GENEVA — The potential of the pending Trans-Pacific Partnership trade accord played a crucial part in 2015 in steering new outlays in greenfield foreign direct investments in Vietnam’s textiles and apparel industry, a United Nations report said.
Last year, Vietnam, the report said, was the largest recipient country for new greenfield FDI in textile and apparel manufacturing, with projects valued at $820 million.
But the U.N. findings also show the pickup in economic growth enabled the U.S. apparel retail service sector to be ranked the top recipient of greenfield FDI’s in this segment, with commitments – mostly by brands – estimated at $6.2 billion, far ahead of second-placed Canada, with $3.2 billion, the U.K. at $2.1 billion, and China with $1.6 billion.
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The report outlines major greenfield FDI commitments in the apparel retail service sector by major brands in both rich and emerging nations, such as France’s LVMH group, which outlayed $72.5 million in the U.S to create 152 jobs, and Italy’s Canali, with investment of $49.4 million for 171 jobs, and U.S.-owned Gap Inc., which invested $23.2 million in China creating 137 jobs and Italy’s Prada, with a $18.1 million investment in Indonesia.
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Greenfield is a form of FDI where a parent company starts a new venture in a foreign country by constructing facilities from the ground up.
In Vietnam, the looming preferential access to rich TPP consumer markets such as the U.S. inspired greenfield FDI from Taiwan-owned Far Eastern Group, valued at $322.7 million to create 3,000 textile manufacturing jobs and $74 million in apparel for 4,000 jobs, and $150 million from China’s Luthai Textile that resulted in 3,000 textile jobs, according to the U.N. Conference on Trade and Development’s “World Investment Report, 2016.”
Hong Kong-owned Crystal Group earmarked $38 million in Vietnam to create 1,212 apparel jobs, and South Korea’s Nobland International invested $18 million that resulted in 903 jobs.
Astrit Sulstarova, chief of trends and data at UNCTAD’s investment and enterprise division, asked about the impact of the pending TPP on Vietnam’s performance, said, “This played an important role. There is an impact because of the TPP and anticipation by investors.”
The 12-country TPP was completed in February and is pending ratification by the signatory nations, incluidng the U.S., where passage by Congress is uncertain.
Global greenfield FDI in the sector last year totalled $24.9 billion, down from $30.1 billion the year before, the report noted. Vietnam’s total FDI inflows, which include equity investment, cross-border mergers and acquisitions, and reinvestment of profits, reached $11.8 billion, up from $9.2 billion a year earlier.
On Bangladesh, the report said, “Thanks to rising FDI in labor-intensive manufacturing, inflows jumped by 44 percent to $2.2 billion, a historically high level.”
The report also concluded that total global FDI last year increased 38 percent to $1.76 trillion, but forecast that global FDI flows this year “are likely to contract” 10 to 15 percent, reflecting the fragility of the global economy and weak demand.
In 2015, the U.S. was the leading host economy and attracted FDI inflows of $380 billion, up on the previous year’s $107 billion, followed by Hong Kong with $175 billion and mainland China with $136 billion.