Footwear exports lag with low-value products ....

Although Vietnam is among the world's top five footwear exporters, 70 percent its leather and footwear businesses still export low-value-added products.

According to Nguyen Duc Thuan, Chairman of Vietnam Leather and Footwear Association (Lefaso), the local leather and footwear industry may earn US$6.2 billion in export revenues this year, which will be nearly $1 billion higher than last year, making 2011 the second consecutive year in which it enjoys an annual growth rate of 20 percent.

But compared with China, which accounts for 70 percent of global footwear exports, Vietnam is still lagging far behind, Thuan said.

Aiming for breakthrough

Lefaso's statistics show that 70 percent of Vietnam's leather and footwear businesses still produce export items under subcontracts for an added value of only 10 to 15 percent.

Nguyen Tien Vi, head of the Ministry of Industry and Trade's planning department, said the next 10-15 years' target would thus focus more on quality growth for the leather and footwear industry.

Vi said it means that the industry will develop the production of materials and accessories, raise added values, improve productivity and product quality, shift from subcontracting to manufacturing, increase design capability and develop new products.

Vi said except for distribution in foreign markets which will remain out of reach for Vietnamese businesses, the leather and footwear sector will focus on the three remaining segments in the value chain: marketing and designing, developing human resources, and organizing production.

Marketing-designing and new product development will help the sector seize 50-70 percent of local market shares, and the number of products developed by local design companies will account for 70 percent of market shares, Vi said.

Meanwhile, the other two segments, which local businesses can undertake, will help expand export markets. The success or failure of human resources development will play a decisive role in increasing production value and competitiveness for footwear exports.

For the time being, the localization rate of the leather and footwear sector has reached 50 percent. The figure is expected to rise to 60-65 percent in 2015 and 80-85 percent in 2025, Vi said.

He said this target is not too high because the Vietnamese market, with its annual capacity of about 750 million pairs of shoes and more than 80 million handbags, is big and attractive enough for manufacturers of materials and accessories.

If the sector can maintain the growth target of 8.2-9.4 percent per year, within the next 10 years, the country will be able to turn out at least 1.6 billion pairs of shoes and 300 million leather products annually, mainly suitcases, wallets and handbags.

But Vi said whether these targets can be achieved or not will depend in part on government policies.

In late February, the Prime Minister issued Decision 12 to support various industries including footwear and leather. Incentives for footwear and leather under this decision are fairly broad, covering land, premises, loans, import and corporate income taxes, and other forms of financial support.

But Vi said most incentives had already been covered in documents issued earlier, so it would be less likely for Decision 12 to bring about a breakthrough.

The most interesting issues to businesses and investors—incentives for land and premises, and investment credits—are only stipulated generally, Vi added.

Vi said what would ultimately matter was whether these incentives would be carried out.

TBKTSG