months of 2007, textile and apparel exports reached US$5.8 billion, an increase of 31 percent over the same period in 2006. Crude oil exports, historically Vietnam's leading export, were valued at US$5.78 billion and are expected to decline.

Overall, export growth in Vietnam has been strong since the turn of the century. In 2002, according to reports, textile and apparel exports grew by 40 percent, and by 33 percent in 2003. US quota restrictions contributed to a slowing of export growth in 2005, when the rate fell to 9.4 percent. With the entry of Vietnam into the WTO, the United States will be required to remove all quotas on Vietnamese goods. This is expected to result in a significant increase in US demand for Vietnamese textiles and apparel.


Production Capacity

According to a presentation by the Vietnamese Ministry of Industry, Vietnam’s annual production capacity in 2004 was as follows:
•    Fiber — 1,050,000 rollers, with 150,000 tons of fiber produced;
•    Textiles — 10,000 weaving machines, 5,500 of various types of specialized weaving machines, including more than 2,000 large-width machines, producing more than 500 million meters of cloth;
•    Knitting — 1,540 machines, with production capacity of 70,000 tons — equivalent to 262 million standard T-shirt products;
•    Complete dyeing — 380 million meters of dyed fabrics; and
•    Towels — 25,000 tons of towels of various kinds.

According to the Switzerland-based International Textile Manufacturers Federation (ITMF), Vietnam’s investments in textile machinery have increased substantially in recent years. In 2006, the country added 171,720 new spindles and 5,840 open-end rotors. From 1997 through 2006, 840,132 spindles and 19,784 open-end rotors were added.

In weaving, Vietnam added 1,357 shuttleless looms in 2006, bringing the total added since 1997 to 6,012.

November/December  2007

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