Vietnam's textile and garment industry delivered a seemingly stable performance in the first five months of 2026: exports reached $17.8 billion, a slight 0.6% year-on-year increase. Behind this figure lies sustained demand from overseas markets, but also deep-seated shifts in growth drivers. According to the Vietnam Textile and Apparel Association (VITAS), the annual export target is set at $50 billion, meaning the second half of the year must achieve approximately $32.2 billion—a significant pressure.
Export Growth Slows: Double Squeeze from Costs and Competition
The 0.6% growth rate is not particularly impressive in the global textile trade landscape. Rising domestic labor costs in Vietnam are eroding its traditional price advantage. Meanwhile, competitors like Bangladesh and Cambodia are accelerating the diversion of global orders with lower labor costs and proactive trade policies. Industry homogenization is intensifying, and the extensive growth model reliant on cheap labor is becoming unsustainable. VITAS Chairman Vu Duc Giang's public statements confirm this: the path of competing solely on price is narrowing.
Green Compliance: A Hard Requirement for Western Markets
The US and EU are Vietnam's core export markets for textiles and garments, and both are tightening trade entry rules. Standards on carbon emission control, renewable energy usage, corporate social responsibility, and environmentally friendly production are continuously updated. Green production capacity is no longer a bonus but a survival threshold. For Vietnamese enterprises, this means production line upgrades, increased certification costs, and a full upgrade of supply chain transparency. Companies that fail to meet these standards risk losing orders directly.
Supply Chain Gaps: The Constraint of 50% Localization
Vietnam's textile and garment supply chain localization rate remains at only about 50%, with key upstream raw materials like fabrics and accessories heavily dependent on imports. This structural weakness directly prevents Vietnam from fully benefiting from tariff reductions and trade facilitation under various free trade agreements. Export profits are eroded by import costs, limiting market expansion. Addressing upstream gaps and building a self-controlled domestic raw material supply chain has become a consensus, but implementation requires time and capital.
Transformation Path: From Efficiency to Value
Facing these challenges, the optimization path proposed by industry experts presents a clear logic:
- Government and industry associations guide investment toward high-tech production lines and environmentally compliant projects, phasing out outdated capacity.
- Scale up green textile and garment industrial parks to create centralized, low-carbon production hubs.
- Promote digital production transformation to enhance efficiency and product value.
- Leverage diversified free trade agreements to explore emerging markets and diversify single-market risks.
These measures aim to shift from cost competition to technology competition and from scale expansion to value enhancement. Digitalization, greening, and self-reliance become the three engines for the next growth phase.