Vietnam’s textile and garment industry continues to be impacted by a changing global trade environment that presents a host of challenges.

Speaking at the
“Strategies for Developing Vietnam’s Textile and Garment Industry in a Fluctuating
Environment” seminar, held recently, Mr. Vu Duc Giang, Chairman of the Vietnam Textile Apparel
Association (VITAS), said 2025 marked a pivotal phase in the industry’s global economic
integration, as its position and stature become more firmly established. Export
turnover reached $46 billion, up an impressive 5 per cent against 2024 and reinforcing
Vietnam’s place among the world’s Top 3 textile and garment exporters.

Challenges on all fronts

As the industry
moves into 2026, Vietnam’s textile and garment sector faces not isolated difficulties
but an interconnected ecosystem of challenges. According to Mr. Giang, the industry
is being heavily affected by global economic uncertainty, rising trade protectionism,
and increasingly-strict technical barriers from major markets such as the US and
the EU. Requirements related to environmental protection, labor standards, and especially
traceability are no longer recommendations but prerequisites for Vietnamese products
to reach global retail shelves.

One of the most
deep-rooted challenges lies in the “health” of domestic enterprises. Ms. Nguyen
Hong Ha, Program Manager at Better Work Vietnam (BWV), noted that around 90 per
cent of companies in the sector are micro, small, and medium-sized enterprises
(MSMEs). With limited financial resources and poor risk management capabilities,
this cohort has become the most vulnerable link in the supply chain as it confronts
a “dual transition”: digitalization to boost productivity, and greening to meet
sustainability standards. Rising logistics costs and compliance expenses related
to green standards are forcing businesses to be cautious in their use of financial
leverage and to prioritize long-term stability over short-term, rapid growth.

Human resources
have also emerged as a critical bottleneck. Vietnam’s textile and garment workforce
is aging, while attracting younger workers is becoming increasingly difficult. More
concerning, around 80 per cent of current jobs remain low-skilled, and workers’
skill levels have seen little meaningful improvement since 2012. As competitiveness
based on cheap labor fades, it is being replaced by demands for resilience and reliability
in labor relations.

In addition, the
sector faces significant challenges in implementing green commitments. Ms. Nguyen
Thi Ngoc Minh, Lean Manager at Hanesbrands, said that while brands have made strong
sustainability pledges, the journey from commitment to actual implementation at
the factory level remains long and complex. Emission reduction solutions require
substantial investment in green technologies and renewable energy, placing direct
pressure on price competitiveness.

From a policy perspective,
Dr. Tran Cong Chinh from the University of Economics Business at the Vietnam
National University, Hanoi (VNU-UEB), highlighted barriers relating to recycling
permits. Many companies wish to reuse wastewater but are constrained by regulations,
as permits are tied to industrial parks. If an industrial park lacks this function,
its member enterprises are also prohibited from implementing circular water treatment
solutions.

Dual roadmap

Amid mounting pressure,
digital transformation and the application of science and technology are widely
seen as the keys to helping the textile and garment industry escape the “low-cost
trap” and move up the value chain.

H.E. Kees van Baar,
Ambassador of the Netherlands to Vietnam, emphasized the role of international cooperation
in advancing sustainable transformation, recommending that the industry continue
to accelerate technological innovation, supply chain transparency, and compliance
with new European market standards. “Technology adoption in textiles should not
be narrowly understood as replacing humans with robots, but rather as people leveraging
AI to work smarter and make more accurate, data-driven decisions,” he said.

Mr. Jatin Paul,
CEO of World Fashion Exchange, said that instead of spending hours or days manually
entering hundreds of pages of data on designs and measurements, AI can read and
process them in seconds. Notably, AI can also function as a living “knowledge library,”
preserving a company’s production know-how even amid high workforce turnover, ensuring
business continuity and smooth knowledge transfer. This is a crucial solution for
helping enterprises respond more rapidly to the constantly changing demands of international
brands.

Alongside digitalization,
“greening” has become a matter of survival. Vietnam has set a net-zero target for
2050, and the textile and garment industry must be among the pioneers. Implementing
green solutions cannot stop at audit reports but must penetrate actual production
processes, including investments in renewable energy and advanced waste treatment
technologies.

The circular economy
model, built on five pillars – sustainable design, green production, waste management,
product life extension, and supply chain management – is being actively promoted
by organizations such as IDH. At model industrial parks like Bao Minh in northern
Ninh Binh province, the application of Phase 2 wastewater treatment technology has
reduced sludge by up to 55 per cent and chemical use by 35 per cent. This demonstrates
that with the right vision and investment, technology can fundamentally address
environmental challenges, transforming “waste” into “resources” through industrial
symbiosis.

Mr. Wu Liang Jie,
Chairman of Hikari Precise Machinery, said modernizing equipment and adopting smart
sewing machines are critical solutions to boost productivity, cut costs, and improve
product quality, enabling Vietnamese enterprises to better meet international brand
requirements.

Unlocking breakthrough policies

To achieve the export
target of $64.5 billion by 2030, equivalent to annual growth of 6.5-7 per cent,
enterprise efforts alone will not suffice. A policy framework that is both enabling
and grounded in reality is essential.

One of the most
positive developments for the industry, according to Dr. Chinh, is the National
Assembly’s passage of the amended Law on Value Added Tax, effective January 1, 2026.
Under the new law, enterprises purchasing agricultural products such as cotton fiber
and pandan leaves will no longer be required to declare the 5 per cent VAT previously
applied, directly reducing input costs and encouraging the use of domestically-sourced
organic materials. In addition, the removal of overly stringent VAT refund regulations
is expected to free up significant financial resources for businesses.

However, Dr. Chinh
argued that the concepts of waste and reusable materials need to be redefined. Currently,
many types of fabric scraps are still classified as waste requiring disposal rather
than as inputs for other industries. Regulations on recycling permits within industrial
parks should also be relaxed to allow factories to implement circular water treatment
without being constrained by outdated infrastructure rules.

Another key recommendation,
put forward by Ms. Nguyen Thi Minh Thuy, Senior Program Manager at IDH, is the development
of a sector-specific circular economy roadmap with clear guidance by industry level.
At present, many enterprises, especially small ones, feel overwhelmed by the lack
of a clear action framework. Establishing international standards and developing
eco-labels for Vietnamese textile and garment products would serve as a powerful
lever for enterprises to fully capitalize on free trade agreements. In parallel,
public-private partnership (PPP) models should be strengthened to share the financial
burden of investing in green technologies, where payback periods are often very
long.

According to Ms.
Thuy, the voices of enterprises need to be more substantively heard during the legislative
process. VITAS should continue to persistently advocate for reforms related to the
Law on Social Insurance, trade union fees, and administrative procedures, to improve
the business environment.

VET-Vu Khue