AEC opens new opportunities for leather, footwear sector

10:07 | 26/08/2014 Cooperation

(VEN) - Following the tariff reduction itinerary, the tariff on Vietnamese footwear exports to the ASEAN Economic Community (AEC) will stand at zero percent by the end of 2015 opening opportunities for the Vietnamese leather and footwear industry to expand its export market and cooperate to develop material sources.

Vietnam Leather and Footwear Association (Lefaso) General Secretary Phan Thi Thanh Xuan said that ASEAN accounts for a significant percentage of Vietnam’s footwear export markets. Footwear exports to this market reached about US$1.807 billion in 2013. Following the tariff reduction itinerary, the tariff on footwear exports to the AEC will drop to zero percent by the end of 2015 providing tremendous opportunities for the Vietnamese leather and footwear industry.

The first advantage will lie in the export market. Among the AEC, Thailand, Vietnam, Indonesia and Malaysia have the most developed leather and footwear industries and share similarities. However, Vietnam holds a high competitive advantage due to a strong skilled workforce and low labor costs. For this reason, it is likely to expand its export market in the AEC.

Vietnam also has opportunities to cooperate with other countries in the region to develop material sources. Not only Vietnam but also other AEC countries currently have to import footwear materials from China. Cooperation within the region will help the countries reduce investment costs, produce and supply a large amount of footwear, progressively reduce material imports and increase the added value of their products.

Since most AEC footwear producing countries export their products, the AEC will help provide a stable source of exports and stabilize their positions in major export markets such as the US, the EU and Japan.

However, Phan Thi Thanh Xuan said that any trade agreement offered both opportunities and challenges. After tariff barriers are removed, the countries will set up technical barriers to protect domestic production and market. So far other countries in the AEC had already established technical barriers to footwear imports.

Footwear exporters and foreign direct investment (FDI) businesses in Vietnam currently do not face many hindrances in terms of technical standards. However, domestic businesses are unlikely to meet quality requirements.

Phan Thi Thanh Xuan explained that most domestic businesses make footwear for domestic sale and do not follow any specific standards. Moreover, they usually buy substandard materials from small-sized facilities and apply dated production technology. For this reason, it is difficult for them to overcome foreign technical barriers.

In addition, after the tariff drops to zero percent, competition among AEC countries will increase, she said.

To increase the resistance of domestic businesses and resist competition with other AEC countries, now is the right time for Vietnamese businesses to renovate themselves, improve the quality of their products, promote their image and build their brand names. They also need to carve a niche on the domestic market to create a basis for expanding to the export market.

Businesses should increase market research to develop a competitive advantage for Vietnamese sports and fabric footwear.

Lefaso will increase updates on the AEC to help businesses thoroughly understand their opportunities and challenges after Vietnam joins the AEC by 2015.

To build the internal strength of the Vietnamese leather and footwear industry, Minister of Industry and Trade Vu Huy Hoang asked the Vietnam Textile and Apparel Association (VITAS) and Lefaso to devise support industry development schemes for the textiles-garments and leather-footwear industries. In the short term the two associations will draw their plans, choose investment locations, and identify the scale of their investment projects, support policies and materials under investment priority./.

By Bui Viet