Footwear material production needs investment

16:19 | 13/04/2015 Trade

(VEN) - Although Ho Chi Minh City has issued a number of policies to promote the development of support industries serving the leather and footwear sector, attracting investment in those industries remains difficult.

Footwear material production needs investment

Consistent policies are important to encourage leather and footwear enterprises to invest in support industries

According to a survey by the Ministry of Industry and Trade’s Institute for Industry Policy and Strategy (IPSI), the local content of support industry products used for manufacturing leather and imitation leather footwear for adults in Ho Chi Minh City was only 37 percent, while the rate of products of the same kind for children was 38.5 percent, that of canvas footwear reached 41 percent, that of sports shoes was 39 percent, while other leather and imitation footwear products reached 38 percent.

According to Shoes and Leather Association of Ho Chi Minh City General Secretary Nguyen Van Khanh, Vietnam’s leather tanning industry needs investment because businesses in the field in general have a humble financial capability. The lack of clear waste standards is hindering the tanning industry from development. This is a reason why foreign investors are reluctant to invest in this sector.

Khanh said that there were several businesses operating in the city’s leather and footwear support industry, including the Gia Dinh Shoes Co., Ltd., Viet A Chau Investment Development Corporation, and Dong Hung Co., Ltd., among others. These manufacturers just made simple products such as soles, eyelets, buttons, zippers, shoe insoles and carton boxes, while most of main materials – leather and imitation leather – were imported.

While preparing to take opportunities to be provided by the future Trans-Pacific Partnership (TPP) agreement, the Gia Dinh Shoes Co., Ltd. early invested in production of raw materials and accessories to satisfy footwear production demands. The company is developing an industrial zone to produce leather and footwear materials and accessories in Binh Duong Province, which is expected to go into operation in April 2015. Gia Dinh Shoes Co., Ltd General Director Nguyen Chi Trung said that the industrial zone is expected to not only increase the local content of company products (the current rate is 60 percent) but also provide a large amount of materials and accessories for other businesses in the sector.

Trung said that capital is the biggest difficulty of leather and footwear material and accessory producers; most of enterprises in the field have to find capital themselves, while there are no preferential policies for leather and footwear material and accessory investors; while the government and the Ministry of Industry and Trade encourage businesses to invest in anticipation of international integration, businesses in the sector haven’t benefited from preferential interest rates subject to medium and long-term loans; it is important to issue preferential land and tax policies for businesses in the field.

Ho Chi Minh City Business Association Chairman Huynh Van Minh said that consistent preferential policies for businesses, including reductions in enterprise income tax and import tax, and value added tax (VAT) exemptions for support industry products are important to develop support industries on a fast and sustainable basis; it is also necessary to have policies on stabilizing interest rates for businesses investing in this sector; the city should prepare land for investors, free enterprises investing apartment and workspace building projects from paying land rents, issue policies to promote skilled workforce training, and promote administrative reform to make it easier for businesses to benefit from investment incentive policies. 

By Thuy Duong