U.S. TPP Withdrawal Affects Investments by Korean Textile Affiliates in Vietnam

According to a report released from the Korea Trade-Investment Promotion Agency (KOTRA), the U.S. Trump Administration’s withdrawal from the Trans-Pacific Partnership (TPP) has begun to affect investments by Korean-affiliated textile and apparel companies in Vietnam.

Korean affiliates had been increasing investments in Vietnam in anticipation that the agreement would come into effect.

As a base for exporting to TTP member countries, Korean textile and apparel companies have invested US$1 billion in Vietnam during the last few years.

However, the U.S. withdrawal will eliminate the huge economic effects of TPP for Vietnam, which was considered to receive the greatest benefits from the agreement. There is concern of oversupply in the textile and apparel sectors if TPP does not come into effect. Vietnamese factories had been operating at full capacity last year, but the operation rate has already fallen to 80%, and the rise in cost and wages in Vietnam is said to be squeezing profits in the industry.

As there are no prospects when TPP will come into effect, KOTRA is proposing measures such as the diversification of export markets. The agency also indicates that it is necessary to utilize free trade agreements (FTA, EVFTA) with the European Union (EU), which are expected to come into force in 2018, and the FTAs ASEAN has with China, India, Japan and other countries.

Vietnam has a population of 92 million, half of which is less than 30 years old. KOTRA says it is necessary to take these factors into consideration for systematically developing this market, as well as capturing the American market with high value-added products.

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