Investing in Vietnam’s Garment and Textile Industry: Overview and Key Dynamics

Vietnam’s garment and textile industry has been a cornerstone of the country’s rapid economic development. Despite global challenges, the sector has proven somewhat resilient and still presents a wealth of opportunities for foreign firms.

The garment and textile industry remains one of the key drivers of Vietnam’s economic growth, with a total export value of US$44 billion in 2024, an 11 percent year-on-year increase. According to the Vietnam Textile and Apparel Association (VITAS), exports exceeded US$17.58 billion in the first five months of 2025, growing by 9 percent compared to the same period last year.  With total imports reaching US$10.63 billion, the industry’s trade surplus was US$6.95 billion in this year’s first five months.

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These impressive numbers have been driven by a number of factors. While the traditional advantage of low labor costs is fading, Vietnam is still keeping an edge with the support from its impressive collection of free trade agreements (FTAs), helping reduce tariffs on its products.

At the same time, Vietnam’s businesses have proven their agility in the face of current challenges, such as sluggish global demand recovery and geopolitical tensions in multiple parts of the world. They have been able to maintain stable production, gradually improve operations, and tap into niche markets for new growth opportunities.

Notably, as the US – one of Vietnam’s key textile export markets – adjusts its tariff policies, many exporters are actively diversifying their markets to minimize potential negative impacts from the policy change.

With this in mind, here’s what Vietnam’s garment and textile sector looks like in the first half of 2025.

Garment and textiles in Vietnam: Overview

Vietnam’s garment and textile industry consists of 3 sub-sectors: the upstream sector (fiber production), the midstream sector (fabric production and dyeing), and the downstream sector (garment manufacturing). According to VITAS, 70 percent of over 3,800 textile factories in Vietnam currently produce garment products, while only 6 percent of these factories produce yarn, 17 percent produce fabric, and 4 percent are dyeing facilities.

Material sources

According to Pham Van Viet, Vice Chairman of the Ho Chi Minh City Association of Garment, Textiles, Embroidery, and Knitting (AGTEK), the supply of raw materials for the domestic textile and garment industry meets only about 40 percent of the demand, including that of FDI enterprises. Many local enterprises continue to rely on raw materials imported from China and Korea, while most of their fiber materials are sourced from India, China, and the US.

Vietnam consumes around 400,000 tons of cotton annually. However, only 3,000 tons are sourced from domestic supply chains, indicating that the domestic supply fulfills less than 1 percent of the total demand.

Garment manufacturing

The downstream sector of garment manufacturing accounts for the bulk of the apparel and textile sector in Vietnam, with cut-make-trim (CMT) models being their main activities. CMT accounts for about 70 percent of the output of domestic garment and manufacturing firms, while the more advanced business models, like original equipment manufacturing (OEM) and original design manufacturing (ODM), account for around 30 percent. Domestic fabric production amounts to approximately 2.3 billion meters per year, satisfying 25 to 30 percent of the domestic demand.

The US, Europe, Japan, and South Korea are the main export destinations of Vietnam’s garment and textile products.

Quest for sustainable local material sources

Vietnam’s garment and textile industry faces a significant challenge in developing sufficient local material sources for future growth. Since the garment industry is primarily processing-based, the domestic value added to each exported garment is only around 45 to 50 percent. This situation complicates businesses’ ability to comply with the rules of origin standards in FTAs, while also exposing the entire sector to potential supply chain disruptions.

The current situation presents an urgent need to build robust supporting sectors within the industry, which can be seen as promising opportunities for investors.

Dynamics shaping the future of Vietnam’s garment and textile industry

Robust trade deals

Increased market access through FTAs and technology are major growth drivers for the garment and textile industry. Vietnam’s bilateral and multilateral FTAs continue to provide Vietnamese manufacturers access to new markets. With new FTAs in effect, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and Vietnam-EU FTA (EVFTA), Vietnam should see increased exports and a push to further develop the industry’s supply chain so that it can take full advantage of preferential tariffs.

Adoption of the green and sustainable trend

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European markets, characterized by increasingly high standards and a growing appetite for green and sustainable products, have always been among the most crucial markets for Vietnamese garment and textile manufacturers. In order not to lose their competitive edges to competitors from other countries, especially China and Bangladesh, many Vietnamese factories have strived to obtain international certificates, such as OEKO-TEX®, GOTS, Global Recycled Standard (GRS), and Fair Trade, to meet the stringent requirements of European countries.

At the same time, Vietnam is investing in green technologies, such as waterless dyeing, solar-powered factories, and wastewater recycling systems, to improve the quality and sustainability of its products. Ethical practices and adherence to labor rights are also enforced carefully to meet Europe’s strict social responsibility standards.

Growing demand for higher value-added production

Furthermore, the shift in manufacturing from China to Vietnam, driven by labor cost advantages and rocky trade relations between China and the US, is expected to give Vietnam’s garment and textile industry another push.

According to the United States Fashion Industry Association (USFIA), 80 percent of US fashion companies plan to decrease their sourcing of apparel from China in 2024-2025. Vietnam was among the first Asian countries to strike a bilateral trade deal with the US administration to avoid even higher “reciprocal tariffs” initially proposed at 46 percent. This shows Vietnam’s willingness to engage and adapt to US trade demands. The new tariff structure could encourage Vietnamese businesses to upgrade their production capabilities and shift toward higher-value-added products, such as semiconductors, rather than remaining solely in labor-intensive, low-value assembly.

That said, moving forward, market access alone will not be enough to generate growth. Vietnamese manufacturers will also need to invest in technology to increase productivity and quality in order to remain competitive.

See also: Vietnam’s Textile Sector Amid US Tariff Pressures: Risks and Opportunities

Vietnam’s garment and textile manufacturing hub

Southern region

Southern Vietnam is considered the garment and textiles hub of Vietnam. Ho Chi Minh City and the surrounding provinces of Dong Nai and Binh Duong are home to a large number of garment factories servicing a broad range of international brands. There are a number of reasons for this, but infrastructure and workforce are two of the most prominent.

HCMC is home to Vietnam’s biggest port. As of 2019, the Port of Saigon was the 26th biggest container port in the world and the fifth biggest in the ASEAN region after the Port of Singapore, Malaysia’s Port Klang, Tanjung Pelepas, and Thailand’s Laem Chabang. As a result, ports in HCMC are responsible for around 67 percent of Vietnam’s seaport throughput.

Around 80 km to the south of HCMC, there is also the Cai Mep-Thi Vai Port. The Cai Mep-Thi Vai Port is a deep-water port that allows larger ships to transport goods into and out of Vietnam. This can significantly reduce shipping costs for manufacturers. A multi-lane highway also connects it to Dong Nai and Binh Duong.

Northern Vietnam

In the North, Nam Dinh and Thanh Hoa are key clusters for textile and garment manufacturers.

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Contributing over 50 percent of its industry sector’s added value, Nam Dinh’s garment and textile industry has experienced substantial growth in terms of size, quality, and market reach. As of March 2025, over 6,000 garment and textile facilities are active within the province, including 420 well-established companies. Mostly located in rural areas, these factories are a key source of employment for tens of thousands of workers. Nam Dinh is working to boost its garment and textile sector by encouraging investment in high-tech projects, highlighted by recent developments like the US$203 million textile and dyeing factory of TOP Textile JSC and the US$40 million plant of China-invested Xielong Vietnam Textile Technology, a major supplier for global brands such as Lining, Xtep, Puma, and New Balance.

Meanwhile, Thanh Hoa hosts more than 300 active textile and garment companies. These firms have adopted advanced technologies and improved their production methods to stay competitive in traditional markets while actively exploring new markets like the Middle East and South America. In 2024, the sector produced over 700 million items, with around 450 million exported, about a 20 percent increase from the previous year. Looking ahead to 2025, the industry plans to sustain this growth, aiming to produce over 700 million items annually and export roughly 470 million units.

Foreign brands manufacturing in Vietnam

There are hundreds of international brands manufacturing garments and textiles in Vietnam, but two of the most well-known are Adidas and Nike.

Adidas

In 2021, roughly 40 percent of Adidas footwear was produced in Vietnam. This follows a big shift over the past decade, with Adidas moving more of its supply chain out of China and south to Vietnam.

This is part of a broader trend in the garment and apparel manufacturing sector as wages in China rise and companies look for new low-wage workforces to produce their goods.

Not only that, but trade tensions between China and key export markets like the US and supply chain disruptions as a result of COVID-19 border restrictions have also provided impetus for sportswear companies to diversify their supply chains.

See also: Where Adidas’ Factories are Located in Vietnam

Nike

As one of the biggest, most well-known brands in the world, Nike is well and truly embedded in the fabric of international sports. This, however, would not be possible without the huge manufacturing operations Nike has developed in Southeast Asia. In particular, Vietnam has become an essential component of Nike’s supply lines.

In fact, 51 percent of Nike’s footwear in 2021 was produced in the Southeast Asian manufacturing powerhouse alone. And this number is increasing: In 2021, Nike had just 138 suppliers in Vietnam. By November of 2022, however, that number had increased to 155.

See also: Where Nike’s Factories are Located in Vietnam

Government support policies

The government has centered its support for the textile industry by expanding industrial parks for textiles and stimulating domestic supporting industries. Local governments are being encouraged to assist firms in research and development activities, technology transfer, and innovation.

Corporate income tax (CIT) incentives

Corporate income tax (CIT) incentives are one of the most attractive features of the Vietnamese business landscape and tend to be one of the most important investment incentives to foreign investors.

There are two main CIT incentives in Vietnam: preferential tax rates, which are reduced tax rates, and tax holidays, which are essentially tax exemptions. These tend to vary based on the location, industry, investment zone, and a number of other factors.

Preferential tax rates

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 The different preferential rates include:

• 10 percent for the lifetime of the entire project;
• 10 percent for 15 years from the first year of income generation;
• 17 percent for the lifetime of the entire project; and
• 17 percent for 10 years from the first year of income generation.

Tax holiday rates

Tax exemptions include:

• Tax exemption for 4 years, 50 percent reduction of payable tax amounts for 9 subsequent years;
• Tax exemption for 4 years, 50 percent reduction of payable tax amounts for 5 subsequent years; and
• Tax exemption for 2 years, 50 percent reduction of payable tax amount for 4 subsequent years.

Looking ahead

Although the garment and textile industry has struggled this year, it is still strong and holds significant opportunities for foreign firms looking for a low-cost manufacturing base in Asia.

For its part, Vietnam intends to focus on moving up the value chain and building a national brand image that is competitive and quality-driven. With these goals in mind and a proven track record of foreign firms making garments and textiles in this burgeoning Southeast Asian nation, Vietnam’s garment and textile sector is well poised to return to its upward trajectory as a global clothing manufacturing powerhouse in the very near future.

This article was first published in May 2018. It was last updated July 14, 2025.

(With inputs from Trinh Minh Huyen Tran)

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