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The Vietnam News

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Vietnam ends garment subsidies

HANOI - State subsidies for the textile and garment industry will end following new regulations issued last week, according to Le Quoc An, chairman of the Vietnam Textile and Apparel Association (VITAS). Speaking at a press conference on June 6, An said ending the subsidy program is necessary for Vietnam to comply with WTO regulations. The subsidies were part of Decision No 55, aimed at developing the industry during 2001-10 and ratified by the prime minister in April of 2001.

"To develop the industry, it was allowed to raise capital mostly from foreign investors, domestic enterprises, commercial loans and a portion from the state's Development Assistance Funds," said An. During 2002-05, Development Assistance Funds (DAF) provided the sector with loans totaling VND1.9 trillion (US$120 million) with combined preferential interest at just $4 million, An said. DAF preferential loans went to projects involving textile weaving, dyeing and finishing, which usually require significant capital investment in the construction of waste disposal and water treatment systems, he added.

The industry received about $500,000 from the state for export promotion and performance incentives. "The support was still kept modest," An said, "and it was several times lower than the fees and taxes that producers had to pay to the State. For instance, just from US-bound fees, the State collected around VND293 billion ($18.3 million) from 2003 to 2005." "When Vietnam becomes a member of WTO, difficulties imposed on domestic garment makers would likely outweigh opened opportunities," An said. The industry imports almost fabrics, garment-making accessories, machinery, technologies, and chemicals, all at high costs.

Upon Vietnam's accession to the WTO, competition in the domestic market will become fiercer as levies against imported textiles and garments will be cut from the current 40-50% down to 10-15%, according to VITAS. Foreign competitors will also have easier access to international advanced technology and management experience. Also on June 6, VITAS, in co-ordination with the Saigon Economic Times, launched a program to select the years top ten textile and garment producers nationwide. The result is expected to be announced in September.

Criteria for selection would cover strength of trademark, high profitability and revenue, environmental friendliness, good conditions for workers, application of IT, multi-functional product development, and export-quality fibre production.

Vietnam News Agency - June 10, 2006.