Vietnam’s textile industry has increased significantly since normalizing relationships with the United States in the 1990’s. Vietnam was granted most favoured nation status (MFN) in December 2001, which led to a dramatic reduction in import tariffs in the US market. Vietnam’s induction to the World Trade Organization (WTO) in 2007 and the Vietnamese government’s strong support of the textile and garment sector, have provided strong incentives to attract foreign investors. The textile industry is now the second biggest exporter in Vietnam and is expected to become the biggest in 2009. However the financial crisis has had a severe affect on Vietnam’s jacquard pattern fabric wholesale industry, which has suffered from a slump in demand from key export markets in the US, Europe and Japan.
Labour cost advantage
In the textile industry, companies are increasingly looking for lower cost countries that can provide outsourcing opportunities. The rising cost of land and labour are diminishing China’s labour cost advantage and Vietnam is increasingly seen as a low cost sourcing alternative to China. Estimates are that wage levels in Vietnam are about one third of those in China’s coastal region. Companies that are chasing lower labour costs are increasingly moving production to Vietnam. In a 2008 Booz Allen Hamilton survey 88 percent of companies originally chose China for its lower labour costs. Of the companies surveyed, 55 percent believe China is losing its competitive edge to countries such as Vietnam. The survey also indicated that 63 percent named Vietnam as their top low cost sourcing alternative to China. However, costs may be rising. The Navigos Group, a leading recruitment solutions provider in Vietnam, announced early in the year that there had been a 16.47 percent increase in Vietnamese workers’ average gross salaries between April 2008 and March 2009.
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