By Sanjay Arora, Wazir Advisors (sanjay@wazir.in)
The textile and apparel (T&A) exports constitute about 15% of Vietnam’s exports turnover. T&A exports of Vietnam earned US$ 39.4 bn. in 2019, while growing at a CAGR of 10% from US$ 27.3 bn. in 2015. While Vietnam’s exports have seen a stable growth, the imports of T&A commodities have also grown at a significant pace. Vietnam’s T&A imports in 2015 were worth US$ 15.4 bn, which has grown since at a CAGR of 8% to reach US$ 20.8 bn in 2019. This signifies that Vietnam mostly relies on imports for conversation of textile and apparel domestically. These large imports of textile raw materials are attractive for textile producing countries like India and China.
Vietnam’s Import Scenario
China is the largest supplier of T&A products to Vietnam with exports worth US$ 10.7 bn, accounting for 51% of Vietnam’s total T&A imports. South Korea and Taiwan are the second and the third largest suppliers with a share of 13% and 11%, respectively.
Man-made (MMF) textiles dominates the T&A imports of Vietnam’s with a ~46% share and is followed by cotton textiles (28%), other textiles (which includes home textiles and other textile material not comprised of Cotton or MMF), apparel (2%), and carpets (1%).
Raw cotton fibre, dyed woven synthetic fabrics, knitted cotton fabrics, coated or laminated fabrics with plastics were the top commodities imported by Vietnam in 2019.
India has potential to expand its share in man-made and cotton T&A market of Vietnam
India is the 8th largest supplier of T&A products to Vietnam with just a 2% market share. India exported around US$ 0.36 bn worth of T&A to Vietnam, with a y-o-y decline of around 43% in 2019. Considering the fact that Vietnam imports a significant amount of textile raw material, India as a large manufacturing base should try to increase its share. India is the largest producer of cotton in the world, the single largest commodity that Vietnam imports. Additionally, India is also a large producer of polyester staple fibre another product that features in Vietnam’s top ten imports.
Apparel represents approx. 75% of the total exports by Vietnam. It imports most of the cotton and polyester fibres (raw material for fabric and apparel production) from other countries i.e., China, South Korea, Taiwan, Japan and India. Woven fabrics derived from high tenacity nylon, polyester and other polyamides are also one of the most demanded categories in Vietnam. India can target these as well.
Vietnam has recently signed a free trade agreement with the EU. The provision of this FTA along with the low manufacturing costs make Vietnam a cost-effective supplier to EU. India can become an important partner to Vietnam by providing essential raw materials for manufacturing apparel for Europe. Additionally, the recent Xinjiang cotton controversy enables India to become the largest supplier of cotton to Vietnam.