The measure was released as Decision 126. Subsidies for textile and garment enterprises were one of the biggest problems in tough trade negotiations with the US, which voiced concern that overly high growth in Vietnam based on subsidies may threaten its own markets. US negotiators cited Decision 55 to prove that Vietnam continues subsidising the domestic textile and garment industry.
Vietnamese officials said that the decision only mentioned solutions for industry development, and the US might have misunderstood the spirit of the document. However, to wrap up negotiations that will pave the way for Vietnam to be admitted to WTO by the end of the year, the government will repeal the decision.
Speaking on the performance of the Vietnamese textile and garment industry in the future, when Vietnam becomes an official member of WTO, Chairman of the Vietnam Textile and Apparel Association (Vitas) Le Quoc An said that local technology was smaller scale and out of date and would not threaten US industry.
Mr An also said that according to Decision 55, total investment capital needed for the textile and garment industry would be $4bil (VND35tril for 2001-2005 and VND30tril for 2006-2010). The decision also stated that the majority of the capital will be sourced from the private sector and foreign investors, while the US side thought that the Government would offer the $4bil.
Domestic enterprises have enjoyed preferences, An said, but these were just small loans from the Development Assistance Fund (DAF), and Decision 55 stated that textile and garment companies must arrange most of capital for their projects and may only can borrow small sums. From 2002 to 2005, garment and textile enterprises could borrow VND1,900bil ($118mil) only, while total export turnover was $5bil every year.
