Vietnam’s Garment and Textile Industry: A Pillar of Economic Growth

Vietnam’s garment and textile industry has emerged as a cornerstone of the nation’s rapid economic development. In the face of global challenges, this sector has shown remarkable resilience and continues to offer a wide array of opportunities for foreign firms.

Key Economic Indicators

The garment and textile industry is a significant driver of Vietnam’s economic growth, with a total export value reaching US$44 billion in 2024, marking an 11% year-on-year increase. The Vietnam Textile and Apparel Association (VITAS) reported that in the first five months of 2025, exports amounted to US$17.58 billion, demonstrating a 9% growth compared to the previous year. Additionally, with total imports of US$10.63 billion, the industry achieved a trade surplus of US$6.95 billion during this period.

Factors Driving Growth

The robust growth can largely be attributed to several factors. While Vietnam traditionally benefited from low labor costs, these advantages are gradually diminishing. Nevertheless, the nation maintains a competitive edge, largely due to its extensive network of free trade agreements (FTAs). These agreements help minimize tariffs, further facilitating export.

Despite facing challenges such as sluggish global demand recovery and geopolitical tensions, Vietnamese businesses have successfully adapted by improving operations and exploring niche markets for new growth avenues. In response to changing U.S. tariff policies, many exporters are diversifying their markets to mitigate potential risks.

Industry Structure

Vietnam’s garment and textile industry can be segmented into three main subsectors: upstream (fiber production), midstream (fabric production and dyeing), and downstream (garment manufacturing). According to VITAS, approximately 70% of over 3,800 textile factories are focused on garment production, while yarn production constitutes just 6% of these factories.

Material Sourcing Challenges

A key challenge facing the industry is its reliance on imported raw materials. Pham Van Viet, Vice Chairman of the Ho Chi Minh City Association of Garment, Textiles, Embroidery, and Knitting (AGTEK), noted that domestic supply satisfies only about 40% of demand. For instance, Vietnam consumes around 400,000 tons of cotton annually, but domestic sources provide less than 1% of this need.

Manufacturing Dynamics

The downstream garment manufacturing sector primarily operates on a cut-make-trim (CMT) model, which accounts for about 70% of the industry’s output. In contrast, more advanced models, such as original equipment manufacturing (OEM) and original design manufacturing (ODM), account for around 30%. With export destinations including the U.S., Europe, Japan, and South Korea, the industry’s future remains tied to its ability to adapt and innovate.

Export Markets Overview

In 2024, the top ten export markets for Vietnam’s garments and textiles have been highlighted below:

Sustainable Transition

The industry now faces the pressing issue of developing local sources for raw materials. With only 45-50% of value added domestically, the potential for supply chain disruptions looms large. This situation reflects an urgent need to develop supportive sectors within the industry, presenting promising opportunities for investors to contribute to strengthening local supply chains.

Green Practices

Responding to international demands, many Vietnamese manufacturers are adopting sustainable practices and green technologies. Compliance with environmental and ethical standards is essential for gaining access to European markets, known for their stringent regulations. Factories are increasingly investing in solutions such as waterless dyeing and wastewater recycling systems to enhance sustainability.

Future Trends

Several dynamics are shaping the future of Vietnam’s garment and textile industry. The increasing market access through FTAs, such as the CPTPP and Vietnam-EU FTA, offers opportunities for expanding exports and enhancing the supply chain. Moreover, the gradual shift in manufacturing from China to Vietnam, exacerbated by escalating labor costs and geopolitical tensions, bolsters Vietnam’s position as an attractive alternative production base.

Technological Investments

The move towards higher-value production necessitates significant technological investment. With U.S. fashion companies looking to diversify their sourcing away from China, Vietnam is in an advantageous position to attract new business. Upgrading production capabilities will be crucial for capitalizing on this opportunity and advancing the industry.

Manufacturing Hubs

Southern Vietnam

The southern region, including Ho Chi Minh City and its surrounding provinces, serves as the main hub for garment and textile manufacturing. Factors such as advanced infrastructure and a skilled workforce make it ideal for factories. The Port of Saigon, one of the largest container ports globally, enables efficient logistics and distribution.

Northern Vietnam

In northern Vietnam, provinces like Nam Dinh and Thanh Hoa are pivotal clusters for textile and garment manufacturing. Nam Dinh, for instance, has seen significant growth, contributing over 50% of its sector’s added value through investments in high-tech projects. These regions actively engage in exploring new markets, aiming for increased production and export capabilities.

International Players in Vietnam

Global brands like Adidas and Nike are substantial players within the Vietnamese manufacturing landscape. Adidas produces approximately 40% of its footwear in Vietnam, reflecting a trend of moving production closer to emerging markets. Similarly, Nike relies on Vietnam for 51% of its footwear, highlighting the importance of this region in global supply chains.

Government Support

The Vietnamese government is actively promoting the textile industry through various policies encouraging the expansion of industrial parks and supporting domestic industries. Corporate income tax incentives, including reduced rates and tax holidays, are designed to attract foreign investment, ensuring that Vietnam remains competitive on the world stage.

With a commitment to advancing its garment and textile sector and harnessing the advantages of robust trade agreements, Vietnam is poised to solidify its position as a leading player in the global clothing manufacturing arena, ready to embrace future challenges and opportunities alike.