Textile industry enterprises face difficulties to benefit from EVFTA

Sapo: From August 2020, the EVFTA Agreement took effect in Vietnam. However, global textile and garment enterprises still have difficulty when they have not really enjoyed the preferential treatment of this agreement.

From August 2020, the EVFTA Agreement takes effect in Vietnam. However, textile and garment enterprises still have difficulty when they have not really enjoyed the incentives of this agreement.

Quy định của EVFTA ảnh hưởng đến công nghiệp dệt may

EVFTA regulations affect to textile industry

The process of tax reduction gradually to 0% in the next 5-7 years for industries exported from Vietnam to the EU, although effective from August 1, 2020. But it is not until August 2021 that textile enterprises start enjoying tax incentives from EVFTA.

Pic 1: Vietnam's garment export industry may face difficulties due to EVFTA regulations

The reason affects the textile industry

  • Lack of raw materials: Now, the main source of supplies for Vietnam's garment and textile is still from China and Korea.
  • For textile products made from imported materials, we are still taxed as usual.
  • Import ratio of about 6-70% of raw materials production materials.
  • Within the first 2 years from the effective date of EVFTA, businesses will be subject to a reduced tax under EVFTA or GSP. However, for the third year onwards, still cannot meet EVFTA's requirements of origin of goods; then the tax payable is from 12% - according to the MFN.
  • Thus, if Vietnam is not fast in the process of changing raw material supplies, efforts in the textile and garment industry may be in vain.

In addition, the tax exemption compared to the cost of raw materials for Chinese firms is not too attractive. The supply is large, available, the delivery time is fast, the cost is 10-40% cheaper than the cost of domestic raw materials.

Therefore, many businesses accept tax rates such as higher than EVFTA and continue to import raw materials from China.

Pic 2: Vietnam's textile industry depends on raw materials from China is a concern

See more: Expenses for renting ready-built factories for light industry enterprises.

Measures to promote the textile industry

The strength of self-sufficient raw materials will bring more benefits to businesses. Only using raw materials from China will have many difficulties when partners arise when supply supply problems.

Covid in 2021, many foreign enterprises producing in China had to look for suppliers in other countries. Avoid passive supply during production.

Therefore, to achieve optimal tariff performance, be more proactive in sourcing goods. Enterprises should focus on diversifying domestic sources.

Pic 3: Ensuring the development process, requires the coordination of both business and government.

Advantages of Loc An Binh Son Industrial Park in the development of the textile industry

Loc An Binh Son Industrial Park was established in 2010, now, the coverage of the industrial park is up to 70%, and diversified industries. The main focus areas are:

  • Light industry
  • Garment
  • Food Processing
  • Supporting industries
  • Assembling

The strategic location of Loc An Binh Son Industrial Park is adjacent to Long Thanh International Airport, Dong Nai. Since its establishment, the management board of Loc An Binh Son Industrial Park has determined to make the industrial park a key strategic development location. Main focus on supporting industries, creating high value, and supporting the construction of Long Thanh airport.

Pic 4: Binh Son Loc An IP is an ideal location for industrial textile enterprises.

See more: Strategic location of Loc An Binh Son Industrial Park

LABS Ip is suitable for industrial sewing factories

Since the Covid19 epidemic up to now, large enterprises have been eager to find other production sites. Because "the world's factory" - China - has problems. Causing the entire supply chain of goods on the market to go wrong. If businesses continue to embrace the psychology of using imported goods, and do not diversify sources of goods, this will easily make Vietnamese enterprises fall into a secret.

Loc An Binh Son Industrial Park with a strategic location, enjoys preferential treatment from the state in tax exemption and reduction when placing the factory here.

See more: Factories for rent in Loc An Binh Son Industrial Park for textile enterprises.


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