Although the leather and footwear industry of Vietnam is likely to earn a total export value of US$17 billion in 2016 thanks to international integration advantages, it will still face enormous challenges posed by heavy dependence on foreign input supplies. Vietnam Business Forum has an interview with Ms Phan Thi Thanh Xuan, General Secretary of the Vietnam Leather, Footwear and Handbag Association (LEFASO), on this issue. Giang Tu reports.
How do you assess the development potential of Vietnamese leather and footwear industry, especially after Vietnam joins FTAs and TPP?
Vietnam is one of the four largest footwear manufacturers in the world by output, just after China, India and Brazil. Its footwear products have been exported to 50 countries and territories in the world.
The leather and footwear industry is one of our backbone exporters, securing an average annual growth of 15 - 18 per cent. From 2016 when Vietnam joins free trade agreements (FTAs) with the European Union (EU), South Korea and specially Trans-Pacific Partnership (TPP), the current tariff of 17 - 45 per cent to 0 per cent will be brought to zero by 2018, thus helping footwear companies to boost exports.
In 2015, the United States spent nearly US$4.1 billion on Vietnam’s leather and footwear products, up nearly 50 per cent and equal to 33.9 per cent of the sector’s total exports. Currently, the US surpassed the EU to become the largest importer of Vietnamese footwear in the world. When the TPP takes effect, the growth prospect is even much higher. The Vietnam-EU FTA is forecast to boost export growth by 50 per cent in 2020 and to 93 per cent in 2025.
Although there are many opportunities in sight, leather and footwear companies' heavy dependence on imported raw materials is just one of numerous challenges. Can you talk about how to address these?
Most key materials for leather shoe production are imported, e.g. leather and leatherette. Domestic leather and leatherette meet only 30 per cent of production demands. Although Decree 111/2015/ND-CP on supporting industrial development has gone into effect, directive circulars and adjustments will be still needed to realise the decree. The promulgation of directive circulars for this decree in the current context of extensive integration will drop opportunities of local businesses and foreign investment flows.
To deal with difficulties, we will need a centralised industrial zone, carry out the master plan for leather and footwear industry development to 2020, with a vision to 2025 adopted by the Ministry of Industry and Trade, and establish specialised industrial areas to reduce production costs for companies.
In addition, leather and footwear companies still have small scales and lack technological equipment and product designers. Exports mainly come from foreign-invested manufacturers, while domestic companies primarily carry out offshore outsourcing orders.
In July, Lefaso will hold the Conference on Leather Footwear Export Promotion 2016. Could you please introduce the new features of this year's conference?
With the support of the Vietnam Trade Promotion Agency (Vietrade) under the Ministry of Industry and Trade, the Vietnam Leather, Footwear and Handbag Association (Lefaso) will host the Conference on Leather Footwear Export Promotion 2016. Over 300 manufacturers and exporters of footwear and inputs in Vietnam and foreign countries will attend the event. This year’s event scale doubles that of 2015, with participants from Italy, Turkey, India, South Korea, China and Brazil.
The conference will provide information and new situations of Vietnamese leather and footwear industry for international customers and Vietnamese manufacturers, update, enhance understanding, improve competitiveness of enterprises in the context of integration, and form trade forum for companies and investors to promote cooperation.
Through this conference, I hope that difficulties against footwear companies like raw materials, input costs and minimum wages will be dissolved to improve the competitiveness of leather and footwear companies to open up cooperation in the integration process.
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