Textiles and dyeing companies thirsty for FDI capital

Experts have pointed out that Vietnam has missed several opportunities to boost garment exports through bilateral and multilateral trade agreements because it cannot effectively call for the investment in the textiles and dyeing.

Projects not welcomed by localities, refused by businesses

A group of 20 Danish textile and garment companies paid a working visit to Vietnam from March 28 to April 2 to seek investment opportunities. John Nielsen, Danish Ambassador to Vietnam affirmed that the companies wanted to invest in Vietnam in the fields of making fabric and high quality garment products, in transferring technologies and sharing designing experiences.

Dang Phuong Dung, Secretary General of the Vietnam Textile and Apparel Association (Vitas) hopes that after the working trip, Danish companies will pay closer attention to investment opportunities in textiles and dyeing in Vietnam. If so, this would be the good news for Vietnam’s textile and garment industry.

In fact, Vietnam has been trying to call for foreign investment in the textiles and dyeing for the last five years. Vitas believes that the weaknesses in the textiles and dyeing in Vietnam could be seen as the big opportunity for foreign investors. However, in fact, very few foreign investors have been interested in the fields, because the fields require large sums of investment capital, while the profit is unstable.

Not only foreign investors, but also local authorities are not welcoming textiles and dyeing projects in their localities. “At this moment, provinces and cities are focusing to attract foreign direct investment in high-technology fields, which use few workers and bring high efficiency,” Dung said.

Also according to Dung, due to the shortcomings in the textiles and dyeing, Vietnam has missed a lot of opportunities to boost exports through free trade agreements. “In the trade agreements, the US and Japanese partners only committed to offering the preferential tariff of zero percent for the garment imports, if all the production phases, from fiber production, fabric weaving, dyeing to tailoring, are carried out in Vietnam,” Dung explained. “Vietnamese products still cannot enjoy preferences offered by the free trade agreements because of the dyeing phase”.

The Vietnam Textile and Garment Group (Vinatex) said it has built up 20 investment projects in the last five years and called for investment in textile and dyeing projects, which aims to increase the locally made content ratio of products.

However, it admitted that it is very difficult to find partners for the projects. Very few enterprises are interested, despite the high added value the investment can bring, and lots of investment incentives.

Vietnamese enterprises would rather set up garment workshops to do the outsourcing for foreign partners than heavily invest in textile. They just need to spend 300,000-500,000 dollars to set up a garment workshop, which allows them to do outsourcing for foreign partners to earn one dollar per product. Meanwhile, in order to invest in a fiber factory, investors must spend at least $15-20 million.

Government urged to offer incentives for textile and dyeing projects

Nguyen Son, Deputy Chair of the Cotton Yarn Association, said that the biggest problem that hinders foreign enterprises to invest in dyeing and textile projects is the required build water waste treatment system.

Vitas admitted that foreign investors only want to make investment in textile and dyeing projects if they can find the industrial zones that have water waste treatment systems already. Meanwhile, most localities require investors to build up waste treatment systems themselves. This proves to be the biggest problem that hinders foreign investment.

In order to attract foreign investment in textile and dyeing, according to Dung, Vietnam should not offer investment incentives to too many subjects, and it should only give incentives to textile and dyeing projects, and some supporting industries. Textile and garment enterprises need to find suitable places to set up long term complexes. Especially, the State should support building waste treatment systems. If so, local authorities will not fear environmental pollution, while foreign investors will feel secure when investing. – Vietnamnet

Tags: invest in Vietnam, Vietnam FDI, Vietnam FDI 2011, Vietnam investment