Footwear sector needs to remove bottlenecks to capitalise on FTAs

HCM City (VNA) – The leather – footwear industry of Vietnam now has big opportunities thanks to free trade agreements (FTAs), but to make full use of those deals, it needs to remove bottlenecks relevant to the supporting industry, heard a forum on December 13.

The Supporting Industry Forum 2019 was held in Ho Chi Minh City by the Industry Agency of the Ministry of Industry and Trade and the Nhan dan newspaper. It focused on the leather – footwear industry amidst opportunities created by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the European Union – Vietnam FTA (EVFTA).

Deputy Minister of Industry and Trade Do Thang Hai said leather-footwear is one of the key exporting industries of Vietnam. With an annual export growth rate of over 10 percent, the industry earned the country approximated 20 billion USD in 2018 and over 10 billion USD in the first half of 2019.

The Vietnam Leather, Footwear and Handbag Association (Lefaso) forecast this year’s leather – footwear exports at some 21.5 billion USD, up 10 percent from 2018.

Vietnamese footwear has been shipped to more than 100 countries, including 50 with imports worth over 1 million USD from Vietnam. The largest markets are the US, the EU, China, Japan and the Republic of Korea.

Vietnam is the world’s second biggest footwear exporter, and this industry is now a great contributor to the national economy, Lefaso said, noting that many companies have expanded production, renovated technology and diversified design to meet consumers’ demand.

[New FTAs put pressure on VN to reform business practices]

However, Lefaso admitted that those achievements are mainly contributed by FDI firms which account for just over 10 percent of all businesses but make up 70 – 80 percent of total export revenue of this industry.

Additionally, the sector is facing numerous challenges such as rising workers’ wage, the Fourth Industrial Revolution, and global economic uncertainties amidst growing protectionism and trade war between the world’s two biggest economies.

According to the association, FTAs like the CPTPP and EVFTA are generating considerable opportunities for the leather – footwear sector. Once these deals become fully effective, tariff barriers in EU and CPTPP members will be removed, promising stronger export growth for the industry.

However, to capitalise on these chances, Lefaso and its member businesses have to deal with existing bottlenecks, including underdeveloped supporting industry and a lack of support policies, plans on value chain development, strong brands, design personnel, as well as research and development centres.

Deputy Minister Hai said these challenges require the industry to pay more attention to promoting productivity and human resources quality, forming value chains, and applying science-technology to improve products’ value and keep foreign investors in the country.

The CPTPP, one of the largest trade pacts in the world, covers 13.5 percent of global GDP and a market of about 500 million people. It gathers 11 countries, namely Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. It officially took effect in Vietnam on January 14 this year.

Meanwhile, the EVFTA, along with the EU – Vietnam Investment Protection Agreement, was officially signed in Hanoi on June 30. Under the EVFTA, the two sides pledge to slash nearly 100 percent of import tariffs, the strongest cut among the FTAs Vietnam has signed.

According to the General Department of Vietnam Customs, the country’s total trade revenue in the first 11 months of 2019 reached 472.36 billion USD, up 7.3 percent year on year. It includes 241.65 billion USD worth of exports, rising 7.9 percent.

In the period, footwear exports brought home 16.55 billion USD, up 12,9 percent from a year earlier. The US and the EU remained the largest importers of Vietnamese footwear with the respective turnovers of 5.96 billion USD (up 13.3 percent) and 4.59 billion USD (up 8.1 percent), accounting for 63.8 percent of the total footwear shipments./.