Vietnam is highly dependent on the import of raw materials such as cotton, fiber, yarn, textiles and garments for clothing production as domestic supply has not been sufficient in the previous years, which concerns cotton in particular. In 2018, domestic cotton production amounted to about two thousand tons, while cotton exports were nearly hundredfold at around 1.6 million tons. Labor costs for clothing production in Vietnam is lower than in China, Indonesia and Cambodia which poses a major competition advantage in the market. Average monthly wages in the garment, textile and footwear industry range from 212 to 235 U.S. dollars.
The export sector relies on the production of foreign-owned companies and local private-owned companies as subcontractors, while local companies also produce for the domestic market. The revenue of major listed textile companies reached about 63 billion Vietnamese dong in 2018. Vietnam National Textile and Garment Group (VGT) is the leading textile company in terms of market cap and revenue by operating 12 yarn factories, five weaving factories, five knitting factories and 24 sewing companies.
With three international airports and over 160 international ports, Vietnam’s infrastructure facilitates the international trade with foreign countries. Vietnam’s exports of clothing worldwide increased by 13 percent, surpassing India and Turkey in 2018. Major export destinations of Vietnam apparel and textiles include the United States, the European Union, Japan and South Korea. The government has also released plans to further enhance the expressway and railway infrastructure.
Several international trade agreements including the EU-Vietnam Free Trade Agreement (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) influence Vietnam’s export-driven growth model as well. As Vietnam faces the risk of relying heavily on raw material exports and the pressure to meet domestic demand, the government planned to support the development of raw materials for the textile, garment, leather and footwear industries to reach 65 percent of domestic supply for the textile and garment industry and 75 to 80 percent of domestic supply for the leather and footwear industry. Together with a strong setup of the sector and the advantages of competitive labor costs and logistics infrastructure, the government had planned to reach an export turnover of 40 billion U.S. dollars for 2019.