Investing in Vietnam’s Textile Recycling Industry: An Investor’s Guide

Vietnam exported about US$44 billion worth of textiles and garments in 2024, ranking third globally after China and Bangladesh. The United States absorbed close to 40 percent of this output, with the European Union, Japan, and South Korea also among the country’s top markets. The industry employs more than 2.5 million workers and contributes nearly 12 percent of national export earnings, making it a pillar of Vietnam’s growth story.

This success, however, comes with new obligations. International buyers, especially in Europe and the United States, are tying long-term contracts to sustainability credentials, while regulators in those markets are tightening rules on recycling, circularity, and supply-chain transparency.

For Vietnam, where much of the sector still depends on virgin inputs and fragmented waste systems, this represents both a risk and a powerful opportunity. Investors who can deliver recycling solutions, supported by traceability systems for compliance, are increasingly the ones who will determine which suppliers remain competitive.

Market scale and untapped potential

The recycling industry in Vietnam was worth around US$1.68 billion in 2025 and is forecast to reach US$2.34 billion by 2030, but textiles make up only a small share of that. Current estimates put the value of textile recycling at about US$27.7 million in 2024, a negligible fraction of the industry’s size.

Yet projections diverge sharply depending on investment: with sufficient capital and technology, some forecasts anticipate a market in the billions by the end of the decade.

Vietnam generates substantial volumes of pre-consumer textile waste each year, with multiple studies estimating output in the range of hundreds of thousands of tonnes. Much of this still goes to landfill or into low-value uses, while higher-grade recycled polyester is imported from China to fill demand. This imbalance between domestic waste generation and limited recycling infrastructure underlines the scale of the opportunity for investors prepared to bridge the gap.

Export market exposure

The figures show that Vietnam’s exports are heavily concentrated in the US and EU, making compliance with their sustainability rules decisive for investors.

Destination	Share of Vietnam’s Textile & Garment Exports (Range)	Notes
United States	~39–40%	Largest single market; dominated by apparel imports
European Union	~20–25%	Second-largest market; top destinations include Germany, Netherlands, France
Japan	~11–13%	Stable demand; compliance and quality standards emphasized
South Korea	~8–10%	Strong intra-Asia sourcing relationships
Other (ASEAN, Canada, etc.)	Balance	Diversified smaller markets

Note: Shares are approximate ranges based on Vietnam Customs, VITAS, and trade press for 2023–2024.

Early movers and proof of concept

Several projects already demonstrate that textile recycling can be scaled in Vietnam. Spanish firm Recover has opened a plant in Dong Nai with a capacity of about 10,000 tonnes per year of recycled cotton-blend fibers. Korean-owned Hansae Group has partnered with state-owned Hanosimex to produce recycled fabrics, with reports pointing to around 4,000 tonnes of EU demand expected annually. These initiatives prove that commercial partnerships can deliver tangible output and that EU buyers are prepared to absorb significant recycled volumes.

The most ambitious signal came in April 2025, when Swedish company Syre signed a US$1 billion agreement with Binh Dinh province to build a polyester chemical recycling complex. The project has received investment registration and aims to be operational between 2028 and 2029, with a target capacity of up to 250,000 tonnes per year, producing virgin-equivalent polyester suitable for export markets in Europe and the United States. If realized, this would be Vietnam’s first gigascale chemical recycling plant, marking a step change for the sector. The project has also sought approval for a pilot import mechanism to ensure adequate feedstock, highlighting that feedstock access will remain a decisive factor for chemical recycling.

In parallel, traceability is gaining momentum. Suppliers linked to brands such as H&M, Adidas, and Nike are beginning to implement blockchain-based certification, QR-coded batch systems, and ERP-driven mapping tools to meet compliance requirements. These efforts remain in their early stages, but they already demonstrate that digital traceability is becoming a market access requirement, not an optional add-on.

Regulations driving change

Vietnam is gradually shaping its regulatory framework to align with circular economy goals.

The National Green Growth Strategy 2021–2030 and the National Action Plan for Circular Economy to 2035 emphasize resource efficiency and reduced waste. While the Extended Producer Responsibility (EPR) regime currently obliges recycling for packaging, batteries, electronics, lubricants, tires, and vehicles, textiles have not yet been formally included. Even so, policymakers have signaled that expansion to textiles is likely as Vietnam deepens its circular-economy commitments.

On the demand side, external rules are decisive. The European Union requires Member States to set up separate textile waste collection by January 1, 2025, and its Ecodesign for Sustainable Products Regulation (ESPR) will introduce Digital Product Passports for textiles as part of its 2025–2030 work plan.

The timing for textile-specific rules will depend on delegated acts, but compliance is expected to phase in from 2027 onward. The EU’s Corporate Sustainability Due Diligence Directive, which entered into force in July 2024, must be transposed by July 26, 2027, with obligations applying in stages: large companies from July 26, 2028, and full application by July 26, 2029.

The US Uyghur Forced Labor Prevention Act, effective since June 2022, further obligates suppliers to prove chain-of-custody transparency. For Vietnam’s exporters, meeting recycling and traceability standards is therefore no longer a matter of branding—it is fundamental to market entry.

Technology and business models

At present, Vietnam’s recycling capacity relies mainly on mechanical processes, which use pre-consumer waste to produce fibers for non-wovens, padding, or blended yarns. This approach is commercially viable and relatively low-cost, but it produces fibers of lower quality than virgin inputs and therefore does not fully meet the needs of premium export markets.

The next stage is chemical recycling, which breaks down textiles into raw materials equivalent to virgin polyester. Although no such plants are yet operational in Vietnam, global benchmarks show that facilities of 100,000 tonnes per year require investment in the hundreds of millions of dollars. Syre’s planned project illustrates the scale of ambition and the likelihood that Vietnam will soon host chemical recycling at industrial levels. For investors, the reward is long-term offtake contracts with EU and US buyers who need virgin-equivalent recycled inputs to meet their own sustainability targets.

Running alongside both is the development of digital traceability platforms, which are fast becoming mandatory for exporters. Systems built on blockchain verification, QR-coded labeling, and supply-chain mapping software are being rolled out by suppliers to global brands. The investment is modest compared to recycling plants, but the payoff is immediate in terms of contract retention and preferred-supplier status.

For foreign investors, the most effective entry path is likely to be phased: begin with traceability systems to secure compliance and contracts, expand into mechanical recycling to monetize waste streams, and scale toward chemical recycling once feedstock agreements and financing structures are in place.

Incentives and entry structures

Vietnam’s Law on Investment provides favorable conditions for projects aligned with green growth and environmental protection. Priority projects may qualify for a four-year corporate income tax holiday, a preferential rate of 10 percent for up to 15 years, and land-use fee exemptions in designated zones, though actual incentives depend on meeting project-specific criteria. Provinces such as Binh Duong and Dong Nai are actively developing industrial clusters that support circular economy initiatives, offering infrastructure and administrative support.

For structuring, wholly foreign-owned enterprises are straightforward for traceability projects, which are light on capital and depend more on systems integration. Recycling facilities, however, often benefit from joint ventures with Vietnamese firms, particularly those that are state-linked or already embedded in textile supply chains.

Such partnerships secure access to feedstock and ease the process of obtaining permits and approvals.

Risks and mitigation

The most immediate risk is feedstock security. Vietnam generates substantial volumes of pre-consumer textile waste, but collection and sorting systems remain fragmented. Without guaranteed supply, recycling facilities face underutilization. The solution lies in long-term supply contracts with manufacturers or direct integration into collection networks at industrial parks.

Another risk is regulatory alignment. A traceability platform that fails to integrate with EU Digital Product Passports or satisfy US customs audits will be commercially useless. Investors must design systems around international compliance requirements from the outset and test them against buyer audits before scaling.

Finally, the sector’s most capital-intensive projects carry financial risk. Chemical recycling plants demand hundreds of millions in upfront investment and long payback periods. To reduce exposure, investors should blend commercial funding with concessional finance. Institutions such as the IFC, Asian Development Bank, and JBIC already support green finance in Vietnam, while the Vietnam Development Bank offers subsidized loans for circular economy projects. Structuring deals that combine long-term offtake agreements with blended finance can lower risk and improve bankability.

Outlook to 2030

By 2030, recycled fiber demand in Vietnam is expected to grow by 12 to 15 percent per year, potentially reaching 20 percent of all fiber use, compared with less than 5 percent today. Much of this demand is being driven by global buyers. H&M has pledged to source 30 percent recycled materials by 2025 and to use only recycled or sustainably sourced materials by 2030. Inditex plans for 40 percent of its fibers to come from conventional recycling by 2030, alongside 25 percent from next-generation technologies and another 25 percent from organic or regenerative sources. Adidas has committed to making 90 percent of its products “sustainable” by 2025 and aims for 10 percent of its recycled polyester to come from textile-to-textile sources by 2030.

If even part of these targets are met through Vietnam’s supply base, the domestic market for recycled fibers could be worth billions of dollars annually. The country’s trajectory will depend on investment. In a high-investment scenario, where chemical recycling facilities like Syre’s are realized and multiple mechanical facilities expand, Vietnam could rival Thailand as a regional hub for sustainable textiles. In a low-investment scenario, the country will remain dependent on imports from China, limiting its competitiveness in higher-value export segments. The difference between these outcomes hinges on how quickly investors move over the next three to five years.

ROI sensitivity for recycling investments (illustrative scenarios)

The figures outline potential revenues, margins, and payback periods across different recycling pathways, showing how returns scale with investment size.

Assumptions:

• Polyester staple fiber price range: US$900–1,300/t (Asia, 2024–2025 benchmarks).
• Mechanical recycling margins: ~8–12% EBITDA.
• Chemical recycling margins: ~12–18% EBITDA (based on global projects).
• Payback periods reflect industry norms, not Vietnam-specific audited outcomes.

Investment Path	Scale (t/yr)	Revenue @ US$1,100/t	EBITDA Margin (Range)	Annual EBITDA (Range)	Payback Estimate
Traceability platforms	N/A	Contract-driven	N/A	Compliance advantage	2–3 yrs
Mechanical recycling	~50,000	~US$55m	8–12%	~US$4.4–6.6m	5–7 yrs
Chemical recycling (base case: Syre ~150k t/yr)	~150,000	~US$165m	12–18%	~US$19.8–29.7m	8–10 yrs
Chemical recycling (high case: Syre scale-up ~300k t/yr)	~300,000	~US$330m	12–18%	~US$39.6–59.4m	8–10 yrs

Note: Figures are illustrative, based on industry benchmarks and public project disclosures (e.g., Recover’s mechanical line in Dong Nai; Syre’s planned Binh Dinh complex). Actual results depend on feedstock security, financing structure, and offtake agreements.

A structured decision framework

Foreign investors considering entry into this sector should view their options along three capital tiers. A low-capital entry through traceability delivers quick returns by securing contract access and compliance with EU and US requirements. A medium-capital path through mechanical recycling provides stable but moderate returns, especially when structured as joint ventures to secure feedstock. A high-capital entry through chemical recycling positions investors at the forefront of virgin-equivalent fiber production but requires long-term risk appetite and blended finance to succeed.

A phased approach is the most prudent. Investors can begin with traceability systems to embed themselves in supplier networks, expand into mechanical recycling once supply chains are secured, and move into chemical recycling as infrastructure and financing align.

Timing is critical

Vietnam’s textile industry stands at a turning point. Export competitiveness now depends on meeting recycling and traceability standards, and the deadlines from both domestic policy and external regulations are approaching rapidly. The country is not yet a leader in textile recycling, but with buyers demanding verifiable recycled inputs and traceability systems, the window for early investment is open.

Foreign investors who move now will gain first-mover advantage, secure long-term offtake agreements with global brands, and benefit from Vietnam’s generous investment incentives.

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