Can Vietnam Regain Its Strength in the Footwear Industry?

The leather and footwear sector has posted impressive growth in recent years to become the third biggest export earner behind garment and textile and crude oil, the Ministry of Industry and Trade-run institute reported. Viet Nam ranks 4th globally in footwear exports, selling its products to 50 countries and territories, with the EU, US, and Japan being the main buyers. The main export items are sports, canvas, and leather shoes and sandals.  The industry now exports up to 90% of its output

However, similar to textiles and garments, the Vietnam's leather and footwear industry had a difficult year in 2009 as it failed to achieve its export target. According to Ms Nguyen Thi Tong, Secretary General of the Vietnam Leather and Footwear Association (LEFASO), the industry is struggling to cope with shortages in labor, materials and, especially, export markets, reported Vietnam Investment Review. She said that even though Vietnam was one of the largest footwear exporters in the world but the industry still lacked the ability to design its own models and had small-scale production and limited service infrastructure.

This year, 2010, Vietnam's footwear industry has set the target for a 17% increase in footwear exports in 2010, trying to reach $6.2 billion in export value. Also, in 2010 the EU will end the General System of Preferences (GSP) statute for imports of footwear from Vietnam, so Vietnam has to try to identify other export markets.

Footwear Manufacturers:

There are more than 700 companies operating in the leather and footwear sector, employing 700,000-750,000 workers, of whom 80 % are women. About 70 % of these companies only do sub-contracting work or OEM for foreign companies; therefore, their techniques, technologies, and designs depend completely on their foreign principals.

Challenges of the industry:

- The industry still imports most raw materials 

- Vietnamese footwear products see little value-addition, experts said, noting that their competitive advantage in terms of prices over rivals like China, India, Indonesia, and Thailand is also gradually shrinking

- To develop sustainably and become more competitive, the sector needs to restructure and increase the local content rate, according to experts

- The industry should upgrade technologies, expand the product range, and improve quality to meet the increasing demands of consumers

Experts suggested that the industry should hire designers and create its own designs rather than just wait for orders and making products based on designs provided by the buyers, said the paper. To capture the domestic market, footwear firms should research the market and expand distribution networks. 



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