Why can Vietnam's textile and garment industry develop rapidly?
Why can Vietnam's textile and garment industry develop rapidly?
Textile and clothing industry is the pillar industry and important livelihood industry in Vietnam. According to the data released by Vietnam textile and Garment Association, as of 2018, there are nearly 7000 textile and garment enterprises in Vietnam, with 2.8 million industrial workers, accounting for about 25% of the total labor force in Vietnam's industrial sector, which plays an important role in maintaining local social stability. The textile and garment industry is also the largest export sector in Vietnam, which is an important source of Vietnam's export earnings and foreign trade surplus. In 2018, Vietnam's total textile and garment exports reached US $36.2 billion, jumping from the fourth place in the world's textile and garment exports to the third place, second only to China and India.
The main advantages of Vietnam's textile and clothing industry are reflected in the following four aspects.
Abundant labor resources
At present, Vietnam is in the demographic dividend period, with a total population of 93 million, mainly distributed in the Red River Delta with Hanoi as the core and the southeast region with Ho Chi Minh City as the center, with great development potential. Among them, the working age population is about 50 million, the median age of the population is only 31 years old, and the population under 35 years old accounts for 55.6% of the total population. The labor participation rate of Vietnam's school-age population has remained stable, reaching over 78% in recent years. The situation that the female labor force is more than the male labor force meets the demand that textile enterprises prefer female employees.
Good business environment
Vietnam's political environment is stable, and the Communist Party of Vietnam is its only legal party. In 2016, Vietnam's top leadership achieved a smooth transition of power, with the term of office approaching 2021, and various domestic reform and opening-up policies continued. The ability of the Vietnamese government to maintain power and control the political situation makes it less likely that political turmoil and terrorism will break out in Vietnam. In the business environment report 2019 released by the world bank, Vietnam's business environment index ranks 69th out of 190 economies in the world.
Preferential tax policies
In order to attract foreign investment, the Vietnamese government has made great concessions in the aspects of enterprise income tax and land rent. According to Vietnamese tax laws and regulations, enterprises investing in Vietnam can enjoy 10% preferential tax rate in 15 years and 17% preferential tax rate in 10 years according to different conditions. At the same time, for Vietnam's open parks, some enterprises meeting the conditions can enjoy the tax policies of "four exemptions and nine reductions" and "two exemptions and four reductions", which has played a huge role in promoting foreign investment in Vietnam's textile and clothing industry.
Tariff advantage
At present, Vietnam has joined a number of free trade agreements, and its tariff advantages provide an opportunity for Vietnam to further integrate into the global value chain and production network. According to the data of the International Cooperation Department of the Ministry of finance of Vietnam, as of December 22, 2019, there are 20 free trade agreements that Vietnam has participated in or is negotiating. Among them, there are 12 free trade agreements that have come into force and are being implemented, which makes Vietnam's export products have certain preferential tariff. Meanwhile, the Vietnamese government is actively promoting the negotiation of other agreements, such as RCEP (ASEAN + 6), Vietnam Norway, Vietnam Switzerland and Vietnam Ireland. If negotiations go smoothly, Vietnam's advantage in tariffs will become more obvious.