Materials account for 68-75 per cent of footwear production costs, but the localisation ratio is now only 40-45 per cent. Key materials like leather, artificial leather and canvas are mostly imported. Increasing the localisation ratio of leather and footwear products is a priority requirement for international integration. The Leather and Footwear Export Promotion Conference will look into related shortcomings and solutions. Below requirements
As of early 2014, the country had 129 material producers, including tanners. The industrial production value of the leather and footwear material sector expanded 16.5 per cent a year in the 2006-2011 period. The proportion of material value to overall leather and footwear production value was only 20.3 per cent in 2011. This growth was lower than supporting industries of other industries like garment-textile, electronics and mechanics, and was not commensurate with the development potential of supporting industries in Vietnam.
The Vietnam Leather, Footwear and Handbag Association (Lefaso) admitted that the added value of leather, footwear and handbags of Vietnam is still low. In 2013, Vietnam’s leather footwear and handbag export turnover reached US$10.3 billion, of which materials account for 70 percent, or US$7 billion. Particularly, imports accounted for 60 per cent, or US$4.2 billion, and domestic sources contributed 40 per cent, or US$2.8 billion. In reality, Vietnam is importing leather from South Korea (18 per cent), Taiwan (14 per cent), Thailand (11 per cent), China (9 per cent) and other countries, and importing other materials from China (60 per cent), Taiwan (20 per cent), South Korea (10 per cent) and other countries (10 per cent). The country also imports machinery and equipment from Taiwan (49 per cent), China (36 per cent), South Korea (9 per cent) and other countries (6 per cent).
In addition, Vietnam’s leather and footwear industry is mainly doing outsourcing for foreign companies which assign materials and product designs. A few input materials are just beginning to be manufactured in Vietnam, like leatherette, non-woven fabrics, technical fabrics, soles, accessories, adhesives and chemicals. Vietnam is now supplying below 20 per cent of these materials.
Moreover, according to Lefaso, if material output is not invested for expansion after 2013, Vietnam will have to import 75 per cent of leather in 2015 and 87 per cent in 2025; 96 per cent of leatherette in 2015 and 99 per cent in 2025; 92 per cent of woven and non-woven fabrics in 2015 and 94 per cent in 2025.
Easing burden of dependency
Currently, Vietnam’s leather, footwear and handbag supporting industries are treated equally with other supporting industries, including incentives for trade promotion, investment credit support, export credit support, export contract execution guarantee. However, to reduce dependency and have input sources, this industry needs more specific support.
According to proposals, in 2015- 2016, the Government should build two centralised leather production zones, invested by ODA capital or development capital, including one in the north and one in the south. However, this target will hardly be met in one year. Thus, the southern facility will be built in a Mekong Delta province first, which is planned to house 3-5 tanneries, each of which will have an annual output of 25-30 million square foot. The investment capital is estimated at VND2,000 billion.
To boost exports and increase domestic material supplies, Lefaso worked out and proposed the project “Organising conference on leather and footwear export promotion and inviting importers into Vietnam.” This is an opportunity to introduce the Vietnamese leather, footwear and handbag industry and its export potential and new investment attraction policies, particularly policies supporting industry investment.
| With the support of the Key National Trade Promotion Programme through the Vietnam Trade Promotion Agency (Vietrade) under the Ministry of Industry and Trade, the Vietnam Leather, Footwear and Handbag Association (Lefaso), in cooperation with the Footwear Distributors and Retailers of America (FDRA), co-organised the “Leather and Footwear Export Promotion Conference” in Ho Chi Minh City on November 10, 2014. The conference discussed advantages, difficulties, opportunities and challenges in export, as well as measures to overcome difficulties related to materials and human resources. This was also a chance for domestic and foreign companies to boost cooperation and mutual understanding, attract investment capital for production expansion, increase orders and expand export. Through this event, Lefaso expected greater support from policymakers to facilitate the sustainable development of the Vietnamese leather and footwear industry in the new era. The event drew the attendance of representatives from the Ministry of Industry and Trade, the US Chamber of Commerce (AmCham), the Vietnam Chamber of Commerce and Industry (VCCI), as well as world-leading footwear brands like Nike, Adidas and WWW. More than 200 business executives were present at the conference. |
However, in the long run, Vietnam needs to develop and implement consistent mechanisms, policies and measures to attract investment capital from large-scale multinational corporations engaged in export leather and footwear production and connect domestic companies to leather supply chains run by such foreign firms, according to Lefaso. In addition, financial support, equipment and technology advice are also needed for domestic supporting industry enterprises to meet the requirements of FDI firms and increase localisation rates.
In 2014, Vietnam’s leather and footwear industry targets to earn US$12 billion from exports, up 16.5 per cent over 2013, including US$9.5 billion from footwear, up 13 per cent, and US$2.5 billion from handbags, up 31 per cent. To achieve this goal, Vietnam should also take advantage of free trade agreements (FTAs) and the Trans-Pacific Partnership (TPP) Agreement. These are considered to be a driving force and a golden opportunity for the leather and footwear industry to develop both quantity and quality.
Minh Trang
Đăng ký: VietNam News