November 16, 2016

Raw materials for shoe industry and mains challenges to be solved

United States and Japan market are in the top 5 in the world on production and are ranked second in exporting footwear and bags to the EU. However, the VN shoe industry is facing many challenges, especially in the raw material. Enterprise forum has an interview with Ms. Phan Thi Thanh Xuan - Secretary General of Leather Footwear Association - Vietnam Handbag (Lefaso ) about this problem. 

According to Ms. Xuan, in the first 10 months of 2014, the whole industry achieved an export turnover of 10.2 billion USD, an increase of 18% compared to the same period in 2013. The sector is aiming to export about 12 billion USD in 2014, growth 16.5% compared to 2013. In detail, footwear exports will reach 9.5 billion USD, growth 13% and exporting bags will reach US $ 2.5 billion, growth 31%. This growth momentum is quite stable, because the leather shoe industry, the bag also achieved an export turnover of 10.3 billion USD, of which footwear exports reached 8.4 billion USD and briefcases - bags - wallets reached 1.9 billion USD, growth 18.4% compared to 2012 and an increase of 35% compared to 2011. 

- Footwear industry is facing many opportunities from integration, but also faces many challenges. 

Footwear industry in Vietnam is facing many great opportunities from free trade agreements (FTAs) and are being actively negotiated by the Government of Vietnam, outstanding among which is the Xuyen Thai Economic Partnership Agreement Binh Duong (TPP), with the European Union (EVFTA), with the Russian-Belarus-Kazakh Union, with ASEAN's agreements will take effect in 2015. However, it is necessary to look directly into practice to understand that going with opportunities is challenging. In parallel with competition challenges coming from integration, the shoe industry and businesses also face internal challenges such as raw material problems, human resources, product development, business management ... 

- Can you analyze the issue of raw materials for Vietnamese footwear? 

This is indeed the biggest challenge of Vietnam's shoe industry today. According to the survey results of the Association, the raw materials account for a large proportion, about 68-75% in the structure of footwear prices. However, the rate of localization of Vietnamese enterprises is only 40-45%. Important materials such as leather, artificial leather, shoe caps are mostly imported. Of the total export turnover in 2013 reached 10.3 billion, the cost of raw materials accounted for about 70%, equivalent to 7 billion USD. In particular, the industry must import 4.2 billion USD (accounting for 60%) from Korean markets, Taiwan, Thailand, China ... and domestic production only reached 2.8 billion USD (accounting for 40%) . 

Support Industry (CNHT) for shoes and bags industry include about 129 enterprises, including tanning companies. In addition, the textile (fabric production, labels, zens, buttons, chun tape ...), chemicals and mechanics enterprises also participate in providing a number of raw products for the leather shoe industry. But according to the General Statistics Office, the industrial production value index of shoe industry has an average growth rate of 16.5% in the period of 2006 - 2011 and the proportion between industrial production value index of leather shoes on the industrial production value index of the whole skin industry in 2011 has only reached 20.3%. This is a low growth rate compared to other industries such as textiles, electronics, mechanics ... We hope that the government will assist enterprises to establish raw material areas through support policies and incentives for investment in the development of raw materials, leather, machinery and equipment. Creating infrastructure for footwear- leatherwear industry sustainable development. 

The government needs to locate tanning industrial zones to create a closed supply chain for the industry. This will help to manage the environment, while attracting domestic and foreign investment to improve the quality of products and proactive materials domestically, reducing trade deficit. The Ministry of Industry and Trade needs to set up a project to invest in the construction of raw materials and productive trading centers, forming networks that provide products and services with large enterprises and corporations to support small companies, which can participate in the supply chain of raw materials for businesses producing shoes and handbags. 

- Lefaso will preside over the conference "Promotion of exporting leather shoes". Please tell me what the biggest goal of the conference is?

Supported by the National Key Trade Promotion Program through the Trade Promotion Department (Ministry of Industry and Trade), Vietnam Footwear-Handbag Association (LEFASO) invited Footwear Distributors and Retailers of America (FDRA) to organise a conference to promote leather and footwear exports with the theme to improve business capacity and export for Vietnamese footwear businesses on November 10, 2014 in Ho Chi Minh City. The conference will aim to discuss the favorable difficulties of the Vietnamese footwear industry and some solutions under the view of international organizations and brands; as well as discussing internal solutions, especially in the issue of raw materials and human resources. Through the conference, Vietnamese footwear enterprises will have the opportunity to better understand the domestic leather industry, gradually adjusting, dismantling difficulties, strengthening production and business capacity, expanding cooperation and delivering international trade in order to better meet the requirements of importers in the context of increasing and deepening economic integration of Vietnam. 

Attending the conference with importers from the US - they were members of the FDRA Association, FDRA's Board of Directors, representatives of the Ministry of Industry and Trade, Vietnam Treasury Office, large shoe brands in the world like Nike, Adidas, etc ... and senior leaders of over 200 enterprises for exporting shoes and raw materials in Vietnam. Through this conference, we look forward to getting more attention from macro executives to create favorable conditions to promote the sustainable development of the Vietnamese footwear industry in the new period. 


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