As Vietnam works to strengthen its manufacturing capabilities, crucial industries—such as apparel (footwear, textiles, and garments), along with electronics and electrical appliances—have contributed significantly to the growth of the manufacturing sector in the country. This article explores the potential and status of clothing manufacturing and why you should start expanding your operations to Vietnam.
Vietnam ranks as the sixth-largest apparel exporter, with a 6.4% global clothing export market share. As of 2021, the export value of items from the country’s textile and garment industry reached USD 40.4 billion. Moreover, China is the primary fabric source for Vietnamese businesses.
The nation is also becoming a major hub for producing footwear, particularly for international companies. For example, in 2020, Nike produced up to 50% of its whole footwear line in Vietnam where it contracts 200 of the company’s manufacturing facilities. The company further intends to bolster its investment in the country.
Another renowned global player, Adidas, has 76 factories located in Vietnam, where the company makes up to 44% of its products. The country has surpassed China to become Nike and Adidas’ primary global production location as of 2020.
Current Status of Textile Manufacturing in Vietnam
According to VITAS (Vietnam Textile & Apparel Association), the country’s textile and apparel export revenue reached USD 40.4 billion in 2021 and is projected to reach USD 45 billion by the end of 2022.
The nation’s textile and apparel industry has maintained a rapid growth rate for the past five years, averaging between 20 – 26% annually. Vietnam ranks third among the nations with the highest global textile and apparel export turnover.
Currently, 5.2% of the worldwide textile and apparel market comprises goods shipped from Vietnam. Its textile and apparel items are mostly imported into the United States, Korea, Japan, and Europe.
Mr. Truong Van Cam also stated that the government needed to rapidly disperse the financial support package for businesses to attract investment to the raw textile materials industry. In his opinion, this will help maintain the growth momentum of textile firms.
To keep up with the trend of green consumption and environmentally-friendly products, he recommended that businesses switch to green production for sustainable value and reduce and recycle waste.
Reasons to choose Vietnam for Clothing Manufacturing
Affordable Labor Costs for Clothing Production
It should come as no surprise that Vietnam‘s affordable labor expenses are one of its most desirable attributes for enterprises. In 2023, it is expected that the average monthly wages will be around USD 251, with big cities like Ho Chi Minh City and Hanoi paying the highest rates. These incomes frequently fall short of the USD 250 to USD 346 range in China.
Additionally, there are indications of stability in the minimum wage growth in Vietnam. Compared to the 6.5% increase in 2018 and the 6.5% increase in 2017, minimum wages increased by an average of 5.3% in 2019 and 6% in 2022. As a result, Vietnam and its clothing manufacturing units can become long-term destinations for investors and businesses.
The Communist Party of Vietnam (CPV), which governs the country as a one-party state, establishes key policies and determines strategic priorities. In Southeast Asia, where some nations continue to be prone to political and economic unrest, Vietnam is one of the most politically stable countries. This characteristic has helped the nation attract capital investment in manufacturing, including the clothing sector.
Large-scale protests and widespread turmoil are uncommon in the country compared to other Asian nations like Thailand due to excellent government control.
The recently re-elected General Secretary, Mr. Trong, is known for his anti-corruption stance and has voiced support for the nation’s continued economic integration.
Free Trade Agreements to Support Import/Export
Economic liberalization has been a top priority in Vietnam’s rapid development plan. Human capital and material capital have seen considerable attention and investment from the public sector and international investors. As part of the global integration process, Vietnam has reached out far beyond its geographic region to establish connections with many of the world’s most advanced economies.
In the previous three decades, Vietnam has signed substantial free trade agreements with more than 50 countries, both individually and in economic blocs.
Following are the trade agreements signed by Vietnam:
- European Union-Vietnam Free Trade Agreement (EVFTA)
- Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
- UK-Vietnam Free Trade Agreement (UKVFTA)
- The U.S.-Vietnam Bilateral Trade Agreement (BTA)
- ASEAN Free Trade Area (AFTA)
- ASEAN-China Free Trade Agreement (ACFTA)
- ASEAN-Australia-New Zealand FTA (AANZFTA)
- Vietnam – South Korea Free Trade Agreement (VKFTA)
- Japan-Viet Nam Economic Partnership Agreement (VJEPA)
- ASEAN-India Free Trade Area (AIFTA)
- Vietnam – Eurasian Economic Union Free Trade Agreement (VN-EAEU FTA)
- Regional Comprehensive Economic Partnership (RCEP)
- Vietnam – Cuba Trade Agreement
- Vietnam-Chile Free Trade Agreement (VCFTA)
Choosing Tax-Free Manufacturing Zones to Set Up Factories
Vietnam has sizable industrial zones that have become crucial hubs for industries. VSIP (Vietnam-Singapore Industrial Park), HPIP (Hiep Phuoc Industrial Park), Phuoc Dong Industrial Park, and The Economic Zone of Dinh Vu-Cat Hai are a few of the country’s well-known manufacturing zones.
Profit from Tax Breaks
- For a maximum period of 15 years, businesses can benefit from lower corporate income tax at 10%.
- A 50% personal income tax discount is available for foreign and local employees.
- Approved projects are exempt from corporate income tax for a maximum of four years.
- For a maximum of 30 years, high-technology projects are eligible for a 10% income tax rate decrease.
- Social projects, including those in the health and education sectors, are eligible for a 10% overall tax reduction.
- Within industrial zones, imported, produced, or processed items are exempt from value-added tax (VAT) and excise duty.
- A 5-year tax break is available for raw materials imported for manufacturing in Vietnam’s industrial zones.
- Companies that trade goods in the ASEAN regions are eligible for tariff reductions.
- The government assists regions with poor socioeconomic situations in developing their infrastructure.
- Companies may have access to preferential funding from the government and be exempt from land leasing costs.
- With a minimum salary range of USD 96 to USD 138 per month, finding cheap labor is easy.
List of Clothing Factories in Vietnam
We’ve also included a sample list of factories in Vietnam, with the type of clothing products they specialize in, courtesy of VSource.
|T-shirts, Polos, Hoodies
|T-shirts, Polos, Shorts
|Multi-Purpose Outdoor Clothing
|Technicalwear for Extreme Sports
|Hi Visibility Workwear
Baseball cap factories
|Baseball Caps and Visors
|TAN THANH DAT
|Baseball Caps and Visors
|AB HAND BAGS
|Doãn Văn Sỹ
|Back to School Backpacks
|Sports and Fashion Shoes
|Men’s Leather Shoes
|Women’s Leather Fashion Shoes
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