The transformation of Viet Nam's textile industry

Viet Nam's textile and garment exports remained stable during the first three months of this year.

However, to achieve the export target of 49 billion USD for 2026 amidst a slow global economic recovery and strong impacts from geopolitical fluctuations, Viet Nam's textile and garment industry is facing new challenges.

Looking back at the export picture in the first three months of the year, the textile and garment industry can be seen to have remained stable despite headwinds from the international market. In March alone, the industry's export turnover reached US$3.82 billion, a 4.4% increase compared to the same period last year. For the entire first quarter, total turnover reached US$10.54 billion, a 2.3% increase; of which, garments contributed US$8.84 billion, accounting for the largest share, but the highlight was the fiber segment with US$1.7 billion and outstanding growth. This demonstrates that the strategy of investing in the upstream part of the supply chain is beginning to yield results, helping Viet Namese businesses gradually reduce their excessive dependence on imported raw materials. The US continues to maintain its position as the main export market for the textile and garment industry.

However, to achieve the export target of 49 billion USD, the textile and garment industry is facing many difficulties that require necessary systemic changes instead of following the traditional outsourcing path. According to Cao Huu Hieu, General Director of Viet Nam Textile and Garment Group (VINATEX), most textile and garment businesses are forced to proactively restructure their production operations, improve adaptability, and optimize costs to maintain efficiency and competitiveness; in which, investing in technology, promoting digital transformation, and developing high value-added products will be decisive factors.

The breakthrough in the fiber segment in the first quarter is evidence of increasing self-sufficiency in raw materials, helping to optimize logistics costs and meet stringent rules of origin to maximize tariff advantages from free trade agreements such as the Comprehensive and Progressive Trans- Pacific Partnership (CPTPP) and the Viet Nam-EU Free Trade Agreement (EVFTA).

Alongside the raw material challenge is the issue of sustainable development standards. Mr. Than Duc Viet, General Director of May 10 Corporation, shared: Customers in the US and Europe are no longer just interested in low prices or exquisite stitching. They are demanding a complete "green" capability profile.

May 10 has had to revolutionize its production system, from dismantling outdated coal-fired boilers and replacing them with electric and biomass boilers, to installing a full solar power system on the rooftops of its factories. ESG (Environmental, Social, and Governance) certifications are now considered a mandatory "passport." Failure to meet circular economy and carbon emission reduction requirements will result in Viet Namese businesses being excluded from the supply chains of global brands, regardless of their production scale.

From a different perspective, Viet Tien Garment Corporation has chosen to innovate through technology and design. In a context where labor costs in Viet Nam are no longer a competitive advantage compared to countries like Bangladesh, India, or Cambodia, Viet Tien has accelerated its shift from a contract manufacturing (CMT) model to an in-house design and pattern development (ODM) model.

By investing in state-of-the-art research and development (R&D) centers and 3D design software, Viet Tien can quickly respond to small, individual orders that demand high fashion standards. The comprehensive digitalization of its management processes not only optimizes labor productivity but also helps the company minimize errors, save materials, and increase profit margins. These are the systemic solutions the textile and garment industry needs to surpass the average level of countries that are purely outsourcing manufacturers.

Looking at the industry as a whole, in order for the textile and garment industry to maintain its position as one of the top 3 leading textile and garment exporting countries in the world, and to achieve the target of reaching 49 billion USD in export value by 2026, Mr. Truong Van Cam, Vice Chairman and General Secretary of the Viet Nam Textile and Garment Association (VITAS), believes that the bottlenecks in dyeing and finishing must be addressed more decisively.

The government and local authorities need to create conditions for the formation of concentrated textile and garment industrial clusters with wastewater treatment systems that meet international standards to attract large investors in the fabric and dyeing and finishing segments. This is key to realizing the "from yarn onward" rule of origin, helping Viet Namese garments fully benefit from free trade agreements.

The "Greening the Textile and Garment Industry" program also needs support from specific financial mechanisms, such as green credit packages with preferential interest rates to enable businesses to upgrade to green technologies. Human resources for the textile and garment industry in the new era also need to be redefined. The industry needs not only skilled garment workers, but also engineers to operate automated systems, fashion designers knowledgeable about global trends, and experts in digital supply chain management. Training and attracting talent for high value-added stages is key to Viet Nam's textile and garment industry escaping the shadow of being a low-cost "world factory."

Furthermore, the linkages between domestic businesses need to be strengthened through the bridging role of associations and the Viet Nam Textile and Garment Corporation. Healthy competition combined with mutual support in the domestic supply chain will create synergy, helping the industry withstand external shocks.

Source: Vietnam.vn