Japanese-affiliated trading firms with bases in Vietnam are increasingly focusing on the local development of fabrics and other materials with an aim at establishing consistent domestic production operations up to apparel manufacturing.
This move is in response to increasing demands from customers who are endeavoring to reduce their costs. A number of local enterprises are also said to be showing interest in the development of fabrics for the purpose of securing factory operation in the future.
According to Japanese affiliates, unlike before, many Vietnamese enterprises are willing to listen to explanations about such development policies. This is probably an influence from the U.S. withdrawal from the Trans-Pacific Partnership Agreement (TPP). Even though it has become difficult for the agreement to come into effect, the factories set up with direct investments by Chinese, Korean and Taiwanese companies, as well as equipment in the up- and mid-stream sectors, which Vietnam has been strengthening as a national policy, are commencing operations, and their operations must be ensured.
The need to establish a supply chain that reduces costs for exports to Japan matches with the circumstances of Vietnam to secure operations and rapidly develop the up- and downstream sectors, and Vietnamese enterprises are showing interest in business with Japan.
Vietnam’s exports of textiles and apparel amounted to about US$28.3 billion in 2016. The growth since 2015 has been only about 5%, due to stagnant markets worldwide and competition with neighboring countries, but exports to the major markets of Europe and the U.S. have been expanding, and exports to Japan, (the third largest export market) also increased by 4.6% in 2016. Although Japan’s apparel consumption is also slow, the relocation of production from China is progressing steadily.