Footwear industry submits strategy

The Vietnam Leather and Footwear Association (Lefaso) has submitted to
the Government a strategy to develop the sector from now till 2020 with a
vision to 2015 which focuses on the support and material industries.

Lefaso President Nguyen Duc Thuan said the strategy
aims at ending the sector's dependence on foreign materials and
technologies, and shifting from sub-contracting to direct contracting.

Under the strategy, the sector will need 18.8
trillion VND (989 million USD) to produce shoe trees and footwear
models, and expand the production of materials including leather and
leatherette.

The plan is expected to help the sector
earn 8.5 billion USD from exports by 2015 and 11 billion USD by 2020 by
boosting the localisation rate to 65-75 percent from the current 50
percent.

Thuan explained that the strategy was
developed because the sector has been suffering from a serious shortage
of materials for many years due to the lack of a support industry.

The country currently has only 30 enterprises, including five with
foreign investment capital, producing tanned leather, the main material
used by the footwear sector. These enterprises can only meet 30 percent
of the material demands of domestic footwear enterprises.

Thuan further explained that the sector has to cope with the EU's anti-dumping tax on Vietnamese footwear.

In an effort to boost exports, Lefaso has carried out many promotional
activities, including hosting the 29th international conference of the
Asian footwear sector, and the international fair for footwear materials
and machines

As customers are shifting their
attention from China to Vietnam , Vietnamese shoe makers currently
have export orders until the first quarter of 2011.

In the first nine months of the year, the sector earned over 3.6
billion USD from exports, a year-on-year increase of 23 percent. The
figure is expected to surpass 5 billion USD by the end of the year./.

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Vietnam footwear industry eyes runaway exports

Footwear exports this year could top a record $5.4 billion, well above the target of $4.6-$5 billion, Nguyen Duc Thuan, chairman of the Vietnam Leather & Footwear Association, said.

Exports maintained their high growth rate in August, he said, with the month’s shipments of $450 million taking the year-to-date figure to $3.22 billion, a 19 percent increase year on year.

Exports had been worth $4.1 billion last year despite the global recession. The number of contracts signed this year is already 16 percent higher than for the whole of last year, Thuan said without specifying their value.

Vietnam is the world’s fifth biggest footwear exporter but the domestic industry faces many difficulties, especially the shortage of workers and dependence on imported raw materials.

The country still imports 70-80 percent of tanned leather and high-quality leatherette to make shoe caps, certain soles, and decorations.

Its support and machine tools industries are in a very primitive stage while footwear marketers and designers lag behind their foreign rivals, making it hard to create international brands for Vietnamese footwear.

Exporters have come up against protectionist barriers in the EU, Peru, and Turkey.

But the industry is aiming to expand exports to markets like the US and ASEAN member countries to take advantage of free trade agreements.

Vietnam has an advantage over its main rival, China, in labor costs since China’s GDP per capita is now $3,000 compared to its $1,200, Thuan said.

Vietnam’s per capita income is forecast to rise to $3,500 only in 2020, which means the leather-shoe industry can continue to be competitive through the next decade, he added.

Another factor in its favor is that demand for leather footwear remains very high.

Worldwide, some 17 billion pairs of shoes are produced every year, of which six to seven billion are manufactured under contract.

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Shoemakers unlikely to meet target

Customers shop for shoes at Viet Plaza Shopping Centre in HCM City. The leather and footwear industry is falling short of a target to meet 70 per cent of domestic demand by 2015. — VNA/VNS Photo Thanh Phan

HA NOI — The footwear industry would have to struggle to reach its target to of 70 per cent of the domestic market in five years without incentive policies, related production site and credit to encourage firms to expand, an industry analyst said.

Viet Nam is the world's fourth largest footwear producer and exporter with turnover of US$2.75 billion in the first seven months of the year, an increase of 13.8 per cent over the same period last year.

However, because the industry exports 90 per cent of production, it met only 40 per cent of domestic demand, the remainder being imported, mostly from China, HCM City Leather and Footwear Association chairman Nguyen Van Khanh said.

The Ministry of Industry and Trade estimated domestic demand would reach 130-140 million pairs of shoes (worth $1.5 billion) a year. The leather and footwear industry planned to supply 70 per cent of local demand by 2015, up from 40 per cent, and this was a tall order, Khanh said.

Viet Nam had more than 500 leather and footwear enterprises, 70-80 per cent of which were outsourcing for world brands such as Nike and Adidas and most of their samples, designs, material and technology were being provided by foreign firms, he said.

The Viet Nam-made leather and footwear products on the domestic market were made by small and medium producers, of which most were in HCM City – about 100 production bases– sized a few producers in the north, including in Ha Noi and Hai Duong.

Small- and medium- sized producers averaged 1,000-1,500 pairs of shoes a month , with only a few making from 6,000 to 15,000 pairs, a small volume compared with the domestic demand, Khanh said.

They faced many difficulties, such as a lack of capital and shortage of land and workforce, inexperienced management and outdated technology and plant.

For the country's leather and footwear industry to reach the target, the ministry and the Viet Nam Leather and Footwear Research Institute needed to conduct research, develop support policies and favourable mechanisms for the smaller enterprises, Khanh said.

There should be industrial zones created for footwear producers and credit funds made available for the development of trade villages and enterprises, he said. — VNS

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