Vietnam’s textile sector ranked second in attracting FDI with more than $1.12 billion out of the nation’s total estimated $5.85 billion worth of pledged investment in the first seven months of 2015, according to the government’s Foreign Investment Agency. The FDI was designated for manufacturing and processing projects in the textile industry. Vietnamese media quoted the agency as saying that the figure accounts for more than 20 per cent of Vietnam’s total foreign investment inflows between January to July this year. Leading experts have stressed that foreign-invested transnational companies, particularly those related to yarn manufacturing, are rushing to shore up their supply chains in anticipation of free trade agreements in the offing. The yarn forward rules of origin do not allow for Vietnam based textile, garment or footwear manufacturers to benefit from the reduced tariffs of the proposed Trans Pacific Partnership (TPP) unless all yarn is manufactured in Vietnam or any of the 11 other TPP nations. Similar provisions are applicable to other free trade agreements. Experts say the complex rules of origin provisions are driving higher levels of inward FDI into the yarn industry in Vietnam. Under the provisions of rules of origin, if a Vietnam based textile company imported yarn from China, it could not avail itself of reduced tariffs for product shipments to the US or any of the other TPP member nations. Turkey has invested $660 million in a fibre producing plant in the southern province of Dong Nai, making it the largest project so far in this field. The other two projects are a plant producing auxiliary products for textile in Binh Duong province and a fibre plant in Tay Ninh, worth $274 million and $160.8 million, respectively. Another $300 million project was listed by a British investor in Ho Chi Minh City. Vietnam’s free trade agreements with the US, Japan, South Korea and the EU are poised to increase opportunities and advantages for investors. According to trade projections, garment exports to the EU are expected to rise by 50 per cent in the first year and around 20 per cent for the consecutive years once the Vietnam-EU free trade agreement comes into effect.
