Vietnam has emerged as one of the leading textiles exporting countries worldwide in recent years. Garment and textile products were among its major commodities based on export turnover in 2020 . As Vietnam reduced its reliance on agriculture, the manufacturing sector has become an important pillar in its modern economy. Next to apparel export demands, the domestic consumer spending on clothing and footwear has been growing fast, thanks to the improving living standards of Vietnamese.

Apparel manufacturing sector in Vietnam

One of the main competitive advantages of the Vietnamese manufacturing industry lies in its low labor cost , compared to its competitors such as China and Mexico. As a result, the industry has become one of the leading sectors for foreign direct investment in Vietnam . Consequently, the export of apparel products relies on the production of foreign-owned companies and local-private-owned subcontractors. Meanwhile, local production and imports address the growing domestic demand for apparel products.

Vietnam is highly dependent on imports of raw materials such as cotton, fiber, yarn, textiles, and garments for clothing production as domestic supply has not been sufficient in recent years. For instance, due to decreasing domestic production of cotton , the country has been a net importer of this material, with the United States being its largest supplier in the past years. Heavy reliance on imports poses significant risks to the apparel manufacturing industry. Along with the pressure to meet domestic demand, the government has thus been prioritizing the development of the domestic raw material supply chain for the textile, garment, leather, and footwear industries.

COVID-19 pandemic’s impact on the apparel industry

The apparel manufacturing sector of Vietnam has been among the hardest hit by the COVID-19 pandemic. The suspension of production in China created a raw material shortage for many Vietnamese producers in 2020. Moreover, several main import markets of textiles and garments went through a crash in demand, leading to order cancellations. This resulted in revenue loss among major textile firms in Vietnam . Textile and garment exports from Vietnam recorded the first year-on-year decrease in 25 years in 2020. However, the value of exports within this sector recovered quickly in the following year. In addition, there are promising signs for this industry. Vietnam signed two valuable trade agreements in 2020: the European Union Vietnam Free Trade Agreement (EVFTA) and the Regional Comprehensive Economic Partnership (RCEP), which should open more opportunities for this sector in the coming years. 


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