Leather and footwear sector keeps leading post: paper

Leather and footwear sector keeps leading post: paper

Pursuing a development strategy aimed at promoting both quantitative and qualitative growth, the Vietnamese leather and footwear sector continues to maintain the position as one of the top leather footwear exporters in the world. Report by the Vietnam Economic News.

The Trans-Pacific Partnership Agreement (TPP) and free trade agreements (FTAs) are expected to open bright prospects for the sector in the near future.

Increases in quantity and quality

2013 was a year full of hardships, but tremendous results were achieved by the Vietnamese leather and footwear sector. Businesses in the sector achieved an impressive export growth rate of 30 percent in October 2013 after decreases in four consecutive months. The yearly export value reached over 10.30 billion USD (footwear: over 8.36 billion USD, up 15.2 percent compared with 2012; handbags, suitcases, headwear and umbrellas: nearly 1.94 billion USD, up 27.6 percent).

The US continued to be a major export market for Vietnamese leather and footwear products. In the first 11 months of 2013, exports to the US accounted for over 30 percent of the total export value of the sector, reaching 2.3 billion USD, up 16.9 percent compared with the same period of 2012. The UK market ranked second with 496 million USD, up 8.9 percent, and was followed by Belgium with 456.1 million USD, up 26.8 percent; Germany 388.9 million USD, up 11.8 percent; and Japan 394.7 USD million, up 16.8 percent.

2013 also marked satisfactory results of the sector in boosting exports to new markets. In the first 11 months, exports to Argentina increased by 59.2 percent, to Chile 22.3 percent, Turkey 41.5 percent, Israel 38 percent, Slovakia 27.5 percent, and Spain 23.9 percent.

In 2013, Vietnam continued to maintain its position as the fourth largest leather and footwear exporter in the world. Notably, the added value of the sector ranged from 45-55 percent, the result of great efforts to improve the quality of products.

Vietnam Leather, Footwear and Handbag Association Vice President Diep Thanh Kiet said the growing localisation rate was the most important factor helping increase the added value in the leather and footwear sector.

Currently, the sector has to import 45 percent of materials required for production, meaning that the remaining 55 percent can be produced domestically. The local content rate of some domestic products has reached 70 percent.

Sports shoes are the top export products of the sector and their local content rate has reached about 50 percent. Domestic businesses are able to produce most kinds of shoe forms, soles and heels. However, the sector still has to import 65 percent of materials required to make leather products.

New opportunities

The TPP is expected to bring the Vietnamese leather and footwear sector golden opportunities. If Vietnam joins the TPP, the sector will be able to boost exports to a huge market with 12 member countries.

More importantly, after the agreement is signed, the tax rate applied on Vietnamese leather and footwear products will be zero percent instead of the current rate of about 14 percent, enhancing their competitiveness.

Leather and footwear businesses are keeping a close watch on EU-Vietnam Free Trade Agreement (EVFTA) negotiations. This agreement will pave the way for Vietnamese leather and footwear products to enter the EU market that boasts a population of some 500 million. The tax rate applied on Vietnamese leather and footwear exports to the EU will be lowered from 12.4 percent to zero percent.

From January 1, 2014, under the Generalized System of Preferences (GSP), the tax rate applied on Vietnamese leather and footwear exports to the EU will be reduced from 13-14 percent to 3-4 percent. Domestic businesses have to be ready to catch new opportunities to increase exports and promote their sustainable growth.

To meet the TPP’s rules of origin, the Lien Phat Company recently invested in building a leather tanning plant with a capacity of 1 million square feet in Dong Nai province to take the initiative in ensuring sufficient material supplies for domestic production and minimise expenses. The plant is scheduled to come into operation in 2014.

The Gia Dinh Shoes Company has made a gradual shift from importing materials to producing them domestically. Currently, the local content rate of the company’s products is about 70 percent.

Along with improving input material production, leather and footwear businesses have paid attention to increasing their productivity. Thanks to the application of new technologies and energy conservation methods, especially the lean manufacturing system, productivity in the sector has increased by 30 percent.

Regarding the development prospects of the Vietnamese leather and footwear sector, RNCOS, a specialist market research company, said that Vietnam had become one of the world’s leading footwear manufacturers and exporters. Most international footwear manufacturers have built their production facilities in Vietnam.

Vietnam’s footwear output is predicted to increase by about 8 percent in the 2013-2017 period, promising the progress of the Vietnamese leather and footwear sector in a near future.-VNA

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