Some suggestions and recommendations to improve the capacity to participate in the global value chain for Vietnamese textile and apparel sector .... For developing countries like Vietnam
The significance of the study
In today's global economy, Global Value Chains (GVC) account for approximately 70% of all trade in goods and services, playing a crucial role in economic growth and job creation According to the World Bank, countries and businesses must implement effective trade and investment policies to fully benefit from GVC participation Engaging in GVC allows companies to access new markets, expand their networks, and obtain diverse resources at competitive prices Additionally, industries gain valuable management insights and access to advanced production technologies through GVC involvement Consequently, participation in global value chains is vital for enhancing the competitiveness of economic entities worldwide.
The textile and apparel industry is one of the earliest sectors to develop, featuring a long global value chain and the potential for high profits and job creation It serves as a crucial link between various industries, including manufacturing and distribution, and demonstrates stable growth regardless of economic conditions For developing countries like Vietnam, this industry plays a vital role in advancing industrialization and modernization, offering opportunities to enhance production and export products with greater added value Consequently, participation in the global value chain of the textile and apparel sector represents a significant opportunity for sustainable long-term growth in these nations.
Mr Luong Minh Huan, Director of the Institute of Enterprise Development (EDI) at the Vietnam Chamber of Commerce and Industry (VCCI), presented a research report highlighting the dynamic capabilities of Vietnamese enterprises.
At the Multi-Stakeholder Forum (MSF) 2022, Mr Luong Minh Huan highlighted Vietnam's significant role in the global value chain, with 62.1% of its total export value linked to it The textile and apparel industry stands out as a crucial sector, historically benefiting from abundant and low-cost labor, which has positioned it as a key contributor to Vietnam's export turnover, accounting for over 10% However, as the labor market evolves, Vietnam's competitive edge of cheap labor is diminishing Currently, the country primarily engages in production, which offers minimal added value within the textile and apparel value chain To align with its development potential, Vietnam must enhance its participation in global value chains and focus on building capacity for activities that generate higher added value, ensuring long-term growth and sustainable competitiveness in the industry.
I selected the research topic "Enhancing Vietnam's Participation in the Textile and Apparel Global Value Chain: Current Situation and Solutions" to address the challenges faced by the industry The findings aim to provide valuable insights for the government, industry associations, and Vietnamese textile and apparel businesses, offering strategic directions and practical solutions to strengthen their involvement in the global value chain.
Overview of the study
The concept of global value chains, first introduced by Porter in 1985, has been further explored by Gereffi and Korzeniewicz (1994) and Kaplinsky (1999) to analyze the role of economic entities in international trade amid globalization Numerous studies have applied the global value chain framework to various industries, including significant contributions from Gereffi and Memedovic (2003), Sturgeon and Biesebroeck (2011), and Strange and Zucchella (2017).
Vietnam is increasingly leveraging GVC tools to enhance the growth of its industries and products amid deeper integration into the global economy Numerous studies and scientific articles, both local and international, have explored various key sectors within the country.
To (2017) examines the stages of the Global Value Chain (GVC) to analyze the factors influencing Vietnam's involvement in the tea industry's GVC, while also suggesting strategies to enhance Vietnam's standing in this sector.
The value chain concept had also been used in an article by Demont et al
(2019) to analyze the rice straw value chain and come to suggestions for the developments for Vietnam
Lebailly et al (2020) conducted a value chain analysis to identify hazards among five key players in the traditional pork value chain, ultimately providing recommendations for enhancing the industrial pork value chain.
Truong and Sidique (2023) conducted a study to evaluate the effectiveness of macroeconomic policies and promote the sustainability of the Chu-mango value chain in Vietnam They employed a Policy Analysis Matrix (PAM) and SWOT analysis to assess policy efficiency, develop diverse policy scenarios, and propose strategic solutions.
In the textile and apparel sector, there are a few research about Vietnam partaking in the GVC, for example:
Nguyen and Hoang (2020) highlight the opportunities and challenges faced by the textile and apparel industry during the 4.0 Industrial Revolution, offering valuable suggestions for navigating this evolving landscape.
In his 2011 thesis, Dang provides a comprehensive analysis of Vietnam's textile and apparel sector within the global value chain (GVC) and offers strategic recommendations for the government to enhance Vietnam's participation in this industry.
In 2015, an article published by Trinh at Dong Thap University highlighted Vietnam's role in the global textile and apparel value chain, proposing strategies for the country to move towards higher value-added stages in the industry.
Recent research articles have examined Vietnam's textile and apparel industry's participation in the global value chain, but these studies are outdated Given the ever-evolving international business landscape, it is crucial to continuously update research to provide relevant and practical evaluations This ongoing assessment will help determine the effectiveness of Vietnam's integration into the global value chain and position its textile and apparel products against competitors.
The thesis titled "Enhancing Vietnam’s Participation in the Textile and Apparel Global Value Chain: Current Situation and Solutions" aims to provide an updated review of Vietnam's textile and apparel industry The author will analyze the current state of the industry, focusing on its structure and value addition, and will offer recommendations for apparel enterprises, industry associates, and the government to improve Vietnam's position in the global market.
The purpose of the study
The global value chain (GVC) in the textile and apparel industry encompasses a comprehensive framework that outlines the production processes, distribution, and consumption of goods across international borders A detailed analysis reveals key characteristics such as the segmentation of production activities, the role of emerging markets, and the dynamics of global trade flows By examining the market share of exporting and importing nations, we can understand the competitive landscape and the strategic positioning of various stakeholders within the textile and apparel value chain This insight is crucial for identifying trends and opportunities in the global market.
Secondly, have a deep understanding about the participation, capacity and current situation of the textile and apparel industry of Vietnam
Thirdly, use the textile and apparel industry structure and smiling curve to evaluate the achievements and limitations of the field
Lastly, overview the orientation of the textile and apparel industry and come up with the general and particular recommendations for each characteristic
The subject and scale of the study
The research object of the thesis is the issues related to Vietnam’s partaking in the textile and apparel GVC
- About the content: Analyzing and evaluate the impact of factors on Vietnam’s potential to grow in the textile and apparel GVC
- About space: Focusing on the textile and apparel value chain of Vietnam and the participation of Vietnam in the GVC
- About time: Studying the textile and apparel sector of Vietnam from 2017 to
2023, from there to propose solutions and adding recommendations to directions and development goals of Vietnam’s textile and apparel field from now to 2030.
The method of the study
This article explores the topic through a blend of synthesis, analysis, listing, and dialectical thinking methods, utilizing the global value chain model and the smiling curve concept The research is grounded in secondary sources, including working papers and peer-reviewed articles, while drawing on data from reputable official sources such as the General Statistics Office of Vietnam, the Ministry of Industry and Trade, and TradeMap.
The structure of the study
The topic “Enhancing Vietnam’s participation in the textile and apparel global value chain Current situation and solutions for Vietnam” is presented in 3 chapter:
- Chapter 1: An overview of the textile and apparel value chain
- Chapter 2: Analyzing the Vietnam’s current situation in global textile and apparel value chain
- Chapter 3: Solution for enhancing Vietnam’s participation in the textile and apparel global value chain
AN OVERVIEW OF THE TEXTILE AND APPAREL
Overview of the value chain
1.1.1 Definitions of the value chain
The concept of the value chain, introduced by Michael E Porter in his 1985 book "Competitive Advantage: Creating and Sustaining Superior Performance," outlines the series of steps that organizations take to deliver valuable goods and services to consumers This framework views the business process as a system, emphasizing that products undergo a sequential series of activities where each contributes to their overall value Importantly, the value derived from each step in the chain exceeds the mere sum of all activities involved.
Numerous studies have been conducted on the concept of the "value chain," yet only a limited number of definitions are widely recognized by reputable organizations such as the World Business Council for Sustainable Development (WBCSD), the International Development Research Centre (IDRC), SustainAbility, the United Nations Environment Programme (UNEP), and the United Nations Global Compact (UNGC).
Value chains play a crucial role in the strategic planning of modern businesses, encompassing the entire lifecycle of a product or process This includes stages such as material sourcing, production, consumption, and disposal or recycling, as highlighted by the World Business Council for Sustainable Development (WBCSD).
The value chain encompasses all activities necessary to transform a product or service from its initial conception through various production phases, including physical transformation and the integration of producer services, until it reaches the final consumer and is ultimately disposed of In this broader context, production is just one of several links that contribute to value addition.
SustainAbility, UNEP, and UNGC define supply chains as the sequence of suppliers contributing to a final product, while value chains focus on the value generated throughout this process, especially for end-use customers.
Value chain can also be defined as literal sense and broad sense
In a narrow sense: A value chain consists of a series of activities performed within a company to produce a certain output
A value chain encompasses a series of interconnected activities conducted by various participants, including primary producers, processors, traders, and service providers, to convert raw materials into finished products ready for retail.
This thesis utilizes Michael E Porter's value chain framework to conduct an in-depth analysis of the global textile and apparel value chain, with a specific focus on the textile and apparel industry in Vietnam.
1.1.2 Structure of the value chain
Michael E Porter introduced a framework designed to help organizations create value for their customers By utilizing a general-purpose value chain model, companies can evaluate their operations and understand how different activities are interconnected This analysis allows businesses to pinpoint activities that enhance value or reduce costs, often achieving both objectives simultaneously.
Figure 1.1 The Generic Value Chain
The framework illustrated in Figure 1.1 categorizes activities into two main groups: Primary Activities and Support Activities This division enables the company to concentrate on the transformation of inputs into outputs that meet consumer demands.
There are five main activities take part in creating the value for purchasers and the overall value for companies:
Inbound logistics involves managing the sourcing of raw materials and semi-finished products from manufacturers or suppliers This critical process encompasses various activities, including distribution, material handling, transportation, inventory control, and storage of goods It plays a vital role in determining the operational efficiency of subsequent activities and relies on strong supplier relationships to create value.
Operations encompass the activities involved in transforming raw materials into finished products, varying widely across different industries and businesses These diverse operations are shaped by the unique characteristics and requirements of each sector.
Outbound logistics involves the transportation, storage, and distribution of goods to retail locations and final consumers The primary objectives of this process include optimizing output in terms of location, timing, revenue, and logistics costs It can be managed internally within organizations or outsourced externally, necessitating effective supply sources, or distribution channels, to ensure products or services reach end users efficiently while managing inventory and optimizing delivery options.
Marketing and sales are essential strategies used to persuade customers to select your products or services over competitors They play a crucial role in business, acting as a leverage point in commerce This process encompasses various activities, including the development of marketing strategies, identification of potential customers, formulation of pricing policies, and establishment of distribution channels.
The advantages you provide and how effectively you convey them are key aspects of the value you offer in marketing and sales
Service is a vital aspect of business that delivers value to customers through activities, skills, labor, or consultation, rather than physical products It significantly contributes to the economy by enhancing customer experiences and interactions While services aim to elevate the value of products offered by businesses, many enterprises in Vietnam are currently underemphasizing this crucial component.
Support value activities involved in competing in any industry can be divided into four generic categories:
Firm infrastructure encompasses management, strategic planning, corporate governance, finance, accounting, legal affairs, public agency relations, and quality management, playing a crucial role in enhancing the sustainability of business operations Unlike other support activities, infrastructure supports the entire value chain rather than isolated functions, serving as a significant source of competitive advantage.
Overview of the global value chain in textile and apparel sector
1.2.1 Characteristics of the textile and apparel global value chain
The textile and apparel industry serves as an exemplary model for studying the buyer-driven value chain due to the ease of establishing apparel businesses and the rise of labor protection movements in developed nations, resulting in a diverse array of apparel exporters from developing countries This extensive value chain contributes significantly to employment opportunities within the industry Key components of the apparel value chain include sourcing raw materials like fabric and thread from textile companies, a production network comprising both domestic and foreign apparel factories, export channels managed by commercial agents, and marketing networks at the retail level.
The apparel industry's value chain begins with prominent retailers and trusted distribution channels in importing nations, which provide seasonal clothing designs before relocating production to developing countries to reduce costs Manufacturers lacking direct brands or distribution rely heavily on these major retailers In this sector, innovation primarily centers on product design and marketing instead of the manufacturing process, resulting in large companies outsourcing production and maintaining significant influence within the value chain.
Geographic location, labor skills, technology, and the size and type of business significantly influence market power and profit distribution within the value chain While stores and brands play a crucial role in competition, apparel companies generally face low barriers to entry In contrast, these barriers increase for textile and yarn companies higher up the supply chain.
To establish and sustain a global brand, substantial advertising budgets and promotional efforts are essential Utilizing information technology enables the development of "rapid response" programs that enhance sales and minimize risks through efficient inventory management, positioning retailers and marketers as leaders in the consumer goods sector In the apparel industry, this approach is embodied in the "lean retail" model.
16 by the combination of production and marketing, often relying on real-time sales information to quickly respond to orders from retailers
1.2.2 Structure of the textile and apparel global value chain
Research by Appelbaum and Geneffi (1994) identifies five key segments within the global textile and apparel value chain, as illustrated in Figure 1.5.
Figure 1.5 The textile and apparel global value chain
Raw materials are essential to the fashion and apparel industry, serving as the foundation for textile production However, their extraction and use contribute significantly to climate change and sustainability issues To address these challenges, the textile industry must collaborate effectively and implement necessary measures to ensure sustainability and adhere to business standards This is an urgent necessity, as over 85% of leading brands have publicly pledged to reduce carbon emissions.
17 reduction targets in their supply chains We can have two paths to reduce greenhouse emissions such as:
- Uses sustainably sourced recycled raw materials
- Use sustainably sourced renewable raw materials that are continuously replenished at or above the rate of depletion
Raw materials, including natural fibers such as cotton, wool, and silk, are transported to textile firms for conversion into fabric Through spinning, these fibers are transformed into yarn, while synthetic fibers are produced from petroleum through refining processes This comprehensive transformation results in a diverse array of fabrics designed to fulfill various production needs.
Fabrics are created from various fibers that are combined and processed to achieve specific qualities such as strength, elasticity, shape, and structure Each type of fiber has unique origins and characteristics, with natural fibers—excluding silk—typically being short in length, measured in centimeters.
Silk and artificial fibers can reach impressive lengths, ranging from hundreds of meters to kilometers Following harvesting or manufacturing, the fibers undergo a spinning process, which is mechanical and chemical-free, although spinning oil is often added to enhance durability, adhesion, and reduce friction Fibers, yarns, or fabrics may be pretreated through processes like dyeing or treatments that improve characteristics such as fire resistance, water resistance, antibacterial properties, or aesthetic appeal Once the fabrics achieve the desired color and properties, they are ready for the production of finished products like sweaters, jeans, or shoes.
Fabric will be shipped to apparel manufacturers in developed countries in North America or developing countries in Asia
In the United States, fabrics and materials are sourced from both local and international suppliers Many manufacturing plants feature their own design and sample development teams, where innovative design concepts are brought to life.
The manufacturing process begins with the creation of prototypes, followed by the approval of samples Once approved, the fabric is cut into pieces and sewn into the final product Throughout this process, quality checks are conducted at each step to ensure the product meets established standards.
Manufacturing factories in Asia source fabrics and materials from major producers like China, India, and Pakistan These factories utilize large production lines with cost-effective labor and advanced production technologies for cutting and sewing Like their counterparts in the US, Asian manufacturing facilities implement quality checks to ensure that the final products meet established standards.
Labor costs in Asia are generally lower than in the United States, leading to more cost-effective manufacturing While US factories prioritize quality and may have longer production times, their products typically come at a higher price Additionally, quality control procedures in the US are often more stringent than in Asia, ensuring that products meet higher standard requirements.
After production in factories, clothing products are exported to targeted audiences Apparel factories in developed countries, such as the US, primarily supply brand-named companies, whereas Asian factories export broadly to both trading companies and overseas buyers.
Differences in how American and Asian apparel manufacturers choose export partners often reflect specific business factors, production strategies, and market conditions:
Labor and production costs in the US tend to exceed those in Asia, placing US factories under significant pressure from competitive pricing As a result, these factories prioritize delivering higher quality products and services, catering to fashion brands that can afford premium pricing Many US fashion brands demand exceptional quality and creativity, leading them to seek production partners that can meet these stringent requirements.
19 meeting these requirements Manufacturers in the US often focus on providing unique and high-quality products to meet the needs of these fashion brands
The current situation of the textile and apparel global value chain
The textile and apparel industry has evolved significantly since its inception, aiming to fulfill diverse fashion and tailoring needs with modern and aesthetically appealing products Over the years, the global textile sector has experienced substantial advancements in manufacturing techniques, transitioning from basic textiles to the integration of cutting-edge manufacturing technologies.
In today's world, clothing serves not only as a means of protection but also as a reflection of lifestyle and personal identity The textile industry is primarily focused on producing garments, footwear, accessories, and related materials The rapid advancements of the Industrial Revolution 4.0 have led to the widespread implementation of new technologies, including the automation of manufacturing processes and the utilization of comprehensive management systems like Product Lifecycle Management (PLM) and Enterprise Resource Planning (ERP) to enhance operational efficiency.
Asia remains the global hub of the textile industry, with China, Bangladesh, and Vietnam at the forefront of production and exports There is a rising demand for sustainable and equitable apparel production, making the establishment of sustainable supply chains a key focus Additionally, emerging nations like India, Ethiopia, and Cambodia are gaining recognition as promising locations for textile manufacturing, presenting new opportunities for industry growth.
The textile and apparel industry is projected to grow steadily, increasing from 655.7 billion USD in 2023 to 703.11 billion USD in 2024, with a compound annual growth rate (CAGR) of 7.2% This growth is attributed to factors such as rising foreign direct investment, increasing demand for man-made fibers, and advancements in manufacturing technology By 2028, the industry is expected to reach 918.71 billion USD, with an estimated CAGR of 6.9%.
1.3.1 Apparel global market share in exporting
In international trade, countries possess relative advantages, as highlighted by David Ricardo, while Michael Porter emphasizes that enhancing competitiveness requires businesses and nations to cultivate unique specialties that differentiate them from competitors This strategic development is essential for engaging in global value chains, enabling countries and businesses to assume significant roles in specific stages of the chain, ultimately boosting their influence and interdependence in international markets.
Comparative advantages in the global apparel industry can evolve, leading to shifts in the roles of various elements within the value chain Currently, Asian countries lead in apparel exports due to their plentiful labor resources, which mitigates the risk of overdependence on any single stage of the value chain.
Table 1.1 Top 5 exporters for apparel and clothing accessories, knitted or crocheted
Value exported in 2022 (Billion USD)
Trade balance in 2022 (Billion USD)
Annual growth in value between
The rising demand for apparel products is driving an increase in the need for textile raw materials However, the industry's reliance on specific countries for these materials poses a risk to the value chain, especially during unforeseen disruptions that can lead to material shortages This situation directly impacts production and the overall value chain in the textile industry Notably, Asia remains a crucial supplier of fabrics and textile materials to businesses around the world.
Table 1.2 Top 5 exporters for knitted or crocheted fabrics
Value exported in 2022 (Billion USD)
Trade balance in 2022 (Billion USD)
Annual growth in value between
Source: Trademap.org 1.3.2 Apparel global market share in importing
While countries in Asia have more advantages in labor and account for the majority of the world’s textile and apparel export market share, developed countries
24 such as the US or European Union (EU) countries do not The trend of importing apparel is more than exporting in these countries
Countries facing high labor costs struggle to compete with those that have lower production expenses in apparel manufacturing, leading them to import fashion products to satisfy domestic demand Additionally, the consumer market in these nations often seeks high-quality items and stylish designs, necessitating imports from countries with greater production capabilities The varied preferences and evolving fashion trends among consumers further drive these countries to rely more on imports than on local production.
Table 1.3 Top 5 importers for apparel and clothing accessories, knitted or crocheted
Value exported in 2022 (Billion USD)
Trade balance in 2022 (Billion USD)
Annual growth in value between
The apparel import market is predominantly located in Western countries, while the raw materials, particularly fabrics for clothing production, are primarily sourced from Asian nations In 2022, Vietnam emerged as one of the top five largest fabric-exporting countries globally and also ranked as the leading fabric importer in the world.
Table 1.2 Top 5 importers for knitted or crocheted fabrics
Value exported in 2022 (Billion USD)
Trade balance in 2022 (Billion USD)
Annual growth in value between
In today’s economic globalization environment, distinguishing between
The distinction between "value chains" and "global value chains" (GVCs) can be challenging, as they are frequently perceived as identical concepts This section aims to clarify the value chain by outlining its fundamental steps and differentiating between two types of GVCs This foundational understanding sets the stage for the author's in-depth research into the global apparel value chain.
The global value chain of the apparel industry encompasses the entire process from research and design to production and distribution, as determined by buyers This article thoroughly analyzes each stage of the value chain and examines the operational dynamics of the global apparel market Furthermore, it presents data and insights on the current trends in the import and export of textile and apparel products worldwide.
In Chapter II, the author explores Vietnam's current role in the global textile and apparel value chain, highlighting both the achievements and challenges the country faces This section aims to provide a comprehensive assessment of the textile and apparel industry in Vietnam and its capacity to engage effectively in the global value chain.
CHAPTER II: ANALYZING THE VIETNAM’S CURRENT SITUATION IN
TEXTILE AND APPAREL GLOBAL VALUE CHAIN
Overview of the textile and apparel sector in Vietnam
2.1.1 Process of Vietnam’s textile and apparel sector
The textile and apparel industry has been a cornerstone of Vietnam's economic development, with its roots tracing back to the establishment of the Nam Dinh textile factory by the French in 1889 Following World War II, the industry underwent significant transformation as Vietnamese enterprises began importing textile machinery from various countries, including China and the Soviet Union In 1986, Vietnam marked a pivotal moment by exporting textile products to Eastern Europe and signing a CMT contract with the former Soviet Union Today, the textile and apparel sector operates through three distinct stages and encompasses five key activities: research and development, sourcing, production, distribution, and marketing.
Vietnam's textile and apparel industry has evolved significantly, transitioning from traditional designs to modern styles that cater to both domestic and international markets This development reflects a rich history of research and design activities aimed at meeting diverse consumer needs.
Since 1975, Vietnamese costume design has been deeply rooted in national cultural identity, with designers primarily being skilled tailors who rely on family traditions and experience, often creating hand-tailored products without modern machinery The Doi Moi policy in 1986 opened up the economy, allowing Vietnam to embrace international fashion trends, leading to a diversification of designs that blend tradition with modernity Today, Vietnamese fashion is vibrant and varied, encompassing office wear, evening attire, and street fashion, as designers continually innovate by merging traditional cultural elements with contemporary styles.
Initially, traditional fiber production relied on raw materials like cotton, silk, flax, and hemp, primarily sourced from craft villages Notable weaving communities, such as Van Phuc silk village, utilized manual looms, resulting in time-consuming and labor-intensive processes that yield fabrics with significant aesthetic and cultural value Traditional dyeing methods employed natural dyes derived from plants, roots, and insects, using techniques like mud dyeing and indigo dyeing However, after 1975, particularly in the 1990s, the establishment of industrial textile factories marked a shift, with the introduction of modern machinery from Japan, Korea, and China, enhancing productivity and quality This evolution also saw the rise of industrial fabric dyeing factories that adopted advanced dyeing technologies with chemical dyes, improving color fastness and resistance to fading.
Before 1975, garment production in Vietnam was primarily centered in traditional craft villages like Van Phuc and Dinh Yen, specializing in handmade traditional costumes such as ao dai and ao ba ba Although modern textile and apparel factories emerged during the French colonial period, their operations were limited in scale and focused mainly on producing fabric to meet the demands of the French in Indochina, utilizing technology and machinery imported from France.
Following the nationalization of textile and apparel establishments in 1975, production shifted to meet domestic demand The 1986 Doi Moi policy significantly transformed the industry by inviting foreign investment and enhancing international trade relations, leading to the emergence of numerous joint ventures with foreign partners These collaborations introduced advanced machinery and technology from Japan, Korea, and Taiwan into Vietnamese textile factories, resulting in improved productivity and product quality.
Since joining the World Trade Organization (WTO) in 2007, Vietnam has significantly expanded its garment export market through various free trade agreements (FTAs) with countries such as the EU, Japan, and South Korea, which have reduced tariffs and streamlined export processes This strategic move has led to a substantial increase in garment exports, primarily to major markets including the US, EU, Japan, and Korea, solidifying the textile industry as one of Vietnam's most vital export sectors.
Before 1986, Vietnam had a centralized and subsidized economy, with textile and apparel products primarily catering to domestic needs and military supplies The country's closed economic policies and trade restrictions severely limited the development of textile and apparel exports However, following the implementation of the Doi Moi policy, Vietnam opened its economy, attracting foreign investment and boosting exports As a result, during the international integration period, garment exports surged, with key markets including the US, EU, Japan, and Korea, establishing Vietnam as one of the world's largest garment exporters.
Before modern media, Vietnam's textile and apparel marketing relied on word of mouth, village fairs, and cultural events During the French colonial era, promotion was limited to serving French consumers in Indochina and small export markets The centralized economy period saw minimal marketing activities, as state-controlled production and distribution left little room for competition, with textiles and apparel sold through state-owned stores However, the Doi Moi Policy marked a turning point, prompting businesses to adopt fundamental marketing strategies such as newspaper and radio advertising, sales events, trade exhibitions, and brand development to compete in the international market.
2.1.2 Legal regulations and policies in the apparel sector
2.1.2.1 Affections of Government in textile and apparel sector of Vietnam
In 2022, the Government of Vietnam approved a comprehensive strategy for the development of the textile, apparel, and footwear industry, aiming for significant progress by 2030 with a vision extending to 2035 This strategy outlines specific responsibilities for various government ministries to enhance the overall growth of these key sectors.
The Ministry of Industry and Trade is responsible for annually allocating national industrial promotion funding to assist textile and apparel organizations and enterprises in vocational training and the adoption of advanced machinery in production This initiative aims to enhance knowledge and awareness of trade defense regulations among businesses and associations in the Textile and Apparel industry, enabling them to navigate legal frameworks effectively and pursue sustainable business strategies Additionally, the ministry will continue to provide support for vocational training and the implementation of advanced production technologies in the textile, apparel, and footwear sectors.
The Ministry of Planning and Investment should lead efforts to attract foreign investment in the Textile and Apparel industry by collaborating with various ministries, branches, and localities It is essential to identify suitable sectors and regions while developing targeted investment promotion programs that leverage opportunities from Free Trade Agreements (FTAs).
The Ministry of Finance was appointed to preside over the development of policies on financial mechanisms, taxes and capital sources to develop the Textile, Apparel and Footwear industry
The Ministry of Science and Technology leads the effort to develop and enhance the national standards system for textile products, ensuring alignment with international and regional standards while collaborating with relevant ministries and agencies to evaluate national technical standards.
The Ministry of Natural Resources and Environment must evaluate the environmental impact of the weaving, dyeing, and finishing stages to update criteria that align with current scientific and technological advancements This reassessment aims to establish a legal framework that enables localities to attract investment for the industry's development.
The Ministry of Labor, Invalids and Social Affairs is tasked with enhancing training models and fostering connections between domestic and international training institutions, as well as between educational establishments and businesses This initiative aims to elevate training quality and align it with the needs of industries, particularly in the Textile, Apparel, and Footwear sectors.
The current situation of Vietnam’s textile and apparel sector
Product research and design play a crucial role in the global value chain (GVC), offering high profit margins but requiring significant qualifications and capital investment To create effective designs, businesses must possess in-depth market knowledge, understand customer needs, and stay updated on current fashion trends In Vietnam, this process presents challenges and demands considerable time for improvement In contrast, countries with established textile and apparel industries, like the UK, USA, and France, prioritize design activities and collaborate with Vietnamese firms through contracts.
Vu Duc Giang, Chairman of VITAS, highlighted that design value constitutes merely 5% of Vietnam's total apparel exports, indicating a significant weakness in the country's textile and apparel sector This shortcoming stems from low professional qualifications and a lack of resources to understand customer preferences In contrast, nations with advanced textile and apparel industries have successfully leveraged design to enhance their market presence.
Despite significant investments and ambitions, countries like Korea, Singapore, and Shanghai struggle to establish a strong presence in the European market This raises the question of how competitive Vietnamese textile and apparel enterprises can be in the international arena, given the substantial investment needed for product research and design, which is time-consuming and requires skilled, creative personnel to align with consumer preferences Currently, the Vietnamese textile and apparel industry lacks independence and a distinct brand identity, primarily focusing on producing fashion goods for developed countries.
China is home to nearly 50 research institutes dedicated to fashion, significantly influencing the apparel industry's growth by analyzing market trends and forecasting design, product quality, and competitive pricing for various target markets In Vietnam, particularly among the youth, there is a notable preference for Chinese apparel, spanning from budget-friendly to high-end options, due to the appealing diversity in product design and competitive pricing.
In 2019, Viet Tien Garment Joint Stock Corporation inaugurated the Duong Long Research and Development Center, a 3000m² facility designed to meet global fashion standards The center aims to foster a creative environment that blends art and fashion, facilitating the transformation of innovative ideas into production-ready products It focuses on meeting the demands of fashion technology in production and business, particularly in ODM (Original Design Manufacturer) and OBM (Original Brand Manufacturer) sectors.
In 2020, Garment 10 Corporation JSC, a leading player in Vietnam's textile and apparel sector, launched a state-of-the-art fashion center featuring a 500-square-meter ready-to-wear area This innovative service model includes dedicated spaces for high-end fashion displays and ready-to-wear options, complemented by premium tailoring services Garment 10 aims to provide exceptional service and sophisticated, world-class fashion products to its customers.
Garment 10 and Viet Tien, as industry leaders, are setting a precedent that inspires other businesses to enhance their efforts Their significant advancements highlight the commitment of major enterprises to elevate Vietnam's role in the research and development phase of the global textile and apparel value chain.
Vietnam boasts a growing number of fashion brands created by local designers, including Canifa, M2, and Elise The country’s emerging generation of designers is increasingly establishing their own labels, producing stylish and contemporary apparel that resonates with the preferences of youth, particularly students and office workers, with brands like Moná, Secodee, and Coolmate leading the way.
High-end designer brands like Fancì, Lseoul, Bupbes, and Mamavirus are gaining recognition on international stages, showcased by A-list stars from Korea and the USUK This exposure has sparked a growing interest among young people worldwide in the design talent emerging from Vietnam However, foreign consumers primarily purchase these brands through online shopping and retail delivery, as their potential remains limited, preventing them from effectively exporting or integrating into the global value chain to enhance value at this stage.
The textile and apparel industry value chain begins with the production of essential raw materials, including cotton, fibers, and dyed textile products As a crucial supporting industry, the textile sector plays a vital role in the apparel industry by supplying necessary materials and enhancing profitability for apparel production.
The textile and apparel industry primarily relies on imported raw materials, including cotton, fiber, and yarn, with significant supplies sourced from countries like the US, China, and Taiwan In 2022, the Ministry of Industry and Trade reported that the import value for these materials reached $6.7 billion, reflecting a 6.5% increase from the previous year.
2021 Of which, imports from the Chinese market still account for the highest proportion, reaching 3.37 billion USD, an increase of 8% compared to the previous
At 43 years, the textile and apparel industry, along with footwear leather, accounts for 50.6% of the nation's total raw material imports To secure a consistent supply of raw materials, it is essential to develop domestic cotton and spinning production Currently, Vietnamese fiber products lack diversity and average quality, making them unsuitable for certain high-end products.
Table 2.1 Vietnam’s textile and apparel raw material import market in 2023
Source: Vietnam Textile & Apparel Association Producing and importing cotton
The General Statistics Office reports a dramatic decline in cotton cultivation, with the area decreasing from 500 hectares in 2016 to approximately 100 hectares in 2020, marking an 80% reduction This significant decrease has resulted in a shortage of inputs necessary for the production process.
The Government's master plan for agricultural production development aims to enhance cotton cultivation by 2020 and establish a vision for 2030, intending to reduce reliance on imported cotton raw materials By 2020, the target is to cultivate over 40,000 hectares of cotton, yielding 50,000 tons of cotton fiber The plan emphasizes the development of rain-fed cotton crops in regions such as the Central Highlands, Southeast, South Central Coast, and Northern midland and mountainous provinces, with a particular focus on implementing drip irrigation systems in the Central Highlands through well drilling.
The Central coastal provinces have 44 irrigation systems in Ninh Thuan and Binh Thuan, yet cotton output remains unimproved In 2021, the General Department of Customs reported a significant increase in cotton imports, reaching 3.23 billion USD, which is a 41.6% rise from 2020 Additionally, the import value of fiber and yarn also grew, totaling 2.55 billion USD, marking a 27.7% increase.
Evaluation of the Vietnam’s textile and apparel value chain
Vietnam's textile and apparel sector is a vital component of the economy, playing a crucial role in boosting exports and driving overall growth It has achieved significant milestones, solidifying its status as a major contributor to the nation's economic landscape.
Vietnam is one of the world’s leading textile and apparel exporting countries with rapid growth
Vietnam's textile and apparel industry has seen significant growth, achieving an export turnover of $44 billion in 2022, making it one of the country's largest export sectors It ranks among the top three textile and apparel exporters globally, with 36 products shipped to 104 markets The United States is the primary market, followed by the EU, Korea, China, and Japan There remains considerable potential for Vietnam to enhance international economic integration and broaden its export markets.
In 2023, the textile industry encountered significant challenges due to global and domestic economic conditions, including inflation in major markets like the United States and Europe, which led to reduced purchasing power and order volumes Additionally, rising interest rates and currency fluctuations further complicated the landscape Geopolitical tensions continued to fragment trade, adversely impacting Vietnam's exports of essential textile products.
Despite a challenging market environment, textile and apparel exports are experiencing growth in key markets such as Japan, Australia, Russia, and India Additionally, enterprises in the sector are expanding into new markets in Africa and the Middle East, helping to stabilize export turnover amid a significant decline in purchasing power.
Vietnam’s apparel products is increasingly diversifying and improving quality
Vietnam is increasingly becoming a hub for apparel production, offering a wide range of products from everyday wear to luxury fashion and high-tech items Vietnamese apparel companies are dedicated to enhancing product quality by refining production processes, sourcing superior materials, and elevating design standards.
Vietnam boasts a diverse range of designer fashion brands across low-end, mid-end, and high-end segments, offering products that meet the quality and price expectations of domestic consumers while ensuring high levels of customer satisfaction.
Enhancing product quality through diverse offerings is essential for Vietnam's textile and apparel industry to meet international consumer standards, which will facilitate the growth of OBM and ODM production methods in the future.
The young generation of Vietnamese designers are receiving attention from celebrities and the youth in foreign countries
In 2020, the Vietnamese brand Fancì Club caught the attention of a stylist from the globally renowned girl group Black Pink, leading to a collaboration for outfit selection in their new music video This partnership sparked a growing trend of Korean girl groups embracing designs from Vietnamese brands.
Korean stars often showcase their fashion choices by wearing outfits from various brands, such as (G)i-dle in Bupbes, Aespa in La Lune, IVE in Giana, and Twice in L’Seoul Additionally, many of these artists frequently don costumes designed by Vietnamese designers during their concerts and photo shoots, highlighting the growing influence of Vietnamese fashion in the K-pop industry.
Jennie, a member of the popular girl group Black Pink and ambassador for luxury brands like Chanel, Calvin Klein, and Gentle Monster, recently showcased a skirt from the Vietnamese brand L’Seoul Her post led to the product selling out within just 15 minutes and significantly increased traffic to the L’Seoul website This highlights the impact of celebrity endorsements on fashion sales and the growing recognition of Vietnamese designers in the global market.
Vietnamese brands have reached international aesthetic standards and have received recognition from highly influential people
Recently, consumers in Asian countries like Thailand and Singapore have embraced the trend of purchasing products from young Vietnamese designer brands on TikTok They have shared videos expressing their satisfaction with the products' quality, price, and trendy designs By capitalizing on this trend, Vietnam has the potential to expand its export of locally designed products to international markets.
Vietnam’s textile and apparel industry has not met green standards of FTAs and developed countries
Textile and apparel enterprises face significant challenges in the international market due to a decline in orders and stringent regulations from developed countries focused on sustainability and greening To survive and remain competitive in the global value chain (GVC), these companies must embrace green transformation as an essential strategy.
Leading global fashion brands are increasingly focusing on sustainable practices and urging their suppliers to adopt eco-friendly methods Vietnam has emerged as a key player in the fashion industry, garnering significant interest, yet it faces challenges in meeting the green production standards outlined in international agreements.
Over 80% of textile and apparel enterprises in Vietnam are small and medium-sized, resulting in a significant lack of capital to invest in green production and comply with complex regulations like LEED, supply chain identification, and traceability Additionally, the rapid growth of industrial parks across the country has heightened environmental impacts, including water and air pollution, waste, and greenhouse gas emissions, which threaten the sustainable development of these industrial areas.
(fibers, fabrics and garments) use a lot of water resources for washing, rinsing, pre- treatment, dyeing and post-treatment finishing
Vietnam’s textile and apparel industry still lacks the ability to achieve self- sufficiency in raw material supply
Vietnam's textile and apparel industry faces significant challenges due to its low self-sufficiency in raw materials, relying heavily on imports, with 32.5% of cotton sourced from the US and 59.28% of fabric and yarn from China as of 2022 This dependency puts Vietnam at risk of losing market share, especially as competing countries like India aim for self-sufficiency in raw materials and target an export growth of $80 billion by 2025 The availability of affordable and high-quality Indian cotton yarn poses a considerable threat to Vietnam's textile sector, increasing competitive pressure in the industry.