Developing supporting industries for the textile and garment industry in Nghe An.
Textiles and garments are one of the major export sectors of Nghe An province. The province currently has over 50 operating companies and factories, creating approximately 40,000 jobs and exporting products to around 20 countries and territories. The supporting industries are a matter of significant concern.
Mainly imported raw materials
Nationwide, the textile and garment industry is heavily dependent on imported raw materials: 99% of cotton yarn (approximately $3 billion) is imported. Similarly, 70% of synthetic yarn ($2 billion) and 80% of fabric ($13 billion) are imported.
The An Nam Matsuoka garment factory, with 18 sewing lines, each employing nearly 130 workers (totaling over 2,500 workers), is currently the largest garment factory in the VSIP Industrial Park, specializing in producing garments for export to Japan and other countries worldwide. To meet export requirements, the factory's raw materials and accessories are all imported.
According to the company's General Director, Mr. Teramur Akito, the factory's accessories are imported from overseas, while the sewing thread and other accessories are imported from a company in Vietnam, which is also Japanese. The accessories are needed in large quantities and must meet European standards as required by customers.
The good news is that at this factory, the cardboard and plastic packaging were purchased from Thien Phu Co., Ltd. and another enterprise in Vinh, which partly shows that Vietnamese accessory products are also being considered, even if they are just by-products.
Haivina Kim Lien Company (a 100% South Korean-owned enterprise) in Kim Lien commune, Nam Dan district, specializes in processing and manufacturing export goods such as gloves and clothing for European countries. Currently, the company provides employment for over 3,000 workers, mainly in Hung Nguyen, Nam Dan, and Do Luong districts.
Ms. Chu Thi Ngoc, Assistant General Director of the company, said: "As a business producing goods for Europe, fabrics and accessories must meet standards, and we import the main raw materials from abroad. Other accessories such as cardboard boxes, lead, zippers, leather, labels, etc., the company also has to purchase from other businesses in the North."
Minh Anh Garment Corporation of Nghe An currently has 4 factories in Nghe An province, located in Vinh City, Do Luong, Tan Ky, Con Cuong, etc., providing jobs for more than 7,000 workers annually. Mr. Nguyen Dinh Sinh, the General Director of the company, stated that the company mainly imports garment accessories from South Korea and China. Other accessories such as fabric, thread, embroidery, lace, etc., are produced domestically.
Textile and garment businesses in Nghe An province in particular, and Vietnam in general, are positioned low in the global supply chain, with approximately 65% of textile and garment businesses exporting garments through outsourcing. Net profit margins are only 1-3%. The advantage of lower wages is a key factor attracting businesses to invest in Nghe An.
Approximately 25% of exports are conducted using the OEM/FOB method – customers provide the designs, and the factory purchases the components, manufactures the garments, and ships them to the customer, with a profit margin of 3-5%. Only 10% of exports are conducted using the ODM method – original design by the manufacturer, also known as private labeling, a form of contract manufacturing, with a profit margin of 5-7%.
Like the rest of the country, Nghe An province imports up to 80% of its fabric for garment exports; approximately 70% of orders are for contract manufacturing. Most raw materials, such as fabric and accessories like buttons and zippers, must be imported from China and South Korea; domestic supply only meets the demand for some needles and sewing threads.
Currently, Nghe An only has one yarn factory belonging to Hoang Thi Loan Textile and Garment Joint Stock Company, with a production capacity of 20,000 tons of yarn per year; and one embroidery facility (Lac Son Industrial Cluster, Do Luong district) with a workforce of 150-200 people embroidering accessories for garment factories and some other handicraft weaving facilities.
Overall, the textile and garment industry has a low level of self-sufficiency in raw materials due to the underdeveloped supporting industries; it mainly focuses on garment processing for export and is trapped in a vicious cycle: importing cotton to spin yarn, then selling the yarn, and then importing fabric again.
According to the Nghe An Department of Industry and Trade, the provincial budget allocates 2-2.5 billion VND annually to support supporting industrial enterprises. The total funding from the local budget for projects implemented to date has reached 6.34 billion VND. However, access to preferential policies from the central government for supporting industries remains difficult. The local budget allocated annually for the development of supporting industries is still low and challenging to implement..
Great potential for supporting industries.
Nghe An has potential in raw materials for cellulose fiber production, such as bamboo and rattan, due to having the largest area in the country, of which forest land accounts for 53.3%; and potential in producing artificial fiber products from petrochemical raw materials from the Nghi Son oil refinery complex in Thanh Hoa.
The challenge is to be able to produce raw materials and components for the industry domestically, while simultaneously protecting the environment and forming integrated textile-garment-material supply chains. Increasing the localization rate is essential to ensure businesses have control over production, reduce costs, and enhance competitiveness.
Currently, the biggest challenge for businesses is how to recruit enough workers, while they are seeking to import auxiliary products, but the cost remains high.
In the immediate future, businesses should closely monitor domestic and international developments, build growth scenarios and necessary contingency plans to proactively and promptly respond to market fluctuations, and seek new markets. They should effectively utilize tariff preferences from FTAs and diversify markets, partners, customers, and products with high added value…
In the long term, it is necessary to study and apply the Textile and Garment and Footwear Industry Development Strategy, from now until 2030, gradually shifting from rapid development to sustainable development based on a circular economy model; perfecting domestic value chains and participating in high-value positions in global supply chains. Textile and garment enterprises should participate more deeply in global supply chains and value chains based on increased competitiveness.
Nghe An is currently prioritizing the development of large-scale textile and garment projects, focusing on high value-added stages, aiming to create key export products and participate in the global supply chain. The goal is to develop garment products that meet domestic consumer demand and are competitive with imported brands, effectively implementing the "Vietnamese people prioritize using Vietnamese goods" campaign.
Recently, Nghe An province approved the investment plan for the Mega Textile - Vietnam project, a large-scale project in the textile and garment industry to be implemented in Dien Tho commune, Dien Chau district, within the Tho Loc Industrial Park Phase 1 (Southeast Economic Zone).
The leaders of the Nghe An Department of Industry and Trade further stated: Nghe An also aims for an average annual export growth rate of 17-18% for the textile, garment, and footwear industries by the end of 2025, and 16-17% by the period 2026-2030. The goal is to achieve an export value of approximately US$755 million by the end of 2025 and approximately US$1,600 million by 2030. The localization rate will gradually increase, aiming for over 45% localization in the textile, garment, and footwear industries by 2030.
The province will also focus on attracting investment to develop supporting industries for the production of products such as: fibers and yarns for the textile industry, especially synthetic fibers; functional fibers, new environmentally friendly raw materials, gradually increasing the localization rate and reducing imported input materials. It will also attract investment in plastic products to support the textile and garment industry, such as plastic pipes and chemical products supporting the textile industry.
Nghe An also prioritizes the development of projects producing knitted and woven fabrics, which can connect the production stages of yarn, garment manufacturing, and high-quality fabrics for export, meeting the needs of domestic garment factories.
