Nguyen Van Tuan, deputy secretary and head of the association’s HCMC branch, told the media on the sidelines of a conference in HCMC on Wednesday that these foreign investors were hoping to capitalize on the Trans-Pacific Partnership (TPP) agreement. The investment potential of such enterprises is high, and they are seeking sites to make investments, he added.

The TPP agreement is still under negotiation with the participation of nine countries, including Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam and the U.S. The U.S. is a large market which accounts for 43% of Vietnam’s export turnover of textile and apparel.

In trade agreements, the U.S. normally imposes the yarn-forward rule of origin on apparel products. Under the rule, products can enjoy tax incentives if yarn production and other production stages are performed in countries joining the agreements.

Meanwhile, Vietnam has to import a large volume of cotton and fiber to spin yarn. However, Vietnam exports 65% of the total yarn production volume, or around 334,000 tons, while the rest of 180,000 tons is used to produce 1.2 billion meters of cloth.

Besides, Vietnam can only produce and dye around 0.8 billion meters of cloth per year, and thus the country still has to import 5.2 billion meters of cloth to meet the demand of six billion meters of cloth per year, according to VITAS.

If these weaknesses remain, local enterprises will find it hard to make full use of tax incentives from TTP once the yarn-forward rule of origin is imposed. Therefore, this will be the chance for foreign enterprises to join this sector.

Investing in the textile and dyeing sector is quite costly. For example, an investment of US$50-70 million is needed to produce 100 million meters of cloth.

According to VITAS, there have been around 3,700 firms operating in this sector, with garment, textile and dyeing firms accounting for 70%, 17% and 4% respectively.