INVESTMENT IN TEXTILE IN VIETNAM 2017-2025 Presented by: Mr. Nguyen Van Tuan Chairman of Vietnam Cotton and Spinning Association (VCOSA) 1
Content I. Vietnam Textile Industry 2000 2016 in overview II. The impact of TPP on the industry III. The development directions in the context without TPP and investment opportunities. IV. Rang Dong IP - the ideal place to invest 2
I. Vietnam Textile Industry 2000 2016 in overview 1. Export turnover 2000-2016 - Export stands for 80% - 85% of total revenue - Average growth rates of 2000 2012; 2013 2015 and 2016 are 15%, 18% and 5.5% respectively. 3
I. Vietnam Textile Industry 2000 2016 in overview 2. FDI into Vietnam textile Sector 1/2000 31/12/2013 1/2014 30/6/2016 Spinning 2.0 1.5 Fabric production 1.2 5.0 Garment 5.0 1.8 Total 8.2 8.3 4
I. Vietnam Textile Industry 2000 2016 in overview 3. Current situation of Vietnam Textile 5
I. Vietnam Textile Industry 2000 2016 in overview 4. Export structure in 2016 No. Product Quantity Amount (billion USD) Market 1 PSF 90,000 ton 0.1 ASEAN 2 Filament yarn 130,000 ton 0.4 Turkey 3 Staple 960,000 ton 2.7 China 4 Fabric 660 million m 1.0 Korea, ASEAN 5 Garment 24.3 USA, EU, Japan, Korea Total 28.5 6
I. Vietnam Textile Industry 2000 2016 in overview 5. Comment Textile and apparel exports account for 80-85% of total industry revenue. Export growth is mainly driven by yarn and garment growth. The growth of the garment sector (account for 86%) is based on cheap labor force The growth of the spinning industry is mainly based on competitive prices and the acceptance of China, Turkey and some ASEAN countries. Foreign direct investment (FDI) is the driving force behind this growth (account for 70%). Rapid growth in the spinning and sewing segment has created an imbalance of the supply chain with bottlenecks in the fabric segment (weaving, knitting, dyeing and finishing) that makes the sector heavily depends on imported fabric (6.5 billion meters per year, equivalent to 75% of demand) and is vulnerable. 7
II. The impact of TPP on the industry 1. The impact of TPP With the yarn forward formula in exchange for the duty elimination from 17.5% to 0% at the US market (accounting for 50% total export), TPP is the main driving force for domestic fabric production. The summarizing FDI into Vietnam below with TPP expectation proved that: From 2000 to 31 December 2013: 8.2 billion USD From January 2014 to 30 June 2016: 8.3 billion USD 1/2000 31/12/2013 1/2014 30/6/2016 Spinning 2.0 1.5 Fabric production 1.2 5.0 Garment 5.0 1.8 Total 8.2 8.3 8
II. The impact of TPP on the industry 2. Review the wave of FDI to welcome TPP a) Typical projects No Company Nationality Amount (mil. USD) 1 TAL Hong Kong 60 2 THIEN SUN JV Hong Kong & Japan 80 3 HAPUTEX Hong Kong 120 4 CRYSTAL PACIFIC Hong Kong 545 5 HUAFU Hong Kong 300 6 LU THAI Hong Kong 161 7 BROS EASTERN Hong Kong 400 8 TEXHONG China 120 9 YULUN China 68 9
II. The impact of TPP on the industry 2. Review the wave of FDI to welcome TPP No Company Nationality Amount (mil. USD) 10 SHENGZHOU China 427 11 WORLDON China 300 12 YU YUANG Taiwan 58 13 POLYTEX FAR EASTERN Taiwan 274 14 SHEICO Taiwan 50 15 GLOBAL DYEING Korea 200 16 HYOSUNG Korea 660 17 PANKO Korea 70 10
II. The impact of TPP on the industry 2. Review the wave of FDI to welcome TPP a) Recognition Investors are mostly big businesses The projects are at large scale and divided into 02 or 03 stages The investment segment is focused on fabric production Purpose of investment to build up their own full supply chain in Vietnam. b) Investment s situation Phase 1 investment is completed. Waiting for the next evolution of post TPP. Surveys show that without either TPP or another alternatives, investing for the next phase would be unlikely. 11
III. The development directions in the context without TPP 1. Goals Try to maintain the annual growing rate of 6 8% during the period of 2017 2025. In order for Vietnam's textile and garment to develop in a stable and sustainable manner, the task of the industry is to promote domestic fabric production, meeting the needs of the industry. If the fabric produced domestically meets the demand, Vietnam's textile and garment industry will not only increase its share in the value of exports and domestic consumption, contribute to the growth of GDP but also create more jobs, build a firm foundation for the development of the industry in a stable and sustainable manner that is precondition for the development of the fashion industry. The solution to this objective is to increase the attractiveness of foreign investment combined with the promotion and support of domestic firms involved in fabric production. 12
III. The development directions in the context without TPP 2. Perspective by 2025 Item Unit Quantity 2016 2025 + / - Labour Mil. pax 2.6 5.0 + 2.4 Materials Cotton, VSF, PSF, filament fiber (Mil. MT) 1.8 4.5 + 2.7 Spinning Mil. spindles 7.2 17.9 + 10.7 Fabrics Bil. m 2 2.85 12 + 9.15 Export Bil. USD 28.5 50 +21.5 13
III. The development directions in the context without TPP 3. Main subjects are also interested in investing in fabric production in Vietnam without TPP No. Subject Nationality Reasons 1 Yarn manufacturers Vietnam - Inability to invest abroad - Export markets are shrinking and competed fiercely, especially from India and Pakistan. - The demand for fabric in the country is very large and stable. - Absolutely capable of producing grey fabrics - The difficulties are technology, dyeing and finishing techniques but those can be searched in the market 2 The small and medium fabric manufacturers Korea - Production cost in Korea is too high - Vietnam meets the conditions for production from materials, labor, land, - Fabric demand in Vietnam is large and stable. - Korea has FTA with both The US and EU 3 The small and medium weaving, knitting, dyeing producers China - High production costs and strict environmental protection policy in China. - Vietnam meets the conditions for production from materials, labor, land, - Fabric demand in Vietnam is large and stable 14
III. The development directions in the context without TPP 4. Investment Opportunities Item Unit Quantity Materials (Cotton, VSF, PSF, filament fiber) MT 2.7 million Spinning Spindles 10.7 million Fabrics m 2 9.15 billion In which, FDI in fabric production is of high appreciation and support by the Government of Vietnam 15
III. The development directions in the context without TPP 5. Solutions for FDI attracting To set up large-scale industrial zones specializing in fabrics production in suitable locations in Vietnam with complete infrastructure system. The government has preferential policies and supportive solutions for each investor. Especially create conditions for domestic enterprises to develop, in which promotes the launching of the model of "Vietnam Textile Village". Enhance the role of associations to increase investment connections between domestic and foreign enterprises. Study on the possibility of promoting the negotiation on the Vietnam-US Bilateral Trade Agreement. 16
IV. Rang Dong IP - the ideal place to invest 1. Location Located close to Beibu gulf and on the Southeast of Nam Dinh city, Nam Dinh province, Rang Dong IP is 140 km far from Hanoi capital and 120 km far from Hai Phong port Industrial park (Phase I) Industrial park (Phase I) Industrial park Industrial park (Phase II) (Phase II) Life Support District Life Support District 17
IV. Rang Dong IP - the ideal place to invest 2. Total area 2,044 ha 519 ha 850 ha 675 ha 18
IV. Rang Dong IP - the ideal place to invest 3. Project goal Take advantages of land resources and labor force in Vietnam to build the international first-class textiles supply chain city, that fused the innovative industrialization mode of textiles supply chain city and the advanced experience of Singapore industrial park. 19
IV. Rang Dong IP - the ideal place to invest THE STRUCTURE: ONE ROAD; THREE CENTERS; FIVE AREAS ONE ROAD The main road of functional development THREE CENTERS Two big industrial service centers One large cultural exhibition center FIVE AREAS Two big industrial parks One international textile town of culture One coastal lake sports leisure tourist area One seaside eco-tourism resort 20
IV. Rang Dong IP - the ideal place to invest 4. Implementation schedule Phase I: 5 years (2016 2020) Phase II: 5 years (2021-2025) Supporting area: 7 years (2024 2030) 21
IV. Rang Dong IP - the ideal place to invest 5. Expected Results (When completed) 2 (two) IPs with total area up to 1,369 ha 1 (one) water plant with total capacity up to 150,000 m³/day 1 (one) waste water treatment plant with total capacity up to 110,000 m³/day Dormitory for 150,000 workers 22
IV. Rang Dong IP - the ideal place to invest 6. Staging implementation Section 1: 300 ha; during 2016 2017 Section 2: 219 ha; during 2018 2020 23
Trung Quốc, 375 Thái Lan, 366 Indonesia, 234 Philippines, 248 Ấn Độ, 217 Việt Nam, 162 Cam pu chia, 101 Bangladesh, 86 Indonesia, 346 Philippines, 327 Ấn Độ, 269 Việt Nam, 250 Cam pu chia, 147 Bangladesh, 112 USD/month Trung Quốc, 625 Thái Lan, 578 IV. Rang Dong IP - the ideal place to invest 7. The motivation for investment a) Cheap labour force 700 600 500 400 300 200 100 - Base Salary Total Pay Burden * Souce: JETRO 12/2013 24
IV. Rang Dong IP - the ideal place to invest 7. The motivation for investment b) Low production Costs - Electricity (7cents/kw) - Land leasing (40 60 USD/m 2 for 50 years) - Complete infrastructure - Encouraging and priveledge Policies for investment o Corporate tax 20% o Subject to the size and location of investment, corporate tax will be exampted 2 years and 50% reduced for the next 4 years or 4 years and 50% reduced for the next 9 years o VAT for machine importation will be refunded 25
IV. Rang Dong IP - the ideal place to invest 7. The motivation for investment c) The size of export markets Signed and effective ATIGA ASEAN - China ASEAN - Korea Vietnam - Japan Vietnam - Chile Vietnam - Korea Signed and effective ASEAN - India ASEAN Australia, New Zealand Vietnam VN Eurasian Economic Union ASEAN - Japan VN EU FTA TPP Conclude negotiation await ratification RCEP VN - Cuba ASEAN - Hongkong VN - Israel On going negotiation 26
Thank you for your attention 27