ABSTRACT
The textile and garment industry was one of the first industries to be liberalized under the Vietnamese government’s economic reform. Trade liberalization and foreign direct investment (FDI) are the driving forces of industry development and thus make up a distinct configuration for rent management. It is an example of a low value-added industry, where trade liberalization creates enormous trade volume, but the value added in production is limited. A major focus of this chapter is to analyze the rent-management mechanisms that hindered industrialization of the textile and garment industry, specifically, explaining why vertical integration between the textile and garment sectors failed. This apparent failure had tremendous consequences: the industry was slow to move up the value chain, achieved limited industrial upgrade, and relied on price competition as its main source of competitiveness. The government attempted to address some externalities using quotas to support export promotion and by implementing industrial policies. Unfortunately, none of the measures was successful. As a result, the industry’s limited success occurred in an ad hoc and spontaneous manner. In the textile sector, FDI only offered limited knowledge transfer – nothing beyond basic production and low-skill technical training.
