FUNCTIONAL UPGRADING IN GLOBAL APPAREL VALUE CHAIN: THE CASE OF VIETNAM

Developing countries like China, India, Bangladesh, and Vietnam are now the largest exporters in global apparel markets mainly due to their participation in the international production networks that are leaded by global buyers. Most of the garment export manufacturers in these countries are found at the low value-added production part of global apparel value chains. There is still a debate on the functional upgrading prospects of these countries although the East Asia newly industrializing countries (NIEs) are generally considered as success stories of moving up from mere assembly to selling their own branded products globally. There is still lack of empirical studies on the current position of developing countries in global apparel value chains. The purpose of this study is to fulfill the gap by examining the case of Vietnamese garment manufacturers. This study is based on secondary sources as well as primary data collected from field study. The field study involved mass survey using questionnaire and in-depth interviews with enterprises, the textile and garment associations and government agencies. The findings show that Vietnamese garment manufacturers, especially SMEs, usually rely too much on powerful foreign buyers in GVC who do not want to share their core competencies in supply chain management, design, marketing and branding. In combination with other external and internal factors, this discourages these firms from functional upgrading. Most of them can not move up to original design manufacturing (ODM) form of exporting and often compete in production sphere in positive way through product and process upgrading or in negative way through squeezing wages and profit margins. The manufacturers who are serving GVC-buyers and non-GVC buyers at the same time are likely to be more successful in functional upgrading than those who are serving only GVC-buyers.