Leather and footwear exports could not reach goal of US$24 billion

How are the fisheries, leather and footwear sectors preparing to "welcome" EVFTA?

From now to the end of the year, it is forecast that the output of the footwear industry will continue to face difficulties. Photo: N. Hue

A year of hardship

According to the Ministry of Industry and Trade, in September, although the index of leather and related products increased by 4.5% compared to August, still fell by 0.4% compared to the same period last year. Accumulated from the beginning of the year to the end of September, the leather and related products index decreased by 3.8% compared to the same period in 2019.

Deputy Minister of Industry and Trade Do ThangHai said footwear production and export are negatively affected by the Covid-19 pandemic. Footwear export turnover of all kinds in the first nine months of 2020 is estimated at US$12.08 billion, down 8.8% compared to the same period in 2019.

Commenting on leather and footwear production and export in the first three quarters of the year, PhanThiThanhXuan, Vice President and General Secretary of the Vietnam Leather and Footwear and Handbag Association (LEFASO) analysed, the leading footwear consuming markets of Vietnam such as the US, China, Japan, Belgium and Germany all dropped sharply compared with the same period last year. In which, for example, in the Chinese market (which accounts for 12% of the export market share), in the past nine months, imports of Vietnamese footwear and bags has decreased by more than 19%.

In leather and footwear exports from the beginning of the year until now, one of the most prominent highlights is the Vietnam-EU Free Trade Agreement (EVFTA) takes effect from August 1. Tran ThanhHai, Deputy Director of Import and Export Department (Ministry of Industry and Trade), said after two months of EVFTA being in effect, the authorized organisations have issued more than 20,800 sets of Vietnam's C / O form EUR. 1to the28 EU countries. Turnover of C/O goods in August wasUS$310 million and in September US$519 million.

“The turnover has clearly increased, showing that enterprises have grasped the regulations to apply incentives. The items that have been granted a Vietnam's C / O form EUR. 1 are mainly footwear, seafood, plastics and plastic products, coffee, textiles andagricultural products. Among them, the item that best takes advantage of the EVFTA's opportunities is footwear (with turnover of US$385 million); followed by seafood (US$118 million), plastic and plastic products (US$48 million),”Hai said.

Cannot reach US$24 billion

From now to the end of the year, it is forecast that the output of the leather and footwear industry will continue to face difficulties, because it depends heavily on the ability to control the pandemic of the US and Europe. According to the Ministry of Industry and Trade, the biggest driver of the industry's growth is the effective EVFTA. To take advantage of the opportunity from this agreement to increase exports, many companies in the industry have made plans such as restructuring machinery, ready-to-use factory infrastructure and raw materials to meet the commitments of the agreement, and at the same time increasing investment in machinery to improve product quality.

Xuan said by the beginning of the fourth quarter of 2020, the import of production materials (from China and Singapore) has recovered more than50%, but enterprises have not yet stabilisedtheir production due to lack of orders from major markets such as the US and EU. It is forecast that from now until the end of the year, the output of the leather and footwear industry will continue to face difficulties because it depends heavily on the ability to control pandemics of export markets.

Some experts assess that, although the EVFTA is very expected, it is not easy to take advantage of for leather and footwear enterprises to increase exports. That is becauseup to 85% of enterprises in the footwear and handbag industry are small and medium enterprises. The EU market is highly demanding with entry conditions that are not easy such as technical requirements, high quality goods as well as requirements for labour and environment.Factors that businesses, especially small and medium enterprises, have to improve a lot to join.

“For the leather and footwear sector, the information about EVFTA for businesses is very limited. The reason is the model of manufacturing, processing, and exporting. We depend a lot on international customers. The problem of the market is almost caused by the client's initiative, we only produce and do business. Enterprises lack dynamic features in accessing the market.

“In addition, internal resources in terms of human resources, infrastructure systems, and enterprises have yet to meet demanddue to the small and fragmented development. We really want businesses to have a positive change to be able to approach the ’game‘well. Along with that, institutions and policies also need to be improved. This requires consistency from enterprises, the State can execute and take advantage of market opportunities in the coming time,” said Xuan.

By 2020, the entire leather and footwear industry sets a target of US$24 billion in exports, an increase of 10% compared to 2019. However, before the negative impacts caused by the Covid-19 pandemic since the beginning of the year, the LEFASO predicts that although there are more positive signals in the coming time, the leather and footwear industry will not be able to achieve the set target.