OIT - Brief - Towards a skills strategy for the textile and garment industry in Viet Nam

Brief February 2025  Key points Towards a skills strategy for the textile and garment industry in Viet Nam: Sector analysis, priority skills needs, actions, and recommendations       Viet Nam’s textile and garment industry has experienced significant growth and made substantial economic contributions to help drive national development, including through the creation of millions of jobs, particularly for women. Job quality in the sector is improving as informality levels decline. Some Decent Work deficits remain, partly due to features of global value chains (GVCs) that result in high shares of temporary employment and excessive working hours. This often translates into some enterprises’ non-compliance with labour laws and standards, particularly occupational safety and health (OSH), that leaves workers and particularly women exposed. Real wages are growing, but slower than the manufacturing average leading to competition to attract workers. Labour productivity and profit margins remain low, dampened by the large share of micro, small and medium-sized enterprises (MSMEs), primarily operating under the cut-make-trim (CMT) production method. There is a significant divide between foreign direct investment (FDI) enterprises, which comprise the majority of large sectoral players, and domestic firms in terms of technological adoption and innovation, productivity, and profitability. The textile and garment industry has reached the crossroads. Looking ahead, there is a critical need to enhance productivity and shift its growth model toward sustainable development, green practices, and technological innovation (including digital transformation). Doing so requires addressing the structural challenges along the value chain, which also necessitates a workforce with the skills to drive this transition forward. To realize this transformational change, this brief recommends a number of key steps, including optimizing the policy environment, industry and training linkages, the relevance of training programmes, inclusive and gender-responsive education and training policies, quality assurance

with the skills to drive this transition forward. To realize this transformational change, this brief recommends a number of key steps, including optimizing the policy environment, industry and training linkages, the relevance of training programmes, inclusive and gender-responsive education and training policies, quality assurance of training, industry participation in skills development, and financing for sector-specific skills and training. Additionally, it identifies business capability gaps, skills implications, and highlights priority skills and interventions for key occupational groups in the short, medium, and long term. POWER OF CONNECTIONSOver the past 40 years, Viet Nam’s textile and garment industry has experienced robust growth and made significant economic contributions. This has created millions of jobs, primarily formal wage employment, particularly for women, with higher incomes also helping reduce poverty. Despite these impressive steps forward, amidst evolving global trends, the industry now requires a step change to upgrade its value chain and shift towards a more sustainable and competitive development model. To realize this transition, enhancing workforce skills is crucial. The research1 summarized in this brief2 spotlights the industry's achievements, opportunities and challenges to its continued development in the context of increasingly deep international integration and participation in GVCs. This analysis informed policy-and decision-makers, social partners, sectoral stakeholders, education and training actors, textile and garment enterprises, and relevant research institutes to identify priority skills needs and actions needed to drive the industry’s transformation and sustainable growth. 3 A combination of quantitative and qualitative methods was used, including analysis of data and information from multiple sources and stakeholder consultations, including sectoral stakeholders, in line with the International Labour Organization’s (ILO) Skills for Trade and Economic Diversification (STED) framework.  © ILO/ Nguyen Duc Hieu Sector analysis 1 ILO and VITAS, 2025. Skills for Trade and Economic Diversification: Analysis of the textile and garment industry in Viet Nam.

Trade and Economic Diversification (STED) framework.  © ILO/ Nguyen Duc Hieu Sector analysis 1 ILO and VITAS, 2025. Skills for Trade and Economic Diversification: Analysis of the textile and garment industry in Viet Nam. 2 The brief was developed under the project “Future of Work in Textile and Clothing: Forecasting and Developing Skills in Viet Nam to Advance Decent Work and Productivity in the Sector” with funding from the Governments of Japan and the Netherlands. https://www.ilo.org/projects-and-partnerships/projects/future-work-textile-and-clothing-forecasting-and-developing-skills-viet-nam 3 ILO and VITAS, 2025. Towards a sector skills strategy for Viet Nam’s textile and garment industry: Priority skills needs, actions, and recommendations for education and training system. 4 VITAS (Viet Nam Textile and Apparel Association) reports US$44.4 billion. According to International Trade Center (ITC), it is US$45.4 billion. 5 VITAS. 6 VITAS. 7 GSO, Statistical yearbooks, 2013-23. Business development and industry characteristics Viet Nam's textile and garment sector integration into GVCs followed the "Doi Moi" reforms and efforts to increase international integration since the early 1990s. The industry made significant strides in the subsequent decades, attracted substantial investment including foreign capital, expanded production and saw its export turnover surge, reaching US$44.4 billion in 2022, 4 accounting for nearly 12 per cent of national export turnover, before dipping to US$ 39.5 billion in 2023, and reached approximately $44 billion in 2024.5 To date, Viet Nam-origin textile and garment exports can be found in 104 countries and territories worldwide.6 As a key economic sector, prioritized by the State to attract domestic and foreign capital, the textile and garment industry has seen its production and business capital increase sharply in recent years. This is evidenced by a

Nam-origin textile and garment exports can be found in 104 countries and territories worldwide.6 As a key economic sector, prioritized by the State to attract domestic and foreign capital, the textile and garment industry has seen its production and business capital increase sharply in recent years. This is evidenced by a growing workforce and the number of enterprises doubling since 2012, surpassing 14,000 in 2022 with MSMEs comprising nearly 90 per cent, as reported by the General Statistics Office (GSO).7 Micro enterprises of less than five employees witnessed the fastest growth from 19 per cent of enterprises in 2012 to 40 per cent in 2022. Firms are mainly concentrated in the Southeast region (50 per cent) and Red River Delta (30 per cent), with recent expansion to central provinces (Nghe An, Thanh Hoa), the 2Brief: Towards a skills strategy for the textile and garment industry in Viet Nam: Sector analysis, priority skills needs, actions, and recommendationsViet Nam and the textile and garment global value chain Although Viet Nam’s textile and garment sector is integrated into GVCs, its participation remains characterized by weak linkages across subsectors and stages, which further dampen value addition and competitiveness. Viet Nam’s participation in high value-added stages such as branding and design, marketing and distribution remains limited. Local firms’ low capacity to provide services – such as raw material sourcing, design, logistics and package services for buyers – implies their interactions with global brands are often through intermediaries, such as regional traders based in Hong Kong (China), Taiwan (China) and the Republic of Korea. Vietnamese brands have grown, but yet to participate in GVCs. As such, the domestic fashion industry has not emerged as a driving force for textile and garment industry development. Due to significant raw material production constraints, Viet Nam remains heavily dependent on imports, which increases costs and makes it challenging to meet rules of origin requirements of free trade agreements (FTAs). The

has not emerged as a driving force for textile and garment industry development. Due to significant raw material production constraints, Viet Nam remains heavily dependent on imports, which increases costs and makes it challenging to meet rules of origin requirements of free trade agreements (FTAs). The heavy dependence on imported cotton (Viet Nam has to import nearly all cotton for domestic needs and production), in a context of volatile and unpredictable prices, greatly impacts its yarn and textile subsectors. While large quantities of domestically produced yarn are exported, domestic textile firms also import yarn. The fabric weaving, dyeing and finishing subsectors remain undeveloped and yet to attract domestic and foreign investment – partly due to an inability to meet environmental standards in the context of weak support policies, such centralized wastewater treatment – leading to a shortage of domestic materials. As a result, Viet Nam’s 3 Mekong Delta, and Northern Midland and mountainous areas.8 Despite high growth, labour productivity in Viet Nam’s textile and garment sector remains low compared to the manufacturing average, and that of some export competitors. Textile labour productivity remains more than four-fold higher than the garment sector’s, 9 reflecting the capital-intensive nature of the former relative to the labour-intensive nature of the latter. The high proportion of MSMEs and prevalence of the low value-added cut-make-trim (CMT) garment processing method, constrain labour productivity growth. These factors also affect enterprises’ profit rate, which remains low compared to the manufacturing sector average. Profit rates increase with the scale of enterprises: higher for large firms, often FDI enterprises and pioneers in technological adoption with robust labour productivity. In 2021, FDI enterprises accounted for 40 out of 44 large firms in the garment subsector (more than 5,000 workers), and 48 out of 53 large enterprises in the textile subsector (more than 1,000 workers). 10 FDI enterprises which accounted for approximately 14 per cent of

firms in the garment subsector (more than 5,000 workers), and 48 out of 53 large enterprises in the textile subsector (more than 1,000 workers). 10 FDI enterprises which accounted for approximately 14 per cent of enterprises in 2021, play a key role in exports of Viet Nam’s textile and garment products with 58–62 per cent of export turnover. 11 Although FDI enterprises have dominated the industry in recent years, large domestic players have grown significantly, expanded production and become strategic partners of international brands. 8 GSO, Enterprise survey 2022. 9 Calculations based on data from the GSO Statistical yearbooks, 2012-22 and Labour force surveys, 2011-23. 10 GSO, Enterprise survey 2022.

11 VITAS.

Nearly US$ 44 billion in 2024, an increase of 11.3 per cent in compared to 2023 of enterprises are FDI enterprises, which are generally larger, more productive and account for approximately 60% of exports Approximately 3.4 million workers across Viet Nam 75% are women 88% are wage and salaried workers average production capital x4 between 20122022 9 out of 10 workers are in middleskilled occupations 14% x2 number of enterprises doubled during 2012 - 22 90% of enterprises are micro, small and medium enterprises (MSMEs) Figure 1: Key information on Viet Nam's textile and garment industry Brief: Towards a skills strategy for the textile and garment industry in Viet Nam: Sector analysis, priority skills needs, actions, and recommendations Source: ILO and VITAS, 2025. Skills for Trade and Economic Diversification: Analysis of the textile and garment industry in Viet Nam.4 12 Ministry of Industry and Trade, 2022. Report on the strategy for developing the textile, garment and footwear industry to 2030 and vision to 2035.

13 VITAS.

Diversification: Analysis of the textile and garment industry in Viet Nam.4 12 Ministry of Industry and Trade, 2022. Report on the strategy for developing the textile, garment and footwear industry to 2030 and vision to 2035. 13 VITAS. garment export production sector must import 80–85 per cent of needed fabric. 12 Recently, due to strict FTA rules of origin requirements of major trading partners, investment in Viet Nam’s textile sub sector has risen and primarily originated from China, Taiwan (China) and Republic of Korea, while domestic investment remains limited. In the near future, the domestic supply of fabrics is forecast to increase with a more robust domestic value chain. In the garment production stage, where Viet Nam’s participation in GVCs is most prominent, prevailing production methods involve simple processing and low value-added activities. In 2021, 65–70 per cent of domestic enterprises applied the CMT method associated with the lowest value-added levels and profit margins, 20–25 per cent applied free-on-board (FOB) or original equipment manufacturing (OEM) production and less than 5 per cent each applied original design manufacturing (ODM) and own brand manufacturing (OBM) (Figure 2). 13 CMT garment manufacturers often participate in the value chain subject to coordination and supervision by international buyers. Most parents of FDI enterprises are closely tied to GVCs and operate under ODM or OEM methods, but many factories in Viet Nam apply the CMT method. A shift from CMT to FOB would significantly boost the added value of production activities at factory level, but barriers hinder this transition: lack of dynamism and limited ability to manage the chain, difficulties in meeting importers’ product quality requirements and delivery time. Enterprises also lack the financial capacity to address risks during contract execution. In addition, as most process products, enterprises struggle to develop design teams and products, as well as connect with the domestic fashion and textile industry. Export sector

importers’ product quality requirements and delivery time. Enterprises also lack the financial capacity to address risks during contract execution. In addition, as most process products, enterprises struggle to develop design teams and products, as well as connect with the domestic fashion and textile industry. Export sector imports 80-85% of its fabric needs Domestic textile enterprises import yarn from abroad while large quantities of yarn are exported Shortage of supply leading to high reliance on imports and difficulties in meeting FTA rules of origin requirements Textile Cotton Spinning Garment Viet Nam only produces about 1.2% of its cotton needs Branding Design Raw materials sourcing Weaving/ Dyeing/ Finishing Fabric Production Cutting/ sewing Marketing/ distribution Underdeveloped, limited investment partly due to environmental standards and weak support measures Despite progress, research, design capabilities remain limited Prevalence of CMT methods resulting in low value added, productivity, profits Dependence on intermediaries to connect enterprises and end customers Cut-Make-Trim (CMT) 65-70% of enterprises Added value: 2.5x Profit margin1-3% Original Equipment Manufacturing / Free on Board (OEM/FOB) 20-25% of enterprises Added value: 12x; Profit margin 3-5% Original Design Manufacturing (ODM) <5% of enterprises Added value: 18x; Profit margin 6-7% Own Brand Manufacturing (OBM) <5% of enterprises Added value: >25x; Profit margin >7% Supporting industries (transport, logistics, etc.)

Supporting industries Figure 2. Viet Nam’s textile and garment value chain Notes: Added value in comparison to the raw materials stage.

Source: ILO and VITAS, 2025. Skills for Trade and Economic Diversification: Analysis of the textile and garment industry in Viet Nam.

Brief: Towards a skills strategy for the textile and garment industry in Viet Nam: Sector analysis, priority skills needs, actions, and recommendations5 14 Wazir Advisors, 2016. Existing and prospective FTAs and their impact on Indian textiles exports: Final report. 15 WTO and others, 2022. Textiles and clothing in Asian graduating LDCs: Challenges and Options. 16 Do Khac Dung, 2021. The competitiveness of the textile industry in Viet Nam: An analysis to the period of a decade. 17 GSO, Labour force surveys, 2013-23. 18 GSO, Enterprise survey 2022. 19 GSO, Labour force surveys, 2013-23. 20 GSO, Labour force surveys, 2013-23. 21 GSO, Labour force surveys, 2013-23.

Comparative advantage assessments of Viet Nam’s textile and garment industry Viet Nam is forecast to capitalize on robust textile and garment market growth in coming decades. While the labour cost advantage is diminishing, competitive energy costs and improved transportation infrastructure will backstop local textile and garment manufacturers’ ability to manage and reduce production costs. In terms of human resources, the industry benefits from a demographic dividend (large and still relatively young population) which, with improved vocational education and training and skills enhancement, has the potential to boost labour productivity and competitiveness. Viet Nam ranks among the top countries globally in garment exports, and its position relative to its industry competitors varies depending on criteria and indicators used by assessments. In one study, its competitive advantage lags behind Bangladesh, India and significantly trails China,14 while in another, Viet Nam outperforms other countries, including China, in product quality, delivery time, but performs less well with regards

competitors varies depending on criteria and indicators used by assessments. In one study, its competitive advantage lags behind Bangladesh, India and significantly trails China,14 while in another, Viet Nam outperforms other countries, including China, in product quality, delivery time, but performs less well with regards to tariffs, financial stability, compliance and sustainability.15 According to a third study, the most significant gap between Viet Nam and China lies in supporting industries. Additionally, factors such as low labour productivity, limited R&D spending, and notably lower FDI and outward investment by Viet Nam’s textile and garment enterprises contribute to this disparity.16 Employment trends and decent work characteristics Employment growth The number of workers in Viet Nam’s textile and garment sector has increased rapidly, from nearly 1.8 million in 2012 to approximately 3.4 million in 2023, of whom more than three million were employed in the garment subsector and 324,000 in the textile subsector. 17 Large enterprises employ a disproportionate share of the sector’s workforce: in 2021, enterprises with 5,000 employees or more only accounted for 0.3 per cent of firms, but employed more than a fifth of the workforce.18 Conversely, enterprises with fewer than 50 employees accounted for 78 per cent of enterprises, but employed only 4.8 per cent of the industry’s workforce. Workforce structure The labour force age structure in the textile and garment industry is shifting towards ageing, as enterprises face challenges recruiting younger workers. Despite a shift towards a more skilled workforce over the past decade, the industry still predominantly employs workers with low educational attainment levels, and without training certificates,19 due to its structure and prevailing CMT production methods. The occupational structure has not changed significantly, as middle-skilled occupations continue to account for the lion’s share (92–94 per cent) of the industry’s employment.20 However, shifts across middle-skilled occupational categories are evident. The shift from 'crafts

production methods. The occupational structure has not changed significantly, as middle-skilled occupations continue to account for the lion’s share (92–94 per cent) of the industry’s employment.20 However, shifts across middle-skilled occupational categories are evident. The shift from 'crafts and related trades workers' to 'plant and machine operators and assemblers' indicates increased automation and a structural move towards employment in larger enterprises. This has led to a decline in semi-skilled manual labour (handicraft workers in smaller workshops) and greater demand for semi-skilled workers who are able to operate and maintain machinery (sewing machine operators, on larger factory floors). Wages and wage growth Real wages of employees have risen rapidly, at an average annual rate of 7.2 per cent between 2013 and 2023 but remain slightly lower than the manufacturing sector average.21 Some enterprises report increasing challenges in recruiting workers due to fierce competition with other emerging manufacturing sectors, such as electronics.

Brief: Towards a skills strategy for the textile and garment industry in Viet Nam: Sector analysis, priority skills needs, actions, and recommendations6 22 GSO, Labour force surveys, 2012-23. 23 ILO and VITAS, 2025. Skills for Trade and Economic Diversification: Analysis of the textile and garment industry in Viet Nam. 24 GSO, Labour force surveys, 2013-23.

Status in employment and informality The quality of employment in Viet Nam’s textile and garment industry has generally improved. This is evidenced by the share of employees in total employment rising 18 per cent from 2012 to 88 per cent in 2023, while the share of own-account workers decreased sharply from 23.6 to 9.6 per cent, as did the share of unpaid family workers. Strikingly, the share of informal workers halved from 52.4 to 26 per cent in a decade to 2023. While this rate is lower than the manufacturing sector average (31

23.6 to 9.6 per cent, as did the share of unpaid family workers. Strikingly, the share of informal workers halved from 52.4 to 26 per cent in a decade to 2023. While this rate is lower than the manufacturing sector average (31 per cent), nonetheless more than 880,000 of the sector’s workers (more than one-in-four) are in informal employment.22 Work arrangements and working hours Positive developments in terms of wage employment growth and declines in informality were accompanied by a rise in temporary employment, particularly in the garment subsector. Additionally, overtime work remains an industry characteristic, despite recent progress. The prevalence of temporary contracts and overtime work is linked to the dynamics of textile and garment GVCs, which are buyer-driven. As most suppliers in Viet Nam operate under the CMT model and compete on a cost-basis with little control over input costs, they have limited room to invest in modern equipment, enhancing workers’ skills, or pursuing strategies to raise productivity. Suppliers, in particular small and medium sized enterprises (SMEs) working as subcontractors, operate on tight margins and face pressures to deliver in Table 1. Labour productivity and wages in the textile and garment industry Labour productivity Gross value added (GVA) (‘000. US$) per worker, 2022 Labour productivity growth AAGR 2015–22 (%) Nominal wage (‘000. VND), 2022 Real wage growth AAGR 2013–23 (%) 4.7 3.6 7,189 7.2 8.2 4.4 7,784 7.5 Textile and garment All manufacturing Source: Calculated using GVA and output data from the ADB’s input-output database and GSO, Labour force surveys.

Note: AAGR (average annual growth rate). a timely and flexible manner while keeping wages in check. This leads to decent work deficits in terms of excessive working hours and arrangements that provide

Source: Calculated using GVA and output data from the ADB’s input-output database and GSO, Labour force surveys.

Note: AAGR (average annual growth rate). a timely and flexible manner while keeping wages in check. This leads to decent work deficits in terms of excessive working hours and arrangements that provide flexibility such as through temporary or casual work but result in acute insecurity for workers.

Compliance with labour laws and international standards The same factors also heighten the risk of substandard practices and non-compliance with international standards and labour laws by factories and subcontractors. In general, export enterprises better comply than domestic enterprises as they receive more investment and are monitored by buyers. During the COVID-19 pandemic, factories further struggled to comply with labour regulations on wage payment, working hours, OSH, and employment contracts. The nature of work in textile and garment factories poses several OSH risks, with women particularly exposed. Aside from some FDI and large enterprises, many factories commonly fail to ensure safe and healthy workplaces.23 With workers’ limited OSH awareness, there is a pressing need to increase the frequency and quality of training to improve their knowledge. Social dialogue and collective bargaining Important steps to promote social dialogue and improve collective bargaining in the industry have been taken in recent years, but challenges remain. It was the first in Viet Nam to implement a signed collective labour agreement in 2010 between the Viet Nam Textile and Apparel Association (VITAS) and the Textile and Garment Union. Currently, 80 textile and garment enterprises participate with 120,000 workers, accounting for 3.8 per cent of the industry’s workforce. However, awareness of the agreement remains limited. Women in Viet Nam’s textile and garment sector The sector continues to provide significant employment opportunities for Vietnamese women, with one million additional jobs for women created over the past decade and the number of women workers growing from 1.4

agreement remains limited. Women in Viet Nam’s textile and garment sector The sector continues to provide significant employment opportunities for Vietnamese women, with one million additional jobs for women created over the past decade and the number of women workers growing from 1.4 million in 2013 to 2.5 million in 2023.24 Although the share of women in the industry decreased in recent years, from 80 per cent in 2012 to 75 per cent in 2022, it remains well-above the manufacturing sector average. Women represent the larger share of employment across most occupational groups. Despite progress, only 30 per cent Brief: Towards a skills strategy for the textile and garment industry in Viet Nam: Sector analysis, priority skills needs, actions, and recommendations7 25 GSO, Labour force surveys 2013–23. 26 Better Work Viet Nam, 2023. Viet Nam Annual Report 2023. 27 3D design, automatic cutting machines, robotic arms, standing sewing lines, hanging conveyor systems, and digitized management software. Factors affecting the industry and skills demand and supply Environment and sustainability The textile and garment industry has significant environmental impacts, with growth and sustainability highly dependent on effective resource management. Viet Nam’s vulnerability to climate change and natural disasters has prompted the government to take policy actions and develop key strategies, including for this industry. However, the greening process poses challenges in terms of resources, finance, technology, and skills supply, especially for SMEs. In addition to engaging new workers who possess required skills, enterprises will need to reskill and upskill workers as they adopt green production. Technological change and innovation The Industrial Revolution 4.0 has introduced several technologies with potential to revolutionize textile and garment production, with important implications for jobs and skills along the supply chain. While the government has prioritized capitalizing on opportunities unlocked by Industrial Revolution 4.0, technological innovation has been relatively slow and incremental, occurring in specific stages such as

garment production, with important implications for jobs and skills along the supply chain. While the government has prioritized capitalizing on opportunities unlocked by Industrial Revolution 4.0, technological innovation has been relatively slow and incremental, occurring in specific stages such as cutting, product inspection, and the use of product design software among others. FDI and large domestic companies have commonly adopted new technologies27 to enhance efficiency, productivity, reduce costs and labour. However, most enterprises are not yet ready for systematic investment in line with Industry 4.0 trends, with required capital particularly out of reach for SMEs. R&D investment remains low, due to slim profit margins and small-scale accumulation. Additionally, as labour costs are relatively low, many enterprises forgo investing in technological innovation. of women in 2023 occupy management positions, while the share of women professionals climbed significantly in the garment subsector over the past decade, but declined in the textile subsector. The gender wage gap declined from 17.2 per cent in 2013 to 9.3 per cent in 2023, as salaries converged across all occupational groups. 25 Although women’s working conditions generally improved on average, more progress can be made in terms of OSH issues, and compliance with labour laws and standards to protect women, particularly during pregnancy.26  Skills development Environment and sustainability Consumers and brands increasingly focused on sustainability and circular fashion. Key markets in Europe have tightened environmental standards for imported goods. Skills for greening and sustainability are in increasing demand. Technological change and innovation The Industrial Revolution 4.0 has introduced several technologies that have the potential to revolutionize textile and garment production. Technological and digital skills including digital marketing, distribution and sales skills are essential. Demo