Increasing the localisation ratio of leather and footwear products is
a priority requirement for the industry in international integration as
materials account for 68-75 percent of footwear production costs, the
Vietnam Business Forum Magazine (VBF) said.
According to the
magazine, the localisation ratio is now only 40-45 percent, while key
materials like leather, artificial leather and canvas are mostly
imported.
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 percent a year in the
2006-2011 period. The proportion of material value to overall leather
and footwear production value was only 20.3 percent in 2011. This growth
was lower than the rate recorded by 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 10.3 billion USD, of which materials
account for 70 percent, or 7 billion USD. Particularly, imports
accounted for 60 percent, or 4.2 billion USD, and domestic sources
contributed 40 percent, or 2.8 billion USD.
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 percent of
these materials.
Moreover, according to Lefaso, if material
output is not invested for expansion after 2013, Vietnam will have to
import 75 percent of leather in 2015 and 87 percent in 2025; 96 percent
of leatherette in 2015 and 99 percent in 2025; 92 percent of woven and
non-woven fabrics in 2015 and 94 percent in 2025.
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.
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 leather and footwear
production. In addition, financial support, equipment and technology
advice are also needed for domestic support enterprises to meet the
requirements of FDI firms and increase localisation rates.
In
2014, Vietnam’s leather and footwear industry targets to earn 12 billion
USD from exports, up 16.5 percent over 2013, including 9.5 billion USD
from footwear, up 13 percent, and 2.5 billion USD from handbags, up 31
percent. 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./.