Shoemakers face shortage of capital

The leather and footwear industry has been facing increased difficulties in sourcing capital towards development due to the current economic crisis.

At the end of 2010, the Ministry of Industry and Trade approved a development strategy aimed at the leather and footwear industry with a total investment of VND60 trillion (US$2.9 billion).

Diep Thanh Kiet, deputy chairman of the Viet Nam Leather and Footwear Association (Lefaso), said that VND2.5 trillion ($180 million) of investments would be spent annually for the next 10 years with 43 per cent of the total amount coming from local funds and 57 per cent from abroad.

The investment would be deployed in developing projects related to the leather tanning industry, industrial zones and support material centres, he said.

However, because of high inflation, many industries have cut investment alongside declining foreign investment caused by the world economic crisis, he added.

Nguyen Thi Tong, Lefaso deputy general secretary, said that it had been extremely difficult to attract investment for development purposes against the current financial situation.

There was currently not enough investment in key projects, which has meant the industry has not been able to achieve its targets, she said.

Under the new strategy, the industry’s export value would reach $9.1 billion in 2015 and $14.5 billion in 2020 and the localisation rate 60-65 per cent in 2015 and 75-80 per cent in 2020 while the industry would utilise 838,000 workers and 1 million workers in 2015 and 2020, respectively.

Over the past few years, production capacity has improved while investment in the production of material has remained due to dried up investments.

Firms have been focusing on producing footwear with the minimum amount of capital at the maximum amount of profit, needing only $1-1.5 million per production line with an annual capacity of 500,000-600,000 pairs each, she said.

Viet Nam was currently able to meet only 40 per cent of leather and footwear industry demand, she added, saying that the industry would have to import material, chemical products and equipment for production purposes.

The industry has only reached 85.5 per cent of its 2000-10 target on the export of footwear and only 40 per cent in terms of localising materials used in footwear production.

During this period, no industrial complexes were built, no trading promotion centres developed and no automated production lines designed.

Nguyen Huu Thuan, Lefaso chairman, said that the industry’s development over the next five years would depend on the development of leather tanning technology in Viet Nam, which still has no facilities locally.

Seeing as material has accounted for around 68-75 per cent of total production costs, producing material domestically would play an important role in the development of the industry and the increase of export values, Thuan said.

Therefore, industry enterprises would have to set up specific projects focused on building industrial complexes with good water and waste treatment systems in order to attract sufficient foreign investment in satisfying domestic material demand, he said. — VNS

Tags: Vietnam Shoemakers