Vietnam FDI 2024 – Updates On The Fashion Industry

Overview of the Fashion Industry in Vietnam

Vietnam’s fashion industry boasts world-class manufacturing capabilities, ranking among the top 3 exporters of Garment & Textile and Leather & Footwear in the world. Key markets include the US, EU, and Japan, presenting lucrative opportunities for investors due to the country’s expanding domestic market and favorable consumer trends. With growing interest in fashion among Vietnamese consumers, the retail sector is thriving, evident in the regular occurrence of various fashion events attracting hundreds of thousands of attendees. These events, including international fashion weeks and collection launches by renowned brands and designers, play a significant role in guiding Vietnam’s fashion market toward robust development.

FDI Flows in The Recent Years

Vietnam’s fashion industry is a magnet for substantial foreign investment, especially in retail. Globally renowned brands like Gucci, Zara, Prada, Uniqlo and Nike have successfully entered the Vietnamese market, experiencing rapid growth and expanding their footprint with new branches. In manufacturing, Vietnam stands out as an appealing destination for investors in Garment & Textile and Leather & Footwear sectors. Major players from countries like Italy, China, Korean and Japan have established manufacturing facilities in Vietnam, with notable players such as Carvico (Hungy Yen Knitting), Coronet, Italian Productions Ltd, Pou Chen Group, Hansae and Matsuoka. They play a pivotal role, commanding a substantial portion of processing activities for world’s renowned brands and exporting to key markets. In 2023, FDI companies contributed over 60% of the total export turnover in these sectors, according to the General Statistics Office.

Form of Investments in Vietnam’s Fashion Industry

Under the Investment Law and WTO Service Commitment, Vietnam welcomes foreign investors in Fashion Retail, Garment & Textile, and Leather & Footwear sectors. Foreign investors can establish foreign-invested companies through two means: Direct investment, where they establish companies with foreign capital without capital percentage restrictions (most of all LLCs – Limited Liability Companies), and Indirect investment, where they invest through capital contribution, share purchase, or stake acquisition in Vietnamese economic organizations.

Depending on the field of operation, investors have to register appropriate business lines to be able to carry out business activities in Vietnam. Following are some common business lines in this field for reference:

  • Wholesale of textiles, clothing, footwear
  • Manufacture of wearing apparel, except fur apparel
  • Manufacture of articles of fur
  • Manufacture of luggage, handbags and the like, saddlery and harness
  • Sp inning of textile fibres
  • Weaving of textiles

Trademark Protection in Vietnam

Vietnamese law places significant emphasis on protecting trademarks in Vietnam. Trademark rights are established in Vietnam through the process of trademark registration, administered by the Intellectual Property Office of Vietnam (IP VIETNAM). Trademark registration grants exclusive rights to the owner for using in Vietnam. Typically, the registration process takes about 12 months, resulting in a 10-year Trademark Registration Certificate, renewable thereafter. Vietnam’s membership in the Madrid system since 2006 facilitates international trademark registration, simplifying procedures and reducing time and costs for applicants seeking protection in multiple countries simultaneously. Additionally, Vietnam’s legislation includes provisions for safeguarding famous trademarks; owners can attain automatic protection without registration by meeting specified criteria outlined in the Law on Intellectual Property.

Government Incentives for Foreign Investors

Vietnamese law provides preferential incentives for investors in the Fashion Industry, particularly for enterprises involved in producing supporting industrial products like fiber, yarn, fabric, leather, and shoe components. These incentives include:

– Two years of corporate income tax (CIT) exemption upon project operation, followed by a 50% reduction for the subsequent four years.

– Import tax exemption for materials and equipment used in project infrastructure.

– Interest rate support for investment loans.

Export Processing Enterprises (EPEs) enjoy VAT, export, and import tax exemptions in additional. Moreover, Vietnam has 16 FTAs in effect, with the most recent notable ones being the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA), offer tariff elimination commitments, enabling Garment & Textile and Leather & Footwear enterprises to access preferential tax rates and expand into diverse markets.

Conclusion

Capitalizing on the favorable investment climate, ample labor resources, and the expanding openness of the economy, many investors in the Fashion Industry have been expanding their operations in Vietnam, particularly within the Garment & Textile and Leather & Footwear sectors. Vietnam is committed to advancing up the value chain and cultivating a national brand image distinguished by competitiveness and quality. With these objectives at its core, Vietnam’s Fashion Industry is primed to reclaim its position as a leading global hub for clothing manufacturing, poised for a swift resurgence in the near future.

In D’Andrea & Partners Legal Counsel we have authored innovative publications exploring Vietnam, produced in order to provide foreign investors and businesses with more practical guidance on how to do business in Vietnam, as it requires a specific context of the economic and legal framework of the country, including tailor-made consultancy for the fashion industry.

The above content is provided for informational purposes only. The provision of this article does not create an attorney-client relationship between D’Andrea & Partners and the reader and does not constitute legal advice. Legal advice must be tailored to the specific circumstances of each case, and the contents of this article are not a substitute for legal counsel.

Carlo Fabrizi Carlo Fabrizi

Carlo Fabrizi

Legal Advisor
Carlo Fabrizi, a representative of D’Andrea & Partners Legal Counsel, handles Foreign Direct Investment projects in Vietnam and South China

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