Leather, footwear run into export challenges

14:52 | 02/03/2018 Trade

(VEN) - The leather and footwear sector has been a key industry in Vietnam for many years, with an average growth rate of about 15 percent a year.

leather footwear run into export challenges

High export growth

The leather and footwear sector recorded high export growth during the 2013-2016 period. In 2017, export turnover reached US$18 billion, including US$14.7 billion from footwear and US$3.26 billion from handbags and luggage. Leather, footwear exports of FDI businesses continued to increase, accounting for 80.6 percent of the sector’s total export turnover. The US was Vietnam’s largest leather and footwear export market in 2017, followed by the EU and China.

Nguyen Duc Thuan, Chairman of the Vietnam Leather, Footwear and Handbag Association (Lefaso), says global market demand is increasing. More than 70 percent of footwear are produced in Asian countries such as China, Vietnam, Indonesia, the Philippines and Bangladesh. Vietnam’s leather and footwear sector targets US$19.5-20 billion in export turnover in 2018, with 55 percent local content.

Vietnamese footwear and handbags are now available in over 100 countries in the world, with 72 countries annually importing more than US$1 million worth of the products. However, footwear and handbag producers in Vietnam currently face four challenges, namely high labor cost, difficulty in applying automation, return of protectionism in many countries, and fiercer competition with firms in foreign countries, especially Myanmar and Bangladesh, said the association.

Increasing productivity

To overcome these challenges and achieve its goals, leather and footwear businesses need to make the most of opportunities provided by free trade agreements. In 2018, the EU-Vietnam Free Trade Agreement is expected to be signed, creating favorable conditions for the leather and footwear sector to achieve better results.

The fourth industrial revolution is forcing Vietnamese businesses to apply new production technologies in order to increase labor productivity. According to a survey conducted by Lefaso, some 75 percent of leather and footwear businesses have experienced difficulties investing in automation.

Experts are advising Vietnam to establish a statistical council on labor productivity in order to help the different economic sectors assess their positions, and thereby provide effective measures to improve labor productivity and competitiveness.

Lefaso has its own research and development center, which seeks to increase labor productivity. It urges manufacturers to base their administration on artificial intelligence, science and technology and to ensure that human resources training is closely linked to actual needs.

To achieve more competitive exports, the leather and footwear sector should overcome high labor costs by moving plants to labor-intensive areas, invest in the development of support industries to raise added-value, and limit production of low-grade products.

Thao Ngoc