17:05 | 20/01/2016 Trade
(VEN) - Free trade agreements (FTAs) have created positive effects helping the leather and footwear sector fulfill its export plan for 2015 ahead of schedule, promising good prospects for footwear exports in 2016.
The export value of the leather and footwear sector is predicted to grow 15-20 percent in 2016 compared with 2015
According to Vietnam Leather, Footwear and Handbag Association (LEFASO) Secretary General Phan Thi Thanh Xuan, footwear exports to all markets grew in 2015. Notably, exports to China increased strongly, reaching about US$600 million.
The strong increase in footwear exports to China was attributed to labor cost rises in the country. The devaluation of the Chinese yuan also created pressures on businesses doing the outsourced manufacturing work in China. Therefore, many investors have moved their footwear production facilities from China to Vietnam to export their products back to China.
Phong Chau Group Deputy Director Nguyen Huu Anh said that apart from traditional markets such as North America and West Europe, the group had promoted exports to new markets such as Thailand and Japan, and its export value grew 5-7 percent in 2015. In his opinion, domestic leather and footwear businesses should bring into play their advantages to benefit from the ASEAN Economic Community (AEC).
In 2015, the leather and footwear sector moved some manufacturing facilities to rural areas to utilize abundant labor resources of localities. This has helped the sector expand production and increase output. The attraction of foreign investment also brought in good results. Many businesses from Japan and Chinese Taipei have invested in building facilities for large-scale production in Vietnam.
Opportunities in 2016
Phan Thi Thanh Xuan believes the EU-Vietnam Free Trade Agreement (EVFTA), the Trans-Pacific Partnership, and the AEC will have strong impacts on the development of the Vietnamese leather and footwear sector. The export value of the sector is predicted to grow 15-20 percent in 2016 compared with 2015.
Xuan explained that the time when the EVFTA takes effect will see the end of preferences for Vietnam under the Generalized System of Preferences (GSP). Thanks to these preferences, Vietnamese footwear exports to the EU have grown 20 percent since 2014. The EVFTA will eliminate most of tariff lines, so it is expected to create a greater impulse for Vietnamese footwear exports to the EU, with export growth forecast to reach 20-30 percent.
Along with opportunities, FTAs have also created pressures on Vietnamese footwear businesses. In 2015, the EU set up a number of non-tariff barriers, including changes in the Registration, Evaluation, Authorization, and Restriction of Chemicals, formaldehyde and azo dyes requirements for leather products, and corporate social responsibility requirements.
In 2016, domestic businesses will have to pay insurance premiums for employees according to their actual salaries. At the same time, they will have to cope with increases in logistics service charges as well as changes in e-customs declaration. These will be considerable hindrances.
To help businesses overcome difficulties, LEFASO will update them on changes in policies and regulations and assist their participation in trade promotion and market development programs. In addition, it will promote business relations with credit institutions to help them seek capital for production expansion.