Although Vietnam is one of the 10 biggest exporters of footwear in the world and the second biggest exporter to the US market, its leather - footwear industry is still prone to instability,” Diep Thanh Kiet, Vice President of the Vietnam Leather, Footwear and Handbag Association (Lefaso) said at a conference titled “Vietnam Economy 2014 - Prospects for footwear - apparel businesses" hosted by the Vietnam Chamber of Commerce and Industry - VCCI - HCM City Branch (VCCI-HCM) in collaboration with Lefaso.
He pointed out that the instability is resulted from the low localisation ratio of the leather and footwear sector, which is currently accounting for only 40-45 percent (mainly sewing threads and shoe soles) while the most important materials - tanned leather and artificial leather, are imported. Not only input materials, the industry is short of technical expertise and design capacity to independently develop domestic brands and production lines. Most footwear technologies and production methods in Vietnam are transferred by foreign companies. Besides, although labour costs are low, most Vietnamese workers in the sector have poor skills and professional knowledge, thus resulting relatively low labour productivity.
Kiet said the Vietnamese leather - footwear industry is now best at production organisation stage, which includes production lines, human resources and production technologies. “If we fail to increase added value and output in three other stages (product design and research, production capacity generation, and product distribution), the leather - footwear industry will not be able to grow up in the next five years,” he added.
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The leather - footwear is an important economic sector as it is a big forex earner for Vietnam. According to statistics, the sector now has 812 active businesses and employs over 624,000 workers.
The sector saw an average annual growth of 10-15 percent from 2010 to 2013. In 2013, it earned US$10 billion from exports, accounting for 8 percent of the country’s total exports. In the first four months of 2014, it raked in export turnover of US$3.717 billion. It was expected to earn US$14 billion from exports in 2014.
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However, according to experts, the Vietnamese leather - footwear sector also has huge potential, particularly when Vietnam is expected to conclude the Trans-Pacific Partnership (TPP) Agreement this year and the Free Trade Agreement with the Customs Union of Russia - Belarus - Kazakhstan is under good negotiation. Ms Pham Thi Thu Hang, General Secretary of VCCI, said Vietnam’s footwear is very competitive in price on global markets and is currently present in most major markets like North America, the EU and Japan.
Mr Phan Chi Dung, Director of the Department of Light Industries under the Ministry of Industry and Trade, said, to grasp the opportunity when Vietnam officially signs free trade agreements (FTAs), many foreign investors are promoting investment in footwear material production, thus opening up a bright prospect for this industry. He said "Although they do not come in a greater number, foreign investors, typical of rich experience and strong financial resources, are rapidly carrying out their investment projects to enjoy investment incentives and increased profit."
According to the Vietnam leather - footwear development master plan to 2020, with a vision to 2025, leather - footwear will become a key export. The sector targets annual growth at 9.4 percent in the 2011 - 2015 and at 8.8 percent in the 2016 - 2020 period while raising the localisation ratio to 60-65 percent in 2015 and 75-80 percent in 2020.
Thanh Thao
Vietnamese
