Leather footwear and handbag exports are expected to top 12 billion USD this year, achieving the target, the Vietnam Leather and Footwear Association (Lefaso) has said.

They were worth 10.4 billion USD last year to rank third in the country's list of key exports, Lefaso Deputy Chairman Diep Thanh Kiet said, adding that the exports were very good in the first half of the year, with footwear exports going up by more than 14 percent and handbags by over 18 percent.

But he and others at a seminar in Ho Chi Minh City on June 23 agreed that small-scale production, poor development of support industries, and lack of skilled workers are making the leather industry's growth unsustainable.

The industry imported nearly 4.2 billion USD worth of leather and other raw materials last year, which accounted for 40 percent of its total export revenues, Kiet told the seminar organised by Lefaso, the Vietnam Chamber of Commerce and Industry (VCCI), and VPBank.

Up to 70 percent of the leather needed for footwear and handbag production is imported, mainly from the Republic of Korea, Taiwan (China), Italy, and Thailand.

Asked whether the problem with China is affecting the industry, Kiet said leather imports from China account for just 6-7 percent, too little to have an effect.

Only 40 percent of fabric and other raw materials can be sourced locally, and the country spent more than 3 billion USD to import the last year, mostly from China.

But there is now a growing trend of shifting production of fabric and others from China to Vietnam to take benefit of the free trade agreements Vietnam is negotiating.

In the next few years, local production can supply more than 50 percent and the rest can be procured from Taiwan, Thailand and Indonesia, he said.

With lower production costs compared with China, high demand in both the local and foreign markets, and advantages from the upcoming Trans-Pacific Partnership, the industry continues to have great potential for development, said Pham Thi Thu Hang, General Secretary of the VCCI.

To capitalise on development opportunities, companies should focus on improving the skills of their workers, diversify their export markets, and pay more attention to the domestic market, she said.

They also need to restructure their organisation based on competitive advantages, strengthen their design capabilities, build brands, and improve technologies to reduce energy consumption and protect the environment, she said.

Most importantly, firms should concentrate on developing their supply chain, with a focus on feedstock, delegates said.

Kiet said the Government should be more pro-active in setting up industrial parks for tanning leather, a key material for the industry.

Phan Chi Dung, Director of the Ministry of Industry and Trade's Light Industry Department, said under the development plan for the footwear industry, the Government wants to raise local content in production to 60-65 percent by 2015 and 75-80 percent by 2020.

The targets are hard to realise, he admitted, but the signing of the FTA with the EU and the TPP is expected to provide a boost to the rate.

There are 812 firms now in the country's leather and footwear industry, he said-VNA