Illustrative image (Photo: baodautu.vn)Hanoi (VNA) - Despite COVID-19 cutting into demand for textiles andgarments, enterprises have poured investment into materials to improve productioncapacity, completing the supply chain and taking advantage of new generation freetrade agreements (FTAs) that have come into effect.
The Century Synthetic Fiber Corporation (CSF), one of the leading companies inthe textile-garment industry, has recently approved a 120 million USDinvestment plan for the Unitex synthetic fibre factory project in Tay Ninh province.It has a total capacity of 60,000 tonnes and focuses on recycled yarn and high-quality fibre. CSF will become the second-largest fibre producer in thecountry once the factory is operational, with a total capacity of 120,000tonnes per year.
The Viet Tien Garment Corporation also plans to invest 300 billion VND (13million USD) in several projects this year, including 100 billion VND (4.3million USD) in the establishment of the Viet Thai Tech Co. Ltd, with a view tosecuring raw material resources.
Similarly, the Thanh Cong Textile Garment Investment Trading Joint StockCompany (TCM) has announced it will start construction of its Vinh Long 2factory this year. With an investment capital of 10 million USD, the factory canmanufacture 9 million items a year.
According to TCM, investment in the production of raw materials becamenecessary to boost its overall capacity of 33 million items per year. With thisnew project, it is expected to increase revenue in the segment by 22 percent in2022 and 27 percent in 2023.
Vietnam hasbecome the third-largest textile exporter in the world, after China and India. Itstextile-garments industry enjoys advantages from a number of FTAs that are adriving force for them to continue investing in expanding production. Forexample, with the EU-Vietnam Free Trade Agreement (EVFTA), exports that meetthe rules of origin in fabric production are eligible for tax incentives.
The UK-Vietnam free trade agreement (UKVFTA) has similar regulations.
Rules of origin have been tightened in the Comprehensive and ProgressiveAgreement for Trans-Pacific Partnership (CPTPP), with requirements that all materialsfrom fibre production to the final stage are produced in Vietnam.
With the EVFTA coming into effect from August 1 last year, tax rates on garmentswill be reduced from 12 percent to zero percent in accordance with a seven-yearroadmap. The agreement provides many more competitive advantages to Vietnameseproducts compared with those from countries such as Bangladesh, Cambodia, andPakistan.
New investment projects, especially in the production of raw materials such asyarn and fabric, will resolve shortages of input materials in the industry.
As the production capacity of enterprises rises, they will benefit from havingmore resources increasing the percentage of origin as stipulated in FTAs.
According to the VNDirect Securities Joint Stock Company, raw materialinvestment projects will partly resolve technical barriers in the EVFTA and CPTPP.
Along with benefits from tariff eliminations, the EVFTA will also help promotethe formation of a closed production chain, increasing added value for theindustry and gradually reducing dependence on the importation of raw materials.
“Vietnam has become an important link in the global textile and garment supplychain, so businesses will continue to pour capital into increasing productioncapacity and take advantage of market opportunities from FTAs,” Vu Duc Giang,President of the Vietnam Textile and Apparel Association (Vitas), was quoted bythe Dau tu (Investment) newspaper as saying./.
VNA
