Vietnam’s garment industry moves beyond low-cost outsourcing

Vietnam’s textile and garment industry is generating high added value, leaving behind the era of low-cost outsourcing, said Vu Duc Giang, chairman of the Vietnam Textile and Apparel Association (VITAS).

The industry’s total exports reached $34.75 billion in the first nine months of this year, up 7.7% from a year earlier, signaling a clear recovery after a period of slowdown, VITAS statistics show.

“Vietnam’s stable political environment is a major advantage, and the country now ranks as the world’s third-largest textile and garment exporter,” Giang told a Thursday conference on the industry and value chain held by Asia Commercial Bank (ACB) in Ho Chi Minh City.

Vietnam has signed and implemented 16 new-generation free trade agreements, with the government aiming to bring the total to 22 in 2027, the VITAS chairman said, noting the expanded network offers a major opportunity to boost exports.

Vietnamese textile and garment products are now available in around 138 markets worldwide, including new destinations such as the Middle East and Africa, with designs tailored to local cultural preferences, he added.

Once overlooked by local manufacturers, the Middle Eastern market, particularly Muslim-majority countries, brought in $1 billion in revenue in 2024 and $700 million in the first seven months of 2025, according to Giang.

Moreover, Vietnam’s labor productivity is now considered higher than that of many regional peers. Although wages in Indonesia and Myanmar are 40% to 45% lower than in Vietnam, their productivity lags by about 40%. Vietnamese workers are regarded as more skilled and efficient, he added.

Vietnam’s textile and garment industry is also rapidly embracing technology, automation, and green production, ranking second only to China in the region in terms of manufacturing modernization, Giang told the conference.

From a banking perspective, Ngo Tan Long, ACB deputy CEO, said lenders were concerned earlier this year about the potential impact of new U.S. tariff policies on textile and garment businesses.

However, this is no longer a concern for lenders, he said, explaining that the rate imposed on Vietnam (20%) is now comparable to that of countries such as Bangladesh (20%) and Indonesia (19%), and even lower than those applied to India (25%).

“ACB plans to expand its financing portfolio for the textile and garment sector over the next two to three years,” Long said. “For the logistics industry, the bank offers working capital loans of up to VND8 billion ($303,721) with terms of up to 10 years.”

For coordination between banks and businesses, Giang said lenders and enterprises should be seen as playing on the same field and sharing challenges. Payment terms have shifted toward telegraphic transfers (T/T), with many buyers now requesting deferred payments of three to six months, creating financial strain for producers.

Giang suggested banks adopt more flexible lending and credit assessment practices instead of rigidly adhering to existing principles.

He pointed out that the textile and garment industry still faces multiple challenges, including reliance on foreign supply chains and raw materials, rising costs driven by higher minimum wages, varying standards set by international organizations, along with market and regulatory risks.

Giang also cited statistics showing that imports of raw materials and accessories remain high at $16 billion, including $11 billion worth of fabric, underscoring Vietnam’s continued dependence on foreign inputs.

Regarding logistics, Dang Minh Phuong, chairwoman of the Ho Chi Minh City Logistics Association, said Vietnam’s textile and garment companies are facing tremendous opportunities, but their ability to seize them depends on how well they understand supply chains and logistics. Logistics costs in Vietnam remain high, she added.

“High costs are eroding businesses’ competitiveness, even as we are seeing a strong flow of orders. This directly affects product pricing and may force companies to accept lower profits in the short term,” she said.