Vietnam targets 10 percent growth in leather, footwear exports

08:30 | 10/02/2019 Industry

(VEN) - Exports of footwear, suitcases and bags reached an estimated US$19.5 billion in 2018, an increase of 10 percent compared to the previous year. With new favorable factors, the leather and footwear sector aims to achieve export turnover of US$21.5 billion in 2019, and create a breakthrough for the development of its support industry, contributing to deeper participation in global supply chains.

vietnam targets 10 percent growth in leather footwear exports

Favorable factors

Phan Thi Thanh Xuan, Secretary General of the Vietnam Leather, Footwear, and Handbag Association, said the Vietnamese leather and footwear sector has a significant position in the world market. Vietnam was second only to China in footwear exports, Xuan said, adding that average export price of Vietnam was US$15 each pair, 1.6 times higher than the world average. Vietnamese footwear quality has improved, as well, making Vietnam a reliable source for importers.

Export markets for leather goods and footwear have also changed markedly. Footwear shipments to China, the Republic of Korea and Japan have increased by over 20 percent, mainly due to Vietnam’s free trade agreements (FTAs) with the Republic of Korea and Japan and between ASEAN member nations and China. In addition to traditional markets such as the US and the EU, the Asian markets will be the key to export growth of the leather and footwear sector in 2019, Xuan said.

Nguyen Thi Thu Trang, director of the WTO and Integration Center under the Vietnam Chamber of Commerce and Industry (VCCI), said that with the deeper and boarder level of commitments, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will provide opportunities for footwear businesses to increase exports. Vietnamese businesses will also have more opportunities in Canada, which will impose a zero import tariff on both leather shoes and handbags immediately. Other CPTPP members like New Zealand, Chile and Australia will eliminate tariffs gradually in the next 3-4 years.

According to the association’s forecast, footwear and handbag exports will maintain a growth rate of 10 percent to reach turnover of US$21.5 billion in 2019.

Support for sustainable development

While short-term growth appears assured, many businesses are concerned about sustainable development. Pham Hong Viet, chairman of the Hanoi Shoes Leather Association, said most leather and footwear businesses are small- and medium-sized, with limitations in terms of financial capacity, corporate governance, and marketing. They have faced difficulties in working directly with customers, and are also under pressure to adhere to strict overtime regulations for workers and environmental standards.

According to the Dong Luc Joint Stock Company, businesses that import shoe soles for production are taxed at 20 percent, while the import tax on whole shoes is zero percent. Clearly, the current tax policy does not encourage businesses to increase the local content.

Leather and footwear firms are also hampered by the lack of research centers and bonded warehouses, making it difficult for them to follow consumer trends and designs.

Nguyen Duc Thuan, chairman of the Vietnam Leather, Footwear, and Handbag Association, said the government and the Ministry of Industry and Trade should support businesses by creating a fair playing ground and minimizing administrative procedures to protect Vietnamese businesses in the domestic market.

Deputy Minister of Industry and Trade Cao Quoc Hung said that as a part of the rapidly changing fashion industry, the leather and footwear sector must focus on developing an appropriate support industry, even though it will take significant time and resources. The Ministry of Industry and Trade will help domestic businesses build a development strategy for the leather and footwear support industry and raise incentives in credit, technology and land for domestic producers, especially small- and medium-sized enterprises. He also urged the association to enhance links between domestic producers and the foreign-invested sector in Vietnam to help them participate in global value chains.

Cao Quoc Hung said the government continues to maintain macroeconomic stability with reasonable interest rates, and to promote administrative reforms in 2019. The effect of the CPTPP will provide export opportunities for businesses, including leather and footwear ones. However, businesses will also face challenges in meeting export standards and overcoming technical barriers.

Viet Nga