Economic Sector

Last updated: Wednesday, May 15, 2019


Many Opportunities for Vietnam Leather and Footwear Industry

Posted: Friday, April 26, 2019

Vietnam's leather and footwear export turnover reached US$19.5 billion in 2018, making Vietnam the second largest country in the world in terms of footwear export volume. However, in order not to depend on partners and get rid of the outsourcing status, the leather and footwear industry needs to innovate.

New progress

If in 2013, Vietnam leather and footwear export turnover reached US$10.32 billion, 5 years later, in 2018, export turnover of the industry nearly doubled to about US$19.5 billion. The total turnover increased by 8.5% against 2017 and accounted for about 8% of the total export turnover of the whole country. This is an impressive achievement of Vietnam's leather and footwear industry in 2018.

Currently, Vietnam ranks second, only to China in footwear export volume with more than one billion pairs of various types per year. In particular, the quality of Vietnam's footwear has been highly appreciated. If the average shoe price in the world is US$9.81/pair, Vietnam's shoe price is about US$15/pair, 1.6 times higher. Vietnam's leather and footwear products are available in more than 100 countries around the world, with the five largest markets including the U.S, European Union, China, Japan and Korea.

In particular, at present, some domestic enterprises have also created many collections and many designs of their own, not depending on customer's designs as before.
Ms. Phan Thi Thanh Xuan, Vice President and General Secretary of Vietnam Leather, Footwear and Handbag Association (LEFASO), said: “Some businesses have built their designs for the coming seasons. It is a very good step for Vietnamese enterprises, when we have gone step by step, from completely dependent on customers' designs, now together with customers to come up with new designs or build their own collections to offer.”

Moreover, Vietnam recently signed a number of trade pacts such as EVFTA, CPTPP which promise to open up many development opportunities for Vietnam's leather and footwear industry, attract investment and boost exports to the EU and CPTPP member countries with potential markets like Canada, Mexico, Australia.

On January 14, 2019, the CPTPP Agreement officially came into force in Vietnam. This is considered a high standard FTA, not only referring to traditional areas such as tariff reduction on goods, opening service markets, intellectual property, and technical barriers related to trade but also dealing with new non-traditional issues such as labor, environment, Government purchase, State enterprises and so on. The implementation of CPTPP Agreement has a significant impact on the leather and footwear industry.

Vietnamese economic expert Nguyen Minh Phong said: “Leather and footwear products have a high rate of tax reduction right after the CPTPP takes effect and with trade advantages stipulated in CPTPP, Vietnam will attract a lot of foreign investment. Export turnover of leather and footwear to member countries of CPTPP will continue to increase in the coming years.”

With new opportunities, Vietnam leather and footwear industry aims to achieve export turnover of about US$21.5 billion in 2019, maintaining the growth rate of 10%. However, to do that, there is still much work to do.

"Knots" to be removed

Although the leather and footwear industry is a key export sector, the added value is not high due to the dependence on imported raw materials. This is the situation of the leather and footwear industry for many years. FDI enterprises have a stable export market but domestic enterprises face many difficulties in the market, so most of them have to perform processing for foreign brands.

Participation in CPTPP has many new opportunities for Vietnam's leather and footwear industry and supports its growth. However, the leather and footwear industry also faces many challenges to meet the new conditions of rules of origin, in which the localization rate of production in Vietnam must reach at least 55%. Therefore, for enterprises that depend too much on imported raw materials, if they do not solve this problem quickly, there will be a risk of losing opportunities.

Not only lack of supply of raw materials, but also production capacity are limits of Vietnamese leather and footwear enterprises. This is due to the fact that many businesses are used to making small orders and focusing on the domestic market. Therefore, when the opportunity comes, businesses that do not improve the scale and production capacity will face difficulty to meet large orders, high requirements in large markets.

Ms. Phan Thi Thanh Xuan said: “Although Vietnam can produce leather and footwear designs, businesses need to try to master them, which means they must build their own brands".
Currently, a number of Vietnamese leather and footwear brands such as Juno, Evashoes, Biti’s, Bita’s are known and trusted by many domestic consumers. However, to further develop and make good use of this integration opportunity, businesses still need a linkage with international brands.

It can be said that with the signing of many trade agreements, the Vietnamese leather and footwear industry has many opportunities to develop production, quality, design and affirm their names as well as escape the outsourcing status. In order to do that, shoe enterprises need to quickly seize opportunities, improve production capacity from technology, design and labor to meet the increasingly high standard demands of the large international markets.

Giang Tu

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