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Collapse of TPP Deal Fails to Knock Vietnam Textile Sector Off Track

Many at this year's SaigonTex show – Vietnam's premier event for the textile industries – welcomed the failure of the TPP initiative, confident that the country's ascent to the top of the exported-apparel sector would continue regardless.

Photo: Limitless possibilities: Vietnam’s ever-expanding textiles and apparel sector.
Limitless possibilities: Vietnam's ever-expanding textiles and apparel sector.
Photo: Limitless possibilities: Vietnam’s ever-expanding textiles and apparel sector.
Limitless possibilities: Vietnam's ever-expanding textiles and apparel sector.

SaigonTex now bills itself as Vietnam's leading textile show, with the 2018 event featuring about 1,000 exhibitors, a slight decrease on last year. While many at the show commented that it was noticeably quieter than its predecessor, there remained an underlying confidence that the sector was continuing to grow.

Among those attending the show was Christoph Peters, General Director of German-based machinery manufacturing firm Illies Engineering. The company has a well-established textiles division, which specialises in high-tech fabric finishing and fibre / yarn production systems.

Acknowledging that the show wasn't as busy as last year, he said: "In terms of visitor numbers, it feels a bit quieter than 2017, but business is still good. There was a lot of over-optimistic hype about the market at last year's show, largely based on the anticipated TPP [Trans-Pacific Partnership] trade deal. That has now obviously dissipated.

"This year, people seem more focused and more ready to do deals, rather than just waiting to engage in idle speculation. I don't expect to see any deceleration in the rate of growth here over the next five years and it could be sustained for far longer."

Rising Demand

Peters' optimism appears well-founded. In 2016, according to a report by Dhaka-based industry magazine, TextileToday, apparel exports accounted for 16% of Vietnam's total outbound trade. This made the country the world's third-largest exporter of garments, with clothing accounting for 70% of the output of the overall textile sector.

As well as a booming export trade, the prospects in Vietnam's domestic market also look healthy. With a population of 90 million – and a disproportionately large younger generation – the recent increases in disposable-income levels have resulted in retail growth of about 20% per annum. The country's apparel and textiles sector employs more than 2.5 million people in about 6,000 companies, with the industry forecast to grow by up to 14% a year, taking it to a total value of US$50 billion by 2020.

Photo: Automated apparel apparatus.
Automated apparel apparatus.
Photo: Automated apparel apparatus.
Automated apparel apparatus.
Photo: Illies Engineering: Sustained growth.
Illies Engineering: Sustained growth.
Photo: Illies Engineering: Sustained growth.
Illies Engineering: Sustained growth.

For many exhibitors, Vietnam is now a major-league player in the Asian textiles market. Clearly a subscriber to this view was Roy Chandra, an Account Manager with Hong Kong-based Artrend, a manufacturer of specialist printing machines for garment factories. Estimating the worth of the country to his business, he said: "Vietnam makes up between 30-40% of our Asian market, with business particularly good for at the moment. We've already made several sales at this show, for instance.

"We are finding that the big players in the garment industry are increasingly opting for Vietnam. In many respects, Vietnam is now where China was 10 years ago, although most of the growth is coming from private-sector initiatives. While the Vietnamese government is not being particularly proactive in supporting the textile industry, critically, it is not getting in the way of private enterprise."

Foreign Investment

To say that foreign companies are now investing heavily in Vietnam would be something of an understatement. The first 11 months of 2017 saw foreign direct investment (FDI) in the country's manufacturing sector soar by 11.9%, with the lion's share going to the apparel / textiles sector.

Lured by the country's surging level of apparel exports, Germany's Malho – a provider of a wide range of textile quality-control solutions – was making its Vietnamese debut at this year's event. Commenting on the response he has received to date, Stephan Kehry, the company's Area Sales Manager, said: "This show has been really good for building relationships and meeting new clients and for getting a feel for what is happening in Vietnam. Although we are finding that there is considerable demand in the Vietnamese market, 60% of that interest is actually from foreign-owned companies."

In terms of FDI sources, much of the investment has actually come from within the Asian bloc, with Japan and South Korea taking point. One key investor is Union Industry, a Hyogo prefecture-based market leader in the socks, stockings and pantyhose sector, as well as a manufacturer of clothing production equipment. Bullish about the opportunities now available locally, Giovanni Lamberti, the company's International Sales Co-ordinator, said: "Vietnam is emerging as a leading producer of socks and we see the potential for a $50 billion market here – one made up of developing micro-niches, as well as wholesale garment production.

"In recognition of the market's importance, we are displaying our new ground-breaking shoe-making machine at this show for the first time. The machine can create the fabric of a shoe, mould it into shape and have it ready to simply stick on the sole all within eight minutes. It is difficult to measure exactly how much time this will save, but it does streamline the overall manufacturing process."

Another Asian incomer doing well in the Vietnam market was Phenitex, a Bangkok-headquartered distributor of Japanese and Taiwanese knitting machines. Noting the ascendance of the local textiles industry, Managing Director Tangsiripornkul Kitti said: "Over the past seven years, I have seen a steady growth in demand for textile machines here. In that time, the Vietnamese market has grown from being a bit player to taking a leading role in the region.

"In terms of this particular show, although visitor numbers appear to be a bit down on last year, the quality of attendees is very good. It has already provided us with a number of potential leads."

It wasn't just foreign players enthused by the buoyant attitude at the event, however, with many local companies seemingly equally positive. Far from immune from this upbeat sentiment was CSP, a manufacturer of garment-cutting machines operating out of both Ho Chi Minh City and Hanoi. Clearly satisfied with its maiden appearance at the event, Software Support Representative Tran Thi Tuyet Dung said: "The show has been great in terms of meeting contacts and providing leads. We'll definitely be back next year."

Collapse of the TPP

Although a number of exhibitors felt that the collapse of the TPP deal may have dented attendance at the show, they were also largely convinced it had done little to stop Vietnam emerging as one of the world's leading garment exporters. In fact, some actually welcomed the failure of the TPP, seeing it as likely to thin out the more marginal players in the sector, while leaving it clear for the more serious players to secure market share and consolidate.

Adamant that the US withdrawal from the TPP will not damage Vietnam's prospects in the long-term, Peters said: "The collapse of the TPP has reduced the number of hangers-on in the sector. If you're looking to get into the market now, you're going to find that that boat has well and truly sailed."

Photo: SaigonTex 2018: Quieter than last year, but still an effective forum for deal-making.
SaigonTex 2018: Quieter than last year, but still an effective forum for deal-making.
Photo: SaigonTex 2018: Quieter than last year, but still an effective forum for deal-making.
SaigonTex 2018: Quieter than last year, but still an effective forum for deal-making.

SaigonTex 2018 took place from 11-14 April at the Saigon Exhibition and Convention Center in Ho Chi Minh City.

Geoff de Freitas, Special Correspondent, Ho Chi Minh City

Content provided by Picture: HKTDC Research
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