Export Promotion for Vietnam Leather - Footwear Industry

The leather and footwear industry is a key export-driven economic sector of Vietnam and a big contributor to the country's GDP growth. Although the added value of the leather and footwear sector is not large, with over 800 enterprises, it generates jobs for 1 million workers, of which 85 percent are female.

 

According to statistics, Vietnam is the fourth largest leather and footwear producer by output in the world after China, India and Brazil but the third largest exporter by value after China and Italy. Vietnam’s footwear has been exported to over 50 countries. Its market share in the US, the EU and Japan has continued to increase to secure the second position only after China. Handbag is a fast-growing export, present in over 40 countries.

 

According to preliminary data released by the General Department of Vietnam Customs, the leather and footwear industry fetched export value of US$5.84 billion in the first five months of 2015, representing an on-year increase of 16.8 percent and accounting for 9.18 percent of the country’s total exports. Of the sum, footwear brought in US$4.6 billion, up 19.5 percent and handbags took US$1.21 billion, up 18.2 percent.

 

Based on monthly export performance, the leather and footwear sector was estimated to earn US$7.1 billion from exports in the first six months of 2015, up 18 percent year on year, of which footwear accounted for US$5.7 billion, up 16 percent, and handbags fetched US$1.45 billion, up 27 percent.

 

 

The Government of Vietnam has actively negotiated FTAs with countries with strong impacts on the sector development. Typical pacts are the Trans-Pacific Partnership (TPP) with 12 Asia - Pacific countries, the FTA with the EU (FTAEV), the FTA with Customs Union of Russia - Belarus - Kazakhstan, and the ASEAN Economic Community Agreement effective in 2015. When Vietnam joins the TPP, the first plus is the elimination of the current tax rate of 3.5 - 57.4 percent. With zero tax, the leather and footwear sector is expected to make a strong export leap. This is not only seen as a driving force but also a "golden" opportunity for the leather and footwear industry to develop both in quantity and quality.

 

ASEAN, a group of 10 Southeast Asian nations, inked FTAs with China, Japan, South Korea, India, Australia and New Zealand. ASEAN is also negotiating a common Regional Comprehensive Economic Partnership (RCEP) between ASEAN with and the six above countries, called ASEAN+6, to form a large FTA area consisting of 16 countries with more than 3 billion people. Vietnam will have the opportunity to expand exports to East Asian nations, India and Australia.

 

Particularly, Vietnam signed an FTA with South Korea on May 5, 2015 and with the Eurasian Economic Union (formerly known as the Customs Union) on May 29, 2015. Signatories are carrying out procedures for the early enforcement of these agreements. Also in the first six months of 2015, Vietnam held talks with other parties to finalise Vietnam - EU FTA and TPP, expected to be signed in 2015.

 

As FTAs will take effect in the next 1-2 years, they will have no major direct impact on export increase in 2015 but they will create an attractive environment for foreign investors seeking to establish production facilities in Vietnam.

 

The ASEAN Economic Community (AEC) will be formed on December 31, 2015, making ASEAN an important market with 625 million people. However, Vietnam’s footwear and handbag exports to ASEAN countries will not increase much because many ASEAN countries are currently strong rivals to Vietnam. Meanwhile, competitive pressures in the domestic market will augment as ASEAN countries will seek to export footwear to Vietnam when import tariffs are made 0 percent.

 

However, the leather and footwear industry of Vietnam must continue to confront many inherent challenges relating to input materials, human resources, product development and business administration. Besides, it will have to prepare for dealing with new challenges arising from FTA requirements.

 

There are many reasons for the current difficulties of the Vietnam’s leather and footwear industry in seeking exports: Outsourcing for export, using input materials offered by foreign contractors, having weak design capacity and weak material production and supply development. Some inputs have not been or little been made in Vietnam, including leatherette, nonwoven fabrics, technical fabrics, insole texon, materials and accessories (in metal and plastic), adhesives and chemicals. The sector can supply less than 20 percent of these items.

 

Besides, product quality of some businesses is disqualified for export. Some companies are qualified for export but they cannot meet delivery requirements.

Besides, the technological level of Vietnamese leather and footwear industry is limited, resulting in production difficulties. Vietnam has not planned material production development zones like leather, cotton, synthetic fibres and chemicals.

 

The Third Leather and Footwear Export Promotion Conference will discuss solutions to resolve internal difficulties and seek export methods for the Vietnamese leather and footwear.

 

The conference is an opportunity for Lefaso to popularise the image and growth of the leather and footwear sector. This is also a chance for the industry and the association to raise its prestige, position and impact in Asia and the world and a good opportunity for Vietnamese businesses to meet, exchange and acquire experience from domestic and foreign companies, contact foreign importers, exporters, contractors and customers to boost export infrastructure and introduce their capacity and capabilities.

 

At the conference, more than 200 footwear exporters and material suppliers in Vietnam and other nations will jointly discuss such contents as leather - footwear and handbag export potential, market demand, advantages, difficulties and challenges in export; barriers to international trade in relation to leather and footwear industry; capacity building for Vietnam’s leather - footwear - handbag products in the upcoming time (to 2020).

 

We expect that the conference will bring practical results to leather and footwear businesses to promote cooperation and mutual understanding, attract investment for production expansion, increase orders and boost export growth. The event is also expected to enhance cooperative relations and export expansion, share information about advantages, disadvantages, opportunities and challenges for each country in the region and in the world for concerned entities to seek proper solutions to take advantage of market expansion opportunities and select product development strategies.

 

Not only that, Lefaso also expected that the conference will help boost the image of leather and footwear industry to delegates from various countries in the region and in the world and introduce export potential, exporter reputation, product quality and export capacity to them.