Vietnam leather & footwear industry confident of target

Vietnam earned US$2.75 billion from exporting leather and footwear products in the first seven months of 2010, an increase of 13.8 percent from the same period of last year

Vietnam earned US$2.75 billion from exporting leather and footwear products in the first seven months of 2010, an increase of 13.8 percent from the same period of last year. Blocking with orders, more than 500 businesses in the leather and footwear sector are confident of making the sector reach its 2010 export target of US$5.4 billion.

This year, along with the world economy’s recovery, the Vietnamese leather and footwear industry has made positive changes despite major difficulties that it faced last year due to the global financial crisis and economic recession. In 2010, sector businesses have so far received 16 percent more orders than the same period last year. They earned export revenues of US$450 million per month on average in June and July. The US, the EU and Japan are the biggest importers of Vietnamese leather and footwear products, with sales to the US amounting to almost US$700 million, accounting for 25 percent of the country’s total leather and footwear export revenue. Major exports of the industry in the first seven months of this year included sport shoes, fashion shoes and bags of different kinds. Vietnam Leather & Footwear Association chairman Nguyen Duc Thuan said that this fast growth (the export growth that the sector has obtained since early this year), makes it feasible for Vietnam to reach its 2010 leather and footwear export target of US$5.4 billion.

Plentiful, skilled workforce is one of factors that make the leather and footwear industry competitive. About 650,000 people are working in the Vietnamese leather and footwear industry. The labor cost in Vietnam is expected to be further competitive at least until 2025. Leather and footwear experts say that labor cost is competitive in countries that have a per capita gross domestic product (GDP) of less than US$4,000 per year, while per capita GDP in Vietnam is expected to reach US$3,500 per year in 2020. Vietnam is one of the countries that have a gold population structure (a structure, a large percentage of which are people of the working age). This is why the Vietnamese leather and footwear industry is expected to be further competitive with its Southeast Asian counterparts in terms of labor cost and quality.

Leather and footwear ranks third among industries in Vietnam in terms of export revenue, after oil and gas and textile/garment. A matter of concern is that 70 percent of the sector’s products are made according to the order of foreign partners. Vietnamese leather and footwear businesses have to import just less than 10 percent of all packaging and soles that they need but 70-80 percent of all high-grade leather that they need, with the vast majority of leather imports coming from China and the Republic of Korea (RoK). Stable material supply approach is so important for Vietnamese leather and footwear businesses to reach sustainable development.

Actually, people working in the leather and footwear sector earn an income that is lower than that earned by those working in some other industries. This has led to a situation in which leather and footwear workers move to those industries in which they can earn a higher income. This has become a major challenge for leather and footwear businesses as their production is a labor-intensive one.

Thuan said that leather and footwear businesses need to well arrange order accomplishment through allocating many orders to areas where plentiful labor force exists to take the advantage of the plentiful, low cost workforce there. The Government should have policies that encourage businesses in the field to construct/install their production bases in areas, especially remote, rural areas, where plentiful workforce is available. – VEN

Tags: Vietnam Footwear Exports, Vietnam leather exports