Leather and footwear sector needs re-planning

15:39 | 05/03/2016 Economy- Society

(VEN) - The master plan for the Vietnamese leather and footwear sector’s development towards 2020 with a vision to 2025 has become unsuitable in a context where it has achieved an annual growth rate of 15-20 percent over the last decade. Therefore, a new plan is crucial for laying firm foundations for the sector to further develop.

Leather and footwear sector needs re-planning

The leather and footwear sector grew strongly in 2015

Large surplus

According to Vietnam Leather, Footwear and Handbag Association (LEFASO) Secretary General Phan Thi Thanh Xuan, the leather and footwear sector’s export value reached US$14.9 billion in 2015, bringing in US$7 billion in value. Exports to the US accounted for the highest percentage of the total export value, 43 percent, with the EU being the second largest importer of Vietnamese leather and footwear products.

LEFASO President Nguyen Duc Thuan said that since Vietnam finished negotiations on some free trade agreements, especially the Trans-Pacific Partnership (TPP), investment in production expansion by foreign invested businesses has increased. The value of leather and equipment imports grew nine percent and 28 percent respectively in 2015.

These FTAs have helped Vietnam attract larger export orders. In January some major importers worked with LEFASO to seek outsourcing partners for orders amounting to about US$50 million. This year the leather and footwear sector expects footwear exports will grow about 15 percent, handbag, umbrella, and headwear exports will grow 13 percent, and the total export value of the entire sector will reach about US$17 billion.

Re-planning, urgent requirement

Economists think businesses with foreign direct investment (FDI) are better prepared to welcome opportunities from international integration than domestic companies. Labor productivity at FDI businesses is much higher compared with domestic companies.

Footwear production technologies have changed rapidly. The use of leather to make shoe caps has decreased by 50 percent. Moldings have been used instead of pressing and pasting technologies to make shoe uppers and soles. “These new technologies have helped increase labor productivity at FDI companies. If domestic companies do not catch up with these changes, they will be unable to compete with FDI businesses in benefiting from international integration,” Thuan said.

The plan for development of the leather and footwear sector towards 2020 with a vision to 2025 has become unsuitable given the new situation, Thuan added. A new plan, in his opinion, is urgently needed to develop the sector in two stages, from 2015-2020, and 2020-2025. In the 2015-2020 period, the sector needs to concentrate on material production and human resources training. It is necessary to build three to four exclusive industrial parks for the sector to create links between manufacturers, build supply chains, and promote exports.

Deputy Minister of Industry and Trade Ho Thi Kim Thoa: The Ministry of Industry and Trade has assigned the Light Industry Department to coordinate with LEFASO to outline a new, suitable plan that could lay the foundation for the leather and footwear sector to further develop.


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