Major pressure of the Vietnamese leather and footwear industry
The big footwear industry in Vietnam
17-08-2016 – 19:40 PM | Macroeconomics – Investment Sharing 4
Major pressure of the Vietnamese leather and footwear industry
Vietnam is the third largest footwear producer in Asia after China, India, and fourth in the world. Currently Vietnam is producing about 920 million pairs of shoes a year, exporting more than 800 million pairs to more than 50 markets in the world, with the European Union (EU) accounting for the largest share. Handbags are also exported to 40 countries, with the US market accounting for the highest rate of 41.6%.
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Vietnam is the third largest footwear producer in Asia after China, India, and fourth in the world. Currently Vietnam is producing about 920 million pairs of shoes a year, exporting more than 800 million pairs to more than 50 markets in the world, with the European Union (EU) accounting for the largest share. Handbags are also exported to 40 countries, with the US market accounting for the highest rate of 41.6%.
Difficulties ahead
With 12 free trade agreements (FTAs) that Vietnam has signed with other countries and regions around the world, Vietnam’s leather footwear exports will enjoy huge incentives as tariffs drop sharply from 3.5 -57.4% down to 0%, opening up great export growth opportunities for the footwear industry.
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However, Diep Thanh Kiet, deputy chairman of the Vietnam Leather and Footwear Association (Lefaso), said that as tariff barriers were lowered, technical and non-tariff barriers were raised. This is a risk for small and medium leather footwear enterprises in the country.
Truong Thi Thu Ha, deputy director of the Light Industry Department under the Ministry of Industry and Trade, said that in the first six months of this year, export growth of leather and footwear was only 7% lower than the same period last year. Much more than the average of 14% in 2015.
In 2016, the footwear sector has set a target of $ 17.4 billion for export and will increase its export turnover to $ 54 billion by 2030. Accordingly, the growth rate in quantity is 1.8 times, but the growth rate in value is up to 4 times. Explaining this gap, Diep Thanh Kiet said that to take advantage of the FTAs as well as enhance the competitiveness of foreign footwear enterprises, domestic enterprises are forced to join the chain. global supply and must advance into the production of high value products, can not continue to produce the current product line.
Previously high value products only accounted for about 5%, but now has reached the level of about 10%. “Some countries, such as Cambodia, Myanmar and Bangladesh, are producing basic footwear and are likely to enjoy preferential tariffs from the European Union and the United States and will be a direct competitor of Vietnam.” Mr. Kiet warned.
In order to participate in the global supply chain, our country’s footwear industry is experiencing great difficulties in the low supply of raw materials and domestic materials. According to Lefaso, the localization rate of products produced by Vietnamese enterprises must be raised to 60% to meet the conditions of origin rules in FTAs that Vietnam has participated in, reducing Logistic costs and increased activeness of Vietnamese enterprises.
Balance the balance
Another paradox, although footwear is one of the industries with the highest export turnover of Vietnam, the “cake” exported is mostly in the hands of foreign direct investment enterprises ( FDI).
According to Lefaso, about 800 FDI enterprises, although accounting for less than 25% of enterprises operating in the industry, are decisively up to 77% of export value, many of which are leading FDI enterprises. lead the market. For example, Pouchen with a dense network of subsidiaries has brought in over VND 30,000 billion in sales (equivalent to 17% of Vietnam’s total footwear export turnover).
FDI enterprises have been very active in the supply chain because their systems are supplied from raw materials, production and distribution. In the global supply chains of major footwear brands in the world such as Nike, Adidas … Vietnamese enterprises are inactive because of the position of outsourcing, the production depends on the importer’s designation. export.
According to Lefaso, the domestic footwear industry still has some basic weaknesses. The first is the lack of capital, because enterprises are now mainly small and medium enterprises. The second is the lack of technology. Third is the lack of senior staff. The fourth is the lack of management capacity and low labor productivity. The average productivity of Vietnamese leather and footwear factories now accounts for only 60-70% of the productivity of FDI enterprises operating in Vietnam.
According to Kiet, the difficulty of the local leather and footwear businesses will increase as production costs are expected to increase in the coming years, especially due to the influence of the recent regulations of the Government on minimum wage.
In order to reduce the current disadvantages of the domestic footwear industry, a Lefaso service center has three main functional groups. Firstly, there is a link between raw materials, products and so on, so as to form a domestic linking chain consisting of brands, manufacturers, suppliers of raw materials and accessories in the country. compete in domestic market and export. Second, focus is on the training of human resources for the leather and footwear industry in Vietnam. Third, put into operation research department, analysis of the environment, chemical standards.
With the door open from the FTAs, as well as the demand from the domestic market, it is hoped that the rapid and radical revolution will be made for the footwear industry in particular.
The leather industry aims to establish a domestic chain
According to Dang Cuong