Researchers from Bao Viet Securities said in a recent report on TPP that 70-80% of textile and footwear materials in Vietnam were currently imported from non-TPP countries, with imports from China accounting for 42%.
Meanwhile, the domestic fabrics and textile industry remained underdeveloped, and mired by a lack of diversity and low product quality. “Thus it’s likely that most Vietnamese textile firms will not benefit from the TPP’s lowered tariffs unless they invest in raw materials supply.”
Additionally, supporting industries for the textile and footwear sectors often require great capital and high standards of anti-pollution measures, which can be challenging for Vietnamese firms. In a recent press interview, Vu Duc Giang, chairman of the Vietnam Textile and Apparel Association, noted that textile and dyeing were major causes for water pollution due to their high levels of sewage.
“As a result, the development of these supporting industries in Vietnam for the TPP must go hand-in-hand with protecting the environment,” Giang said.
Furthermore, various investors from non-TPP markets, such as China, the Republic of Korea (RoK), and Taiwan (China), have recently built weaving and dyeing factories in Vietnam to comply with the “yarn forward” rule of the TPP.
There are concerns that this may discourage the development of the domestic supporting industries. Foreign textile firms may receive all TPP tax reductions instead of Vietnamese companies.
“It remains unclear to know whether the TPP will benefit Vietnamese or foreign firms more, especially as overseas investors have already rushed to build their own fabric factories in Vietnam while the domestic supporting industries are still struggling,” noted a Vietcombank Securities forecast report 2016.
Experts suggest that Vietnam should focus on solving these problems during the upcoming two-year ratification period, when the TPP gets approval from the member countries’ legislative bodies before taking effect.
