1.Vietnam’s basic economic situation in 2020
In 2020, the economies of various countries around the world will face tremendous difficulties and challenges. However, Vietnam’s economy still maintains growth. According to information from the Ministry of National Planning and Investment of Vietnam, in 2020 Vietnam’s GDP is US$340 billion, bucking the trend and growing by 2.91%. Vietnam ranks 40th in the world and fourth in ASEAN. Its per capita GDP has reached approximately US$3,500, ranking sixth in ASEAN.
In the international economic context where the Sino-US trade conflict is still ongoing, and natural disasters and the COVID-19 epidemic have had a serious impact on economic activities and people’s lives, Vietnam’s factories and enterprises have low operating rates and high unemployment . In order to achieve the dual goals of “preventing epidemics and developing social economy”, the Vietnamese government has introduced a series of policy measures such as reducing taxes, deferring tax payments, and economic subsidies, and has successfully weathered the high-risk period of the epidemic, allowing the Vietnamese economy to achieve the same results. Positive results for growth. China, Vietnam and Myanmar are the three Asian countries that achieved positive economic growth in 2020. In 2020, Vietnam’s economy exceeded US$343 billion, surpassing Singapore (US$337.5 billion) and Malaysia (US$336.3 billion), becoming the fourth largest economy in Southeast Asia, second only to Indonesia (US$1,088.8 billion) and Thailand (US$509.2 billion) ), Philippines (US$367.4 billion).
IMF Report on the economic size ranking of the ten ASEAN countries (unit: US$1 billion)
A bright spot in the economic situation in 2020 is that Vietnam has overcome many difficulties caused by the epidemic and maintained positive export growth , the surplus reached a record high (US$19.1 billion), and the export surplus has been maintained for five consecutive years. The signing of free trade agreements has brought positive signals to Vietnam’s economy, especially the Vietnam-European Union Free Trade Agreement (EVFTA). In 2020, exports to the EU reached US$34.8 billion. It is worth noting that after five months of implementation (starting from August 1, 2020), Vietnam’s exports to the EU totaled US$15.4 billion, an increase of 1.6% over the same period last year. This reflects Vietnam’s high growth in domestic production capacity, convenient investment, production and business environment, and many achievements in the international economic integration process.
Overall, although the GDP growth rate of 2.91% in 2020 was the lowest in most years between 2011 and 2020, the impact of the epidemic on all socioeconomic sectors Against the backdrop of negative impacts, this is a huge success for Vietnam.
Vietnam’s GDP growth rate in 2020
However, there are still many problems in Vietnam’s economy that need to be solved and improved. With the expansion of openness and the deepening of international integration, all fluctuations in the world economy have impacted the Vietnamese economy. In addition, the inability to ensure the sustainability of export growth, backward technological level, low labor productivity, over-reliance on imports in many fields, and the absence of a complete industrial supply chain are all shortcomings of Vietnam’s economy in improving its international competitiveness.
According to the Vietnamese government’s draft economic development goals, Vietnam’s economy has three strategic goals from 2021 to 2030: institutional breakthrough, human resources breakthrough, and infrastructure breakthrough. The GDP growth rate is expected to be about 7%/year, and the per capita GDP will reach 4,700-5,000 US dollars; by 2030, Vietnam will become a developing country with modern industry, high average income, and per capita GDP of about 7,500 US dollars; by 2045, Vietnam will Enter the ranks of high-income developed countries.
2. Current status of Vietnam’s textile industry in 2020
Vietnam, known as the second factory in the world, is extremely dependent on exports as the backbone of the national economy. The textile industry is Vietnam’s second largest export industry, with exports accounting for approximately 12% of the country’s GDP and creating a large number of jobs (accounting for more than 20% of the industrial labor force and 5% of the total labor force). However, the export volume mainly comes from foreign-invested enterprises. Although the scale of foreign-invested enterprises in the textile and garment manufacturing industry only accounts for 25%, their export volume reaches more than 60%. The profits that Vietnamese companies derive from the textile industry are very low, accounting for about 3% of exports.
Vietnam’s textile exports in 2020 were approximately US$35.3 billion, a year-on-year decrease of 9.29%. Among them, suits and shirts are the main products in textiles with high added value and have always been listed as major profitable and strategic products. However, due to market fluctuations, consumers turned to purchasing necessities, resulting in a 20% drop in sales. Even so, against the backdrop of a 25% decline in the global textile industry, Vietnam’s textile exports ranked second in the world, which is an excellent answer. It is estimated that Vietnam’s textile exports will reach US$38.5 billion in 2021, an increase of about 8%. The main export markets are still the United States, South Korea, Japan, China and the European Union.
Vietnam’s cumulative yarn export volume in 2020 was approximately US$3.69 billion, which was higher than that in 2019. On the other hand, these enterprises will also face competitive pressure, related difficulties and challenges to improve the quality of goods and services and increase added value.
The RCEP agreement is basically an agreement linking ASEAN with five other partners. For example, a company only needs to follow 1 rule of origin in an FTA, instead of having to follow 5 separate rules of origin as before. At the same time, customs procedures and trade facilitation rules were agreed and strengthened. Therefore, in essence, it will not over-open the market and directly lead to a sharp increase in the trade deficit than before.
Following the rules of origin is very conducive to the export of processed goods previously imported from raw material importing countries such as China and South Korea to markets such as Japan, South Korea, Australia and New Zealand. Due to the supply and demand factors, They are all participating countries in the agreement and have a large demand for Vietnamese export goods. Tariff reciprocity will help promote exports to the above-mentioned markets and enhance product competitiveness.
3 Impact on the textile industry
RCEP has created a new supply chain system and certificate of origin rules, which will provide Vietnam with opportunities to expand and stabilize its export market. With great convenience, coupled with a good investment environment and labor dividends, the textile industry, as one of Vietnam’s pillar industries, will surely usher in huge business opportunities. The scale of spinning will continue to expand and attract more foreign investment; higher requirements will be placed on yarn quality and equipment upgrading will be accelerated to comply with market trends; printing, dyeing and weaving, as industry bottlenecks, will also receive more attention. Therefore, textile machinery will usher in a favorable situation. In recent years, it has absorbed a lot of foreign capital transfers, especially in the garment industry, which further reflects Vietnam’s labor force advantage, and the demand for fabrics will also increase accordingly. However, due to insufficient supply and supporting facilities, the local industrial chain is still in the early stages of development and will still rely on imported raw materials for a certain period of time.
China Textile External Company exports multi-warehouse cotton blending machine to Nam Dinh, Vietnam
In short, under the background of economic globalization, even though Facing many difficulties and challenges in its development process, Vietnam, as a booming emerging country, is facing a new era of development under an increasingly open market economy system, relying on huge labor dividends and hard-working pioneering spirit, and attaching great importance to rejuvenating the country through science and education and talent cultivation. Given the unprecedented opportunities of the times, it will surely become a shining pearl in Southeast Asia and even the world in the near future.