Foreign-invested firms take control over footwear export

As of June this year, foreign-invested businesses made up 81.3% of the exports in the sector, while local firms held only 18.7%. The disproportion is forecast to continue.

According to statistics of the Department of Light Industry under the Ministry of Industry and Trade (MoIT), leather and footwear is one of Vietnam’s spearhead exports, with an average growth hitting 9.7% per year, making up between 8-10% of the country’s annual export turnover.

The industry has recorded strong growth in recent years, reaching US$14.88 billion in 2015, up 15.8% year-on-year.

In the first six months of this year, export turnover of the combined sector reached US$7.94 billion, with US$6.34 billion contributed by the footwear industry.

Vietnam now has great opportunities to develop the leather and footwear industry, especially through advantages from free trade agreements (FTAs) between the country and the European Union (EU), the Republic of Korea (RoK) and through the Trans-Pacific Partnership (TPP) agreement.

When the TPP comes into force, Vietnam will be able to enjoy preferential tariffs which can eventually be cut to zero percent when exporting its footwear products to TPP markets and if materials for the sector can be made domestically or imported from other TPP member nations.

However, Nguyen Duc Thuan, Chairman of the Vietnam Leather, Footwear and Handbag Association (Lefaso) commented that Vietnamese leather and footwear firms have been heavily dependent on imported input materials.

Local enterprises are meeting difficulties in fully taping into the advantages from FTAs because t hey have yet to obtain permits to build material processing factories for the footwear sector in Vietnam, while foreign-invested enterprises are favoured in the field.

Additionally, domestic firms also come up against obstacles in selling their products in the home market as they are subjected to fierce competition from well-know brands from around the world, Thuan said.

According to Truong Thi Thu Ha, deputy head of the MoIT’s Light Industry Department, the ministry approved adjustment to the development plan of the sector to 2025, with a vision to 2035, which aims to form a leather and footwear industry network towards facilitating the development of support industries and service sectors.

Vietnam expects to earn US$17 billion from leather and footwear exports this year.

As of now, Vietnam is one of the four largest footwear producers in volume in the world, and is also the third largest footwear exporter in value, after China and Italy. Domestic footwear products are shipped to 50 countries and territories worldwide.