Over the past two decades, India has invested substantial political, diplomatic, and economic capital to foster good relations with Afghanistan, especially since the fall of the Taliban in 2001. Trade has been one of the key components of these relations, with India being the largest market for Afghanistan’s exports in South Asia, accounting for 41.2% of its global exports in 2020. In 2021, Afghanistan’s exports to India were US$509 million, while imports from India constituted US$825 million.
However, the Taliban takeover of Afghanistan in August 2021 has impacted the India-Afghanistan relations on multiple fronts, especially damaging trade relations between the two countries. According to the Federation of Indian Export Organization (FIEO), the Taliban stopped all imports and exports from India through transit routes in Pakistan, also called the International North-South Transport Corridor (INSTC), the main trade pathway.
The route blocking has impacted many businesses across India. One of the sectors witnessing direct repercussions has been the textile industry. The halted trade resulted in stock worth US$540,000 being stuck as corporate bank holders in Afghanistan were not able to withdraw money and do any electronic transactions, as per the Afghanistan Central Bank’s order. Due to this, over 100 traders in Surat, Indian textile hub, were hit hard with delayed payments.
Sugar and dry fruit
India’s sugar exports to Afghanistan have been hit as well with Indian merchants reporting cancellations of orders as a result of the changed rule in Afghanistan. Indian traders were already treading cautiously about exporting to Afghanistan, insisting on advance payments due to the looming uncertainty and restricted trade routes. Following the political upheaval in Afghanistan, Indian sugar exports came almost to a halt in September 2021. Indian food ministry seemed optimistic and expected the trade to resume under the new Taliban regime. However, it is still uncertain how this will unfold, especially in the face of sugar export restrictions introduced by India in May 2022 to ensure domestic availability and to keep the local prices in check.
The new rule in Afghanistan has not only affected Indian exports, but also imports, with imports of dry fruit seeing a particularly major blow as India receives 85% of its dry fruit from Afghanistan. With the disruption of shipments, dry fruit prices in India saw a considerable increase (around 30%), especially as the timing coincided with the festive season (from October to December) in India, a period with the highest demand for dry fruit.
The carefully-nurtured trade relations between India and Afghanistan have been gravely affected post the Taliban takeover and routes closure. As both countries are each other’s important trade partners, there is some hope that trade relations could resume over time, although it would be naïve to expect the matters to fall back to the state from before the Taliban takeover any time soon.
Pakistan routes issue
India had already faced problems routing its exports and imports to and from Afghanistan, as Pakistan repeatedly denied India’s access to overland trade routes with Afghanistan in the past. As a result, India sought alternative routes: one route through Chabahar Port in Iran and an air freight corridor. Although these are not major trade routes, the opening up of such alternatives allowed India’s exports to Afghanistan to be less dependent on Pakistan. Pakistan’s trade routes denials in the past could be somewhat seen as a blessing in disguise, especially in the face of the current INSTC block.
However, the INSTC continued to be the key route for India’s exports to Afghanistan, and its shutting also caused some drastic consequences impacting India’s trade with other countries. Not only was this route used to export products to Afghanistan but it was also a very important trade route for India to reach European and Central Asian markets and vice versa. Although some goods are still being exported through the international North-South Corridor and the Dubai route, the INSTC is the fastest connection to a range of international markets. The closure will continue to have impact on trade timelines and pricing as traders will have to resort to longer trade routes or trim the volumes of goods traded.
When and how India-Afghanistan relations could recoup is yet to be seen, and will depend significantly on the Taliban’s recognition as a legitimate government. While the Taliban may have gained military control over Afghanistan and stated that they want better diplomatic and trade relations with all countries, they are still struggling for global recognition and economic support.
While there is not much that India can currently do regarding its trade situation with Afghanistan, it can look at nurturing and developing relationships with alternative trading partners, especially that trade with Afghanistan is unlikely to return to the previous normal. The Indian government needs to work on policies to aid traders and improve relations with other countries, such as Bangladesh and Turkey, to attempt to fill up the void left by the Taliban upheaval.
Gone are the days when consumer bought a pair of jeans and wore it for years. Fast fashion culture has conditioned consumers to expect a constant stream of new clothing that feeds their desire to buy more in order to keep up with the changing trends. Owing to fast fashion, affordable clothes are being manufactured at a warp speed, worn, and quickly discarded, making clothes disposable commodities rather than keepsakes. About 100 billion clothing items are manufactured globally each year and consumption has increased by 400% in the last two decades. Fast fashion has undeniably democratized high fashion by providing affordable apparel for everyday shoppers but it comes at an enormous cost, not reflected in its bargain-basement price tags.
Fast fashion is the fashion now
Selling large quantities of inexpensive clothing has made fast fashion a dominant business model in the garment industry. Another reason for its popularity is the taste of luxury clothing that it offers to shoppers without paying the full price. Fast fashion brands, such as Zara and H&M, are able to produce low-cost mimics of high-end fashion brands. The moment a model walks down the ramp wearing clothes of luxury brands such as Louis Vuitton, fast fashion brands mass produce replicas of a similar design and sell them at astonishingly low prices.
While established luxury clothing brands take months to design and distribute a clothing item, Zara is able to design, produce, market, and distribute a new piece of clothing to its stores located across 93 countries in mere two weeks. This enormous efficiency in producing mass clothing at an economical format provides an edge to fast fashion companies that traditional clothing brands will always struggle to replicate.
Fast fashion has transformed dynamics of the whole fashion industry, changing the traditional four-season fashion calendar to 52 micro-seasons. Fast fashion companies such as Missguided launch about 1,000 new products monthly, while Fashion Nova rolls out 600 to 900 new styles every week.
The blindingly fast pace at which clothes are being manufactured and discarded has its consequences. The manufacturing process is environmentally damaging and speedy supply chains depend on underpaid and overworked factory workers.
Environmental cost of fast fashion
The environmental menace linked to manufacturing and consuming fast fashion is hidden across the lifecycle of each piece of clothing. The production process is tremendously polluting to begin with, as factories indiscriminately dump toxic chemical-laden wastewater into rivers and tonnes of greenhouse gases are emitted while manufacturing – about 1.2 billion tonnes of CO2 is emitted annually by the global textile industry, which is more than aviation and shipping industries combined.
Even the choice of fabric for manufacturing fast fashion garments is posing environmental risks. Proportion of synthetic materials, such as polyester in our clothing has increased two-fold since 2000, rising to 60% in 2019. These fibers are oil-based and a single polyester shirt has 5.5 kg of carbon footprint, as compared to 2.1 kg from a cotton shirt. Moreover, polyester generates vast amounts of greenhouse gases, sheds microfibers that cause plastic pollution in oceans, and when disposed, it does not naturally decompose, compounding the waste problem.
A major ramification of fast fashion is that clothes move from consumer’s wardrobes to garbage as fast as they are manufactured. It is likely that within 7-8 uses, a jeans or shirt would be discarded for clothing that is newer and trending. The shorter lifespan of garments is not only generating enormous amount of waste but is also putting strain on production resources such as water that is extensively used in the manufacturing process.
Globally, about US$ 400 billion worth clothing is discarded prematurely and 21 billion tons of textile is sent to landfills annually. The ecological cost associated with these garments is tremendous – 3,000 liters of water is required to manufacture one cotton shirt and a pair of jeans needs about 8,000 liters of water, almost the amount of water an average person drinks over two years is utilized in production of garments that will be quickly discarded.
Social cost of fast fashion
With rise of globalization, supply chains have become international, which has led to increased outsourcing of textile production to countries that offer low-cost labor. Fast fashion’s low price tags largely depend on even lower production costs. Hence, countries such as USA produce only 3% of its garments, while the rest is outsourced to developing countries, such as Bangladesh, India, Vietnam, etc.
Low-cost production means factory owners need to cut down costs, which is usually done at the expense of safety and results in providing appalling working conditions for factory workers. Fast fashion production uses 8,000 synthetic chemicals, several of those chemicals are carcinogenic affecting health of factory workers. Moreover, workers are constantly exposed to fumes of toxic chemicals, which pose serious threat to their lives.
Fast fashion frenzy has led retailers to indulge in unfair labor practices in an attempt to keep production costs low and simultaneously increase production. About 85% of textile factory workers are women, who work overtime and are highly underpaid. Lack of regulation has given way to exploitation of labor in countries such as Bangladesh, where retailers pay as little as US$ 2-3 per day to garment workers, a larger portion of them are engaged by fast fashion brands. Even in developed economies such as the USA, companies such as Fashion Nova have been found to pay employees far below the minimum wage – the brand was reported to pay US$ 2.77 an hour to its workers in Los Angeles.
Additionally, cases of child labor have been registered in countries including Bangladesh, Brazil, China, India, Indonesia, Philippines, Turkey, and Vietnam.
A move towards sustainable production
In the past decade, changing consumer attitudes associated with sustainability and corporate transparency have propelled fast fashion retailers to rethink impact of their production processes.
Notable steps have been taken by some of the largest fast fashion brands such as Zara and H&M. Zara aims to use 100% organic, sustainable or recycled material in its clothing line by 2025. Also, it has plans for its facilities not to produce any landfill waste by 2025. Currently, Zara has a sustainable clothing collection, Join Life, which uses sustainable raw materials such as organic cotton, tencel (cellulose fiber), or recycled polyester.
H&M also has a similar vision of using 100% sustainably sourced or recycled materials in its garments. It also aims to reduce water consumption and CO2 emissions in production processes. The company already has a clothing line, Conscious, which uses sustainable materials for manufacturing garments.
Both companies also claim to be striving to provide better working conditions for workers and pay fair wages.
Thanks to fast fashion, for many consumers, what used to be a thoughtful and occasional purchase, has turned into a series of impulse buys at shorter intervals. The rate at which garments are being produced is not environmentally sustainable and putting profits ahead of workers’ welfare has led to abuse and exploitation of laborers globally.
Fortunately, the number of eco-conscious consumers is on the rise, a fact that has pushed fast fashion retailers to reevaluate strategies and focus on sustainable production. However, a question still remains how much of those sustainability pledges and greener production goals actually hold true.
Can fast fashion really be sustainable?
The fundamental problem lies in the business model of fast fashion that is based on selling more products. The industry’s profitability hinges on luring consumers to fresh stream of new clothes and designs that are launched almost weekly. A business model that is based on over-production is far from being sustainable.
Fast fashion companies are often criticized for greenwashing and distracting consumers from their harmful practices. For instance, H&M’s recycle program encourages shoppers to donate their old clothes, which H&M claims to recycle to create new textile. However, only 0.1% of all collected clothing is believed to be actually recycled, while the rest is most likely dumped in landfills. H&M’s clever marketing tactics make shoppers believe that it is a green company, but in reality, H&M offers discount vouchers to shoppers in exchange of their donated clothes, which pushes consumers to buy even more clothes.
Claims made by fast fashion companies on using 100% sustainable fabric have been questioned by various experts and critics, as all fabrics utilize enormous amount of natural resources and energy in the production process. Fast fashion companies might be shifting to fabrics with lower environmental profile but it cannot be completely sustainable, as claimed.
Moreover, H&M and Zara’s sustainable clothing lines, Conscious and Join Life, have been called out for misleading consumers with vague sustainability claims. It is unclear to consumers why these companies are labelling their clothing lines as sustainable. The companies have never defined terms such as ‘sustainably sourced’ or ‘sustainable materials’, used to describe their clothing lines. Hence, it is ambiguous how they source the materials, what is meant by sustainable materials, and what portion of garments they actually constitute.
While making an effort to use environmentally-friendly materials is definitely a step towards better production practices, it is not enough to compensate for the overall damage that fast fashion companies impose on the environment, hence, consumers also need to do their part.
Time to slow the fast fashion
Fast fashion thrives because companies create demand for clothing. To curb this demand, consumers need to make changes in shopping behavior to reduce their own environmental footprint.
A conscious choice needs to be made to purchase less clothes and to use the existing ones for longer time period. Solely wearing a garment for nine months longer can reduce carbon footprint of that garment by 30%.
Buying used clothes is another way to reduce environmental impact. Wearing used garments is a sustainable way to recycle clothes which would otherwise be discarded in landfills. If every shopper purchased one used item in a year, it could save CO2 emission equivalent to pulling out half a million cars from roads for a year.
Nonetheless, if consumers make mindful choices and fast fashion brands commit to doing business differently, we would be able to produce and consume less.
Mainland Southeast Asia (MSEA), comprising six countries – Myanmar, Laos, Vietnam, Cambodia, Malaysia, and Thailand, has emerged as one of the key regions for low-cost sourcing of textile and apparel (T&A, also referred as textile and clothing or textile and garment). Many global brands such as Tommy Hilfiger, Marks and Spencer, GAP, Adidas, Nike, etc. are increasing their collaboration with the region to leverage cheap labor pools. The T&A industry in most MSEA countries are witnessing positive growth, except Laos and Thailand, where the industry is in state of decline.
Gap, Adidas, and Giorgio Armani are some of the renowned fashion brands that manufacture their designs in Cambodia. As of 2014, Cambodia was the sixth fastest growing economy in the world and its textile production held a 1.2% share of the global market by volume in 2008. It is no coincidence that whenever Cambodia is mentioned, almost instantaneously, it is linked to a soaring apparel production sustained by a large number of factories as well as workforce in number only comparable to some of the world’s largest textiles producers such as Thailand or Vietnam. Is Cambodia ready to face this steep growth?
Accounting for 16% of the country’s GDP in 2012, garment sector certainly plays an important role in the Cambodian economy. It provided employment to 8.2% of the country’s population in 2014, while textile export accounted for 80% of Cambodia’s total exports in 2013. Moreover, Cambodia’s government has recently increased its focus on industry development with stress on garments. The country has not only set a long term Industrial Development Policy to spur its textile sector growth but it also has implemented initiatives seeking to organize the apparel production and become an even more appealing destination for international buyers as well as investors.
In 2009, as a long term strategy, the country became part of the Association of South East Asian Nations community (ASEAN), a regional economic and political organization associating 10 member states. This allowed Cambodia to take advantage of several FTAs previously signed by ASEAN with developed countries, and benefit from many other betterments offered by this international community. After years of political stress and economic instability of the Cambodian’s economy, ASEAN membership helped Cambodia register a manifold increase in trade in the last five years, with stabilized inflation rate at about 4%, and an expected GDP CAGR of around 8-9% during 2015-2018.
Since declared a Least Developed Country (LDC) in 1991, Cambodia has been benefitting from quota-free and duty-free export to EU countries without having to comply with the rule of origin, a rule establishing that all manufactured goods must originate from the country of export. Fabrics may come from, i.e. China, but it is Cambodia that manufactures and exports all of the clothing and footwear to places such as UK (which accounted for 7.8% of total garment exports from Cambodia in 2013) or Germany (accounted for 6.7% of total garment exports in the same year). For a country as heavily dependent on raw material (57.2% of total imported garment raw material came from China in 2013) as Cambodia, this scheme is greatly favorable, allowing the country to export US$554 million worth of textiles and footwear during the Q1 2015 to the EU alone.
For the past two decades, the country has been relying on FDIs with a strong focus on garment industry investment. Cambodia became an attractive investment destination in 1996, after receiving the status of Most Favored Nation (MFN) by the USA and launching an open trade administration with permissive investments and incentives for foreign investors. Due to open trade policies such as no price controls on products or services, free remittance of foreign currencies abroad, and full import duty exemption, favoring mostly foreign capital, Cambodia tripled its FDI in the last decade with a record of US$4.6 billion of cumulative approved FDI. As of 2014, about 28% of that FDI, or US$1.28 billion, focused on the garment and footwear sector production through foundation of new factories and implementation of high-tech manufacturing equipment rather than depending on low cost and low skilled labor as means of retaining international competitiveness.
Despite an increase in total export volumes buoyed primarily by textile and footwear export over the past several years, Cambodia’s government is yet to address internal problems that may obstruct both the country’s economy as well as apparel sector’s growth in the coming years.
During the last decade, Cambodia has strategically positioned itself as an attractive FDI destination for clothing and footwear companies to make their designs or to open new low-cost production facilities. However, since 2014, Cambodia’s internal conflict with garment sector workers has affected the country’s image causing a decline in purchase orders for the first time in a decade. The conflict has also negatively impacted foreign investors who are losing confidence in the country’s management of the apparel sector, and subsequently, Cambodia is registering a decline in FDI inflow, which it greatly relies on to aid its apparel industry development. Further, considering Cambodia’s textile industry is highly dependent on imported raw material and electricity, the apparel production cost is susceptible to possible increase in prices of imported fabric and unforeseen changes in electricity rates.
As a result, it does seem Cambodia is still unprepared to handle a possible steep growth of its textile industry. Although there have been several industrial development policies implemented to better organize the industrial setup, Cambodia is yet to build strong manufacturing industries to supply for its own apparel industry needs. Further, the ongoing lack of a fully-working power grid that feeds textile factories puts Cambodia in a weak position vis-à-vis its garment-oriented competitors. Therefore, in order to become a truly large player in the global apparel industry playground, Cambodia has to focus its efforts on developing self-sustainability and overcoming its ingrained internal conflicts.
Recording a positive growth year after year since 2001, Vietnam’s garment and textile industry is now banking on a potential TPP and some FTAs to continue its journey on the success path. However, as some of the already existing problems, such as heavy reliance on imported raw materials, become a bigger concern, and new problems such as increase in production cost and threatened interest of domestic players come to surface, will the industry be able to secure its future?
Vietnam’s garment and textile industry has been one of the country’s leading sectors, recording growth of more than 15% annually between 2001 and 2014, remaining the chief contributor to Vietnam’s economy. 18% year-on-year growth was registered by Vietnam’s textile and garment exports in 2013, which took exports value to a whopping US$20 billion.
Garment and textile exports also accounted for a significant proportion of Vietnam’s GDP (approximately 15%) and total exports (about 18%), in the same year. The industry provides jobs and salaries to over 4.5 million workers, out of which approximately 2.5 million are direct workers in 4,000 textile and garment enterprises. Products of the industry get shipped to more than 180 countries across the world.
A lot of optimism is budding around the industry’s performance for the year 2015 and ahead, part of which is arising from the market’s consistent positive growth trajectory traced during the past several years.
Another reason for the optimism is Vietnam’s potential Trans-Pacific Partnership (TPP) with 11 countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the USA) and FTAs with the EU, South Korea, and the Eurasian Customs Union of Belarus, Kazakhstan, Armenia, Kyrgyzstan, and Russia.
The TPP and the FTA with the EU are in last stage of negotiations, while the FTAs with Eurasian Customs Union and South Korea were signed in December 2014 and May 2015, respectively. Industry stakeholders are relying on the TPP and the FTAs to steer the sector into the future.
Completion of the TPP is estimated to increase Vietnam’s garment and textile exports to the USA to US$30 billion by 2020, as compared with US$8.6 billion exports recorded in 2013, recording growth of approximately 250%.
With the EU being the second largest importer of Vietnam’s textiles and garments, a FTA between the two would further boost Vietnam’s garment and textile industry. It is expected that exports from Vietnam to the EU would increase by 20% during 2013-2020 as the value of textiles and garments exports is projected to increase from US$2.7 billion to US$3.2 billion.
Vietnam’s FTA with South Korea is expected to almost triple bilateral trade value during 2015-2020, to reach US$20 billion by 2020. Garment and textile industry is expected to be amongst several Vietnamese industries, which are likely to be positively impacted by the FTA. Also under the FTA between Vietnam and the Eurasian Customs Union, Vietnam’s exports, including textiles and garments, as well as seafood, wooden furniture, and agricultural products, are benefiting from preferential tariffs and are expected to increase by 30% during 2013-2020.
Opportunities for Vietnam’s Garment and Textile Industry from the TPP and the FTAs
Further expansion of the industry’s exports share in the USA
Even though the USA has been Vietnam’s largest garment and textile exports market (as of 2014), the industry’s exports account for only 8-9% of total textile and garment imports in USA. TPP offers a chance to increase Vietnam’s textile and garment’s share to 12-13% in the US market as the tariff would be reduced from 17% to 0%
Increase in the number of foreign direct investments in the industry
Number of foreign investments is likely to increase in Vietnam’s garment and textile industry with the completion of the TPP and the FTAs with the EU, the Eurasian Customs Union, and South Korea. The industry might further develop (e.g. in terms of infrastructure) through utilization of additional revenue generated from increased exports. This can perhaps become a key reason for foreign investors to initiate new investments in the industry
Becoming one of leading nations in global garment and textile production chain
Vietnam has a chance of becoming a truly global player in the world garment and textile industry if it starts manufacturing high-quality textiles and garments by upgrading and maintaining its production standards and adopting advanced production technologies with the help of FTAs
Boosting Vietnam’s local garment and textile players’ position in the market
FTAs can boost restructuring process among Vietnam’s garment and textile companies and offer a new array of opportunities arising from preferential or 0% tariffs, cheaper supplies, and loosening of other trade barriers. Vietnam’s government can also promote local players further by offering garment and textile industry related subsidies (for example, charging lower taxes on garment and textile manufacturing plants). Such subsidies would further encourage Vietnam’s local garment and textile industry players to expand their operations and help the industry in a positive way
Roadblocks for Vietnam’s Garment and Textile Industry Growth
Heavy Dependence on Imported Raw Materials
According to VINATEX (Vietnam National Textile and Garment Group, Vietnam’s state-owned largest garment and textile corporation which manages Vietnam Textile Garment Group), in 2013, the country’s domestic cotton production satisfied only 1% of the industry demand while domestic fabric production fulfilled 12-13% of the demand. Materials from China account for almost 50% of the total raw materials imported by the industry. As of 2013, cotton worth US$7.5 million, yarn worth US$350 million, and fabric worth US$3 billion were imported from China to Vietnam.
Raw material development in Vietnam is challenged by environmental protection laws implemented by Ho Chi Minh City Garment and Textile Association (HCMC, a government association) wherein limited licenses have been awarded to Vietnam’s garment and textile dyeing and weaving plants as they cause heavy pollution. Moreover, farmers have been earning higher profits through plantation of crops other than cotton which further hampers local cotton production.
The potential TPP is likely to be based on the yarn-forward principle. The principle mandates every stage of garment and textile production (such as sourcing/developing of raw materials, weaving, dyeing, finishing, and sewing) to be executed in Vietnam or 11 other TPP member countries. Only if this requirement is met, the products will be eligible for a duty-free export to other TPP member countries. Since China accounts for almost 50% of the total raw materials imported by Vietnam’s garment and textile industry, the yarn-forward principle would further compel Vietnam to locally produce raw materials to manufacture garments and textiles to be exported to other TPP member countries.
Increasing Production Costs
Growing prices of electricity and transportation, along with an increase in minimum wages are also becoming new causes of headache to the industry players. In Vietnam, minimum wages witnessed a hike of 15.2% in 2014 (while it is generally assumed that already a 10% increase in minimum wages pushes up a company’s salary costs by almost 17% due to increased allowances and other social benefits).
For the year 2015, Vietnam’s garment and textile manufacturers believed that if the increase in minimum wages goes beyond 12%, the impact of the increase will be noticed in terms of higher market selling prices of Vietnam’s garments and textiles. Such a situation would reduce total revenue generated by the industry as higher selling prices might adversely affect exports and thereby, take away some FTA-related potential revenue. In order to avoid the situation, Vietnam’s garment and textile manufacturers attempted to cap the increase in minimum wages by a maximum of 12%, in 2015. However, Vietnam’s government decided the hike for the year 2015 to be 13-15%, which is bound to adversely affect selling prices of the industry’s products.
Interest of Domestic Market Players at Risk
FTAs such as those with the Eurasian Customs Union, the EU, South Korea, and the TPP would open doors of Vietnam’s garment and textile industry for foreign players. Foreign companies have already accelerated their investments in the industry. This is leading to higher number of foreign firms, which are usually technologically advanced and capital rich, sidelining local industry players (as per Viet Nam Chamber of Commerce and Industry report published in 2014, as of 2013, 96% Vietnamese companies operated on small scale and lagged behind on capital and technology fronts).
Some examples of foreign players planning to enter the industry include Kyung Bang Vietnam (a 100% South Korean invested enterprise), which is in the process of establishing a spinning plant with a capacity of 6,000 tons per annum in Vietnam’s Binh Duong province. Another example is a Hong-Kong based company, Texhong, which is also planning to build a spinning plant in the country’s Quang Ninh province. The entry of foreign players in the industry is likely to intensify competition among all the industry players (both local and foreign).
For the period 2015-2020, Vietnam’s garment and textile industry targets a production growth of 12-14% on an annual basis, 3 million people additionally employed in the industry, and export revenues valued at US$25 billion by end of 2020.
In the light of challenges faced by the market, the industry has started to take efforts in order to have a roadblock-free path ahead to achieve its targets.
Reduce heavy dependence on imported raw material
After realizing the importance of localizing raw material production for the industry, initiatives to increase domestic raw material production are being undertaken. A cotton manufacturing plant, known as “Rang Dong Industrial Park” (infrastructure development expected to complete by end of 2015), at a size of 1,500 hectares and worth US$400 million is being established in Vietnam’s Ninh Thuan province. The park is expected to record production value of US$3 billion on an annual basis.
In addition to this, Vietnam is urging for inclusion of “weak rule of origin” or “single transformation rule” in the TPP agreement. Inclusion of the rule will mandate only cutting and sewing aspects of garment and textile manufacturing process to be performed in one of the TPP member countries. This would allow Vietnam to export garments and textiles manufactured with imported raw material to other TPP members.
Lower production cost
Since the production cost is bound to increase due to growth in minimum wages, it is of paramount importance for Vietnam’s garment and textile manufacturers to look for ways to control and minimize the overall production cost hikes. This might be possible through adoption of more efficient and advanced technologies.
To make the adoption possible, the government in channeling its efforts to attract higher number of FDIs in the industry.
The industry plans to host “Vietnam Garment and Textile Forum – 2015 edition” in June 2015 in Hanoi. Major garment and textile companies such as H&M, Adidas, Puma, and Li & Fung are expected to participate in the forum.
Protect the interest of domestic market players
The government undertook attempts to help domestic raw materials producers as it noticed that certain raw materials utilized by the Vietnamese industry are being imported without any tax.
As such imports tend to hurt domestic producers, in May 2015, Vietnam’s Ministry of Textile and Garment proposed a 2% import tax on polyester staple fibre, which is presently enjoying no import tax.
Objective of the proposal is to safeguard the interest of domestic fibre producers, who were found not to be running at full capacity while imports of the fibre were being recorded at around 150,000 tonnes on an annual basis
All these initiatives will have to stand the test of time, and whether they prove themselves to be sufficient to help Vietnam’s garment and textile industry grow while deriving maximum benefit from the potential of the TPP and various other FTAs, is to be seen.