Trans-Pacific Partnership agreement (TPP) and several free tradeagreements are expected to be signed this year and they will providehuge opportunities for the breakthrough development of Vietnameseleather - footwear industry. However, to seize these opportunities,businesses need to identify their market positions and products as wellas satisfy requirements for quality and model.
Vice President ofthe Vietnam Chamber of Commerce and Industry (VCCI) Doan Duy Khuongspoke with the Vietnam Business Forum Magazine (VBF) about the issue.
*Whatdo you think about opportunities for Vietnamese economic sectors ingeneral and the leather - footwear sector in particular when TPP andFTAs are signed?
Vietnam has been gradually deepening itsintegration into the world economy. The WTO entry in 2007 has brought alot of remarkable achievements in promoting economic growth, especiallyinternational trade. Currently, Vietnam is pushing up negotiations ofsome trade agreements, including the TPP, the Vietnam - EU Free TradeAgreement and the Free Trade Agreement between Vietnam and the CustomsUnion (Russia, Belarus and Kazakhstan). The effect of these tradeagreements is forecast to be greater than the WTO entry, particularlyfor export-oriented industries like leather - footwear.
Tradeagreements, including TPP, will actually open up golden opportunitiesand provide new boosts for Vietnamese leather, footwear and handbagcompanies to develop in both scale and quality. When TPP takes effect,exports and imports among member countries will enjoy preferentialtariffs, which may be reduced to zero in the long term. This advantagewill help Vietnamese footwear edge up its competitiveness againstproducts from some rivals like China and India. They are theworld-leading exporters of leather, footwear and bags but they are notTPP members.
The FTAs between Vietnam and the EU and betweenVietnam and the Russia Customs of Union - Belarus - Kazakhstan, whichare under negotiation, also present great opportunities. These areimportant trading partners and traditional markets of Vietnam and thebig importers of Vietnamese leather and footwear. Compared with otherexporters in the region, Vietnam holds considerable advantage infootwear export to the EU market. The FTA with the EU will substantiallysupport Vietnam. If the FTA negotiations with the EU and the CustomsUnion of Russia - Belarus - Kazakhstan are concluded, the Vietnameseleather - footwear industry will have competitive advantages over othercountries.
Besides, many foreign manufacturers will locate theirprojects in Vietnam and this is another plus for the leather - footwearindustry. US and EU footwear and handbag firms will relocate theirproduction bases from China to Vietnam to enjoy TPP treatments. IfVietnam misses this tremendous opportunity, it will be unable to addressits inherent weakness: Reliance on foreign inputs.
*What are the weak points of Vietnamese leather - footwear companies when they join these joint markets?
Foryears, leather, footwear and handbag are key exports of Vietnam. In2013, this sector fetched 10.32 billion USD from exports, up 18 percentover 2012 and exceeding the full-year target by 3 percent. Stronggrowths are expected when the above FTAs take effect. Nevertheless, inreality, Vietnamese leather - footwear enterprises still have a lot ofweakness and face with numerous difficulties.
The biggestchallenge for Vietnamese leather, footwear and handbag firms is how toapproach TPP countries when inputs are mainly imported from non-TPPmembers. According to statistics, the localisation ratio of this sectoris just 50 - 55 percent and the rest is offset by imports.
Thesector will encounter difficulties in production mode because manycompanies are offshore contractors for foreign partners. Many take onlow-value stages in the global supply chain.
In addition, theywill see difficulties with non-tariff barriers because theircompetitiveness, technical competence and designing capacity are weakwhile importers always demand strict quality, delivery, technicalspecifications. To penetrate into developed markets like the US andJapan, they cannot limit themselves with average products but they mustlook to higher grade product lines.
Besides, they lack experiencein building independent brands. This is very important when brandingand intellectual property are of deep concern as now.
*So, what is your advice to them?
Accordingto the master plan on Vietnam leather - footwear industry developmentto 2020, with a vision to 2025, the leather - footwear industry willbecome a spearhead export sector of the economy. Its annual productionvalue was forecast to expand 9.4 percent in the 2011 - 2015 period, and8.8 percent in 2016 - 2020 and the localisation ratio is expected to beraised to 60-65 percent by 2015 and 75-80 percent by 2020. To achievethese objectives, they need to change business methods and sensiblyapproach markets.
First of all, they must form internal supplychains with organic interconnectivity among stages. A complete supplychain, from design, input, accessory, production and distribution mustbe established by TPP signatories because one of conditions to begranted tariff preference in TPP member countries is Vietnamesecompanies have to show the proof that their products use materials fromTPP countries and are made by TPP countries.
In addition, they must understand market tastes to have appropriate approaches.
Fortechnical barriers or non-tariff barriers, they must actively invest intechnological innovation, enhance product competitiveness in TPPcountries, and apply certified technical and quality standards to passall requirements imposed by importing countries. Besides, they shouldstep up market research and trade promotion and build long-term businessplans to improve export quality and competitiveness.
They alsohave to take into account other factors like rules of origin,intellectual property, technical barriers, and sanitary-VNA
Vice President ofthe Vietnam Chamber of Commerce and Industry (VCCI) Doan Duy Khuongspoke with the Vietnam Business Forum Magazine (VBF) about the issue.
*Whatdo you think about opportunities for Vietnamese economic sectors ingeneral and the leather - footwear sector in particular when TPP andFTAs are signed?
Vietnam has been gradually deepening itsintegration into the world economy. The WTO entry in 2007 has brought alot of remarkable achievements in promoting economic growth, especiallyinternational trade. Currently, Vietnam is pushing up negotiations ofsome trade agreements, including the TPP, the Vietnam - EU Free TradeAgreement and the Free Trade Agreement between Vietnam and the CustomsUnion (Russia, Belarus and Kazakhstan). The effect of these tradeagreements is forecast to be greater than the WTO entry, particularlyfor export-oriented industries like leather - footwear.
Tradeagreements, including TPP, will actually open up golden opportunitiesand provide new boosts for Vietnamese leather, footwear and handbagcompanies to develop in both scale and quality. When TPP takes effect,exports and imports among member countries will enjoy preferentialtariffs, which may be reduced to zero in the long term. This advantagewill help Vietnamese footwear edge up its competitiveness againstproducts from some rivals like China and India. They are theworld-leading exporters of leather, footwear and bags but they are notTPP members.
The FTAs between Vietnam and the EU and betweenVietnam and the Russia Customs of Union - Belarus - Kazakhstan, whichare under negotiation, also present great opportunities. These areimportant trading partners and traditional markets of Vietnam and thebig importers of Vietnamese leather and footwear. Compared with otherexporters in the region, Vietnam holds considerable advantage infootwear export to the EU market. The FTA with the EU will substantiallysupport Vietnam. If the FTA negotiations with the EU and the CustomsUnion of Russia - Belarus - Kazakhstan are concluded, the Vietnameseleather - footwear industry will have competitive advantages over othercountries.
Besides, many foreign manufacturers will locate theirprojects in Vietnam and this is another plus for the leather - footwearindustry. US and EU footwear and handbag firms will relocate theirproduction bases from China to Vietnam to enjoy TPP treatments. IfVietnam misses this tremendous opportunity, it will be unable to addressits inherent weakness: Reliance on foreign inputs.
*What are the weak points of Vietnamese leather - footwear companies when they join these joint markets?
Foryears, leather, footwear and handbag are key exports of Vietnam. In2013, this sector fetched 10.32 billion USD from exports, up 18 percentover 2012 and exceeding the full-year target by 3 percent. Stronggrowths are expected when the above FTAs take effect. Nevertheless, inreality, Vietnamese leather - footwear enterprises still have a lot ofweakness and face with numerous difficulties.
The biggestchallenge for Vietnamese leather, footwear and handbag firms is how toapproach TPP countries when inputs are mainly imported from non-TPPmembers. According to statistics, the localisation ratio of this sectoris just 50 - 55 percent and the rest is offset by imports.
Thesector will encounter difficulties in production mode because manycompanies are offshore contractors for foreign partners. Many take onlow-value stages in the global supply chain.
In addition, theywill see difficulties with non-tariff barriers because theircompetitiveness, technical competence and designing capacity are weakwhile importers always demand strict quality, delivery, technicalspecifications. To penetrate into developed markets like the US andJapan, they cannot limit themselves with average products but they mustlook to higher grade product lines.
Besides, they lack experiencein building independent brands. This is very important when brandingand intellectual property are of deep concern as now.
*So, what is your advice to them?
Accordingto the master plan on Vietnam leather - footwear industry developmentto 2020, with a vision to 2025, the leather - footwear industry willbecome a spearhead export sector of the economy. Its annual productionvalue was forecast to expand 9.4 percent in the 2011 - 2015 period, and8.8 percent in 2016 - 2020 and the localisation ratio is expected to beraised to 60-65 percent by 2015 and 75-80 percent by 2020. To achievethese objectives, they need to change business methods and sensiblyapproach markets.
First of all, they must form internal supplychains with organic interconnectivity among stages. A complete supplychain, from design, input, accessory, production and distribution mustbe established by TPP signatories because one of conditions to begranted tariff preference in TPP member countries is Vietnamesecompanies have to show the proof that their products use materials fromTPP countries and are made by TPP countries.
In addition, they must understand market tastes to have appropriate approaches.
Fortechnical barriers or non-tariff barriers, they must actively invest intechnological innovation, enhance product competitiveness in TPPcountries, and apply certified technical and quality standards to passall requirements imposed by importing countries. Besides, they shouldstep up market research and trade promotion and build long-term businessplans to improve export quality and competitiveness.
They alsohave to take into account other factors like rules of origin,intellectual property, technical barriers, and sanitary-VNA
