Leather, footwear sector improves growth quality

12:20 | 20/01/2019 Industry

(VEN) - Phan Thi Thanh Xuan, Secretary General of the Vietnam Leather, Footwear and Handbag Association, told Vietnam Economic News’ Viet Nga that the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is expected to create positive changes in the growth quality of the domestic leather and footwear sector when it takes effect in 2019.

leather footwear sector improves growth quality
Phan Thi Thanh Xuan, Secretary General of the Vietnam Leather, Footwear and Handbag Association

Could you share the leather and footwear sector's 2018 results?

In 2018, the sector's export value reached about US$19.5 billion, up 8.6 percent compared with 2017. Notably, knapsack and handbag exports to major markets, such as Japan, the US and the EU, remained on the rise.

Businesses also promoted exports to China. Exports to this market have grown 20 percent in recent years. The sector imports materials from China and exports finished products to this market, creating opportunities for domestic companies to increase their share in this huge market.

Leather and footwear are key Vietnamese exports. However, their added value remains low. Could you share your views on this matter?

Domestic leather and footwear companies for many years have worked as outsourcing service providers for foreign brands of foreign invested companies in Vietnam. For this reason, the added value they created could not be high. In previous years, foreign invested companies contributed 80-81 percent to the leather and footwear sector's export value. But in the first 11 months of 2018, their input dropped to 79.4 percent of footwear export value and 76.2 percent of handbag, purse and bag export value. Meanwhile, the export value of domestic companies increased.

The CPTPP has been ratified by some countries. What do you think of its impact on leather and footwear exports in 2019 and ensuing years?

Tariffs on leather and footwear will be cut considerably as soon as the agreement takes effect. The export of these products to CPTPP member countries is expected to grow 10-15 percent in 2019.

Other CPTPP members, such as Japan, Australia, New Zealand, Singapore, Malaysia, Chile and Brunei, have already signed free trade agreements (FTAs) with Vietnam, and businesses have enjoyed tariff cuts when exporting to these markets. Therefore, no breakthrough is expected in leather and footwear exports, especially to markets that already have FTAs with Vietnam.

However, the CPTPP is expected to help attract more foreign investment in the leather and footwear sector. Companies with foreign direct investment will help domestic businesses produce materials and gradually deepen their involvement in global supply chains in order to enhance their competitiveness and create higher added value, thus improving the growth quality of the entire sector.

What do you think the state and businesses should do to take advantage of opportunities presented by the CPTPP?

The CPTPP creates a large playing field that requires businesses to prepare carefully. Specifically, businesses need to study its regulations, especially on rules of origin. They should invest in equipment and technology to meet quality requirements of each member country, and intensify trade promotion activities in member markets.

For its part, the state should issue decrees and circulars guiding business access to tariff cuts under the CPTPP and their implementation of rules of origin and other regulations. The state should also support their participation in trade promotion activities to help them take advantage of CPTPP preferences to increase their added value and improve growth quality.

Viet Nga