"The most difficult thing is to meet the requirements of origin from fabric onwards, or from yarn onwards," said Truong Van Cam, General Secretary of Vietnam Textile and Apparel Association (Vitas). "This is a core issue if we want to enjoy preferential treatment from free trade agreements."
In 2018, Vietnam's textile and apparel imports up to 12.7 billion US dollars of raw materials. In the first 6 months of 2019, imports of this item showed no signs of declining, reaching about 6.7 billion US dollars, mainly from countries outside the region where Vietnam signed the agreement, of which, 55% of the original raw materials from China, 20% from Korea, 16% from Taiwan; 6% from Japan, according to data from Vitas.
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) came into effect in January 2019, and the Vietnam-EU Free Trade Agreement (EVFTA), just signed at the end of June 2019, was It is expected that it will open the door for Vietnamese goods to reach the market of 1 billion consumers, accounting for about 40% of global GDP. The CPTPP includes a number of Vietnamese countries that have not yet signed a free trade agreement (FTA) such as Peru, Mexico and Canada.
In particular, Canada, even without an FTA, exports of textiles and garments to this market each year have reached 700-800 million US dollars, just after Japan.
The two agreements above have fast and strong tax reduction rates. Currently, Vietnam's textile and apparel products are subject to an average tax of 9.6% when exported to the EU.
Taxes to markets in the CPTPP fluctuate, depending on each member state, often at very high levels, for example Peru 17%, Mexico 20-35%. The EVFTA and CPTPP agreements will soon push the current tax rate to 0%.
"Nearly all textile products will not be taxed," Vitas Secretary General said. The EU has a faster tariff reduction schedule when 85% of tariff lines will be reduced immediately to 0% when EVFTA takes effect and is near like 100% of tariff lines 7 years later.
For CPTPP, the tax reduction schedule will take longer, in some markets such as Mexico and Peru, the tax reduction time is up to 16 years because these are markets with similar production and export structure as Vietnam.
Opportunities are only in potential form when the textile industry cannot solve the problem of yarn origin.
The brands already have their supply chains, while domestic enterprises have not been deeply involved in this chain, just stopping at processing, the stage of bringing the lowest added value in the whole chain.
The issue of yarn origin onwards is difficult to solve if the labels continue to designate sources to buy raw materials from partners other than CPTPP and EVFTA as at present.
"The raw material from Vietnam is usually 10% higher than the same material source from China," said Ron Dutta, director of raw materials in Asia, of Garan Incorporated, a children's clothing brand in the US. has 10 years of operation in Vietnam, said.
“Vietnam's raw materials are very limited and must be imported, mainly cotton. Domestic labor costs are no longer cheap. "
China, a country that supplies more than 50% of raw materials to Vietnam, produces on a large scale, focusing on raw materials at very competitive prices.
However, China is not included in the two new generation trade agreements that Vietnam has just signed. Currently, Vietnam and China are only members of China Asean Free Trade Agreement (ACFTA) which came into effect in 2010 and the Regional Comprehensive Economic Partnership (RCEP) is being negotiated.
Vitas leaders "hope", benefits from CPTPP, EVFTA will cause brands to find domestic suppliers instead of foreign ones, because if they do not meet the rules of origin, textile products will be hit. Very high taxes, up to 25%.
But "hope" is not enough and needs the highest level of support from the authorities. The Ministry of Industry and Trade is developing a textile industry development strategy, which is expected to be issued in 2019.
If approved, the strategy will guide the construction of a large textile industry, attracting upstream projects such as textile and dyeing to address the bottleneck of the industry.
"We have great expectations for this strategy," Cam said.
Vitas also has ambitions in the near future when textile and garment industrial zones, with an area of about 400-500 hectares, will be built and will gather businesses in the watershed areas such as yarn, weaving and dyeing. Each such industrial park provides at least 1 billion meters of fabric / year to the market.
This is a solution in the management's efforts to solve the "bottleneck" of the textile industry when joining newly signed agreements.
But the construction of industrial zones dedicated to the textile industry, to focus on environmental issues, including the dyeing industry, is not easy in the context of scarce land resources.
Earlier, the wood processing industry also proposed to the Prime Minister to build an industrial zone for this industry, but so far it has not been able to do so because it could not find land.
Moreover, upstream production requires huge resources, both in capital as well as in people.
For example, investing in a small and medium-sized dyeing factory also costs about US $ 70-80 million, while building a factory with a few thousand employees will cost only over VND 100 billion (equivalent to VND 100 billion). approximately 4.5 million US dollars).
The technology in this industry is also difficult and constantly changing, even with technology know-how, few businesses can do it.
"Many businesses have failed to invest in the dyeing industry because they want to succeed, not only to have money, but also to have the technology and the people who operate it," Cam said.
When there is no strategy, businesses in the industry still have to find a niche, ie some exceptions as committed in CPTPP or EVFTA.
With the EU, domestic enterprises can increase the import of raw materials from South Korea, Japan, countries that have signed FTAs with both the EU and Vietnam. For CPTPP, businesses can import raw materials from Japan, member countries.
The CPTPP also made an exception to the shortage of supply for 187 items, of which 8 items were applied for a period of 5 years, 179 items were permanently applied.
For these exceptions, raw materials imported from countries outside the CPTPP are still recognized as rules of origin and enjoy tax incentives. 3 suitcases and bags; women's bra; Children's clothes made of synthetic fabrics only need to apply two cutting and sewing stages to be exempt from tax.
However, this is not a commodity that accounts for a large proportion of Vietnam's total textile and apparel export turnover. In order to benefit from trade agreements, businesses must still be proactive in sourcing domestic raw materials.
"We still have to take care of the raw material from the fabric or yarn onwards," Mr. Cam emphasized.
Source: vietnambiz.vn
