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Vietnam’s footwear industry actively seizes opportunities from TPP - Part 2 PDF Print
Monday, 07 December 2015 11:00

VIETRADE - Currently one out of three domestically purchased pairs of shoes is made in Vietnam in the context that 130 pairs of shoes were purchased in 2013. According to the master plan of development of footwear of Vietnam to 2020, with a vision to 2025, footwear industry is the key exporting industry, with its strategic products are shoes, sandals and priority to sneakers and canvas shoes, fashion leather footwear, high quality briefcase, bag, and wallets, accessory production and supporting industries, quality leather and leatherette; as well as building capacity to design and develop new products. Outlook for Vietnamese footwear is positive, especially when export tariffs to EU and other TPP countries will be reduced to 0% and Vietnam abides by the geographic origin regulation for its products.

 

Currently, Vietnam’s footwear industry has 812 enterprises and more than 624,000 employees (75% of whom are female); 70% of big exporting enterprises are joint ventures or 100% foreign capital. 90% of Vietnam’s footwear products are processed products that are dependent on technical devices, technology, design, and sources for imported supplies of raw materials, accessories.

 

In reality, Vietnam is independent of its materials for canvas shoes (100%) and some other products (30-40%), however more than 70% of enterprises completely depend on imported materials. Every year, Vietnam spends approximately US$ 300 million on importing leatherette and leather. Leather factories are incapable of supplying 10% of their demand and are now working with only 25% of their capacity due to lack of materials. Raw materials account for a large proportion (68-75%) of price structure of footwear. Localization rate of enterprises in the industry is only 40-45%. These enterprises have to import most of the important materials such as leather, leatherette, canvas for upper parts, PVC, PU paint, fabric, and glue. They are also dependent on suppliers from raw materials to designs and marketing, therefore are unable to develop their own brands. Less than 20 enterprises with 100% Vietnamese capital are able to manufacture under FOB terms.

 

“Being the contractors” means footwear industry has very little added value and it is hard for enterprises to play an active role in receiving orders managing the supplies of materials. Such dependence of imported materials from other countries lowers added value of its exporting products.

 

In the period of 2009 – 2013, although domestic production was 350 million square feet/year, increasing by 3 times compared to that of 2006, of which 60% were for export, this only met 40% of the demand for leather for export production. With a vision to Vietnam’s current growth, demand for leather for exporting footwear production by 2015 will increase around 700 – 750 million square feet and will continue to increase in the coming years. Without new investment or expansion of its production, Vietnam’s domestic capacity to produce leather for export will continue to decrease. There are growing pressure and demand for planning of industrial zones exclusively for footwear industry with synchronized system on infrastructure to dispose environment pollution on production sewage; for development of raw material zone (leather, cotton, synthetic fibers, and chemicals). It is expected to be a substantial motivation to create development forces for footwear industry.

 

Footwear companies with sales of over 2,000 billion VND in 2014

Footwear_companies_with_sales_of_over_2000_billion_VND_in_2014_-1


In order for enterprises to proactively execute plans to prepare for new opportunities, develop beyond contractors, it is important to promote campaign to raise awareness on opportunities, advantages, disadvantages from TPP, FTAs between Vietnam and EU and other partners.

 

Especially, it is urgent to have plans for footwear industrial zones, even for leather industry, with large-scale establishments of hundreds of hectares that are convenient for environment protection, collective production management, and development for supporting industries with practical mechanisms and policies. In addition, it is important to invest logically and efficiently in marketing, design, and market development; to increase social and environment responsibility for green production and sustainable development.

 

With experience and success over the past 20 years of establishment and development, footwear industry is waiting for a directive on the development of supporting industries, with necessary support on tax (corporate income tax, import tax, VAT), infrastructure, and credits to attract more investors; especially small and medium enterprises should be supported to develop in order to reach the target of 1.69 billion production of shoes and sandals, 311 million production of bags and suit cases, 63 million production of hard leather ... to reach the total export revenue of US$ 24.5 billion by 2020. (the end)



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