Vietnam Leather and Footwear Industry

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Developments and challenges in the Vietnamese footwear and leather manufacturing industry, reflecting changes in Vietnam's competitive position

Text of Vietnam Leather and Footwear Industry

  • VIETNAM LEATHER AND FOOTWEAR INDUSTRY OPPORTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO

    VIETNAM LEATHER AND FOOTWEAR INDUSTRY -OPPORTUNITIES & CHALLENGES ON THE WAY OF

    VIETNAM ENTERING WTO

    Speech of: Dr. Nguyen Thi Tong General Secretary of LEFASO Vietnam

  • VIETNAM LEATHER AND FOOTWEAR INDUSTRY OPPORTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO

    I. OVEREVIEW OF VIETNAM LEATHER & FOOTWEAR INDUSTRY:

    I.1. Specifications:

    I.2. Overewiew of Vietnam Leather and Footwear Industry:

    I.3. Disadvantages and difficulties:

  • I.1. Specifications:

    Leather and footwear industry attracts a huge amount of employment of society

    Beside getting a lot of priorities from exporting, also has export potential

    It has to face direct pressure from the regional and international economic integration. Therefore, the industry gains a lot of opportunities as well as facing with more challenges.

    VIETNAM LEATHER AND FOOTWEAR INDUSTRY OPPORTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO

  • I.1. Specifications (continue):

    In the industry, operate enterprises from all economic sectors, the numbers of State - Owned enterprises are being narrowed with the privatization process

    The industry are now taking advantages and opportunities together with countries in Asia region for development. Vietnam today is one of the top 10 leading countries in footwear production and exporting in the world.

    VIETNAM LEATHER AND FOOTWEAR INDUSTRY OPPORTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO

  • I.2. Overwiew of Vietnam Leather and Footwear Industry:

    I.2.1. Production Capacity and fact figure:

    a. Different kind of footwear: 520.0 million pairsIncluding:

    - Sport shoe: 290.50 million pairs - Canvas shoe: 45.00 million pairs - Ladies shoe : 100.20 million pairs - Other (slippers and sandals) : 84.30 million pairs

    b. Different kind of bags and handbags: 45.0 million Pieces

    c. Finished leather: 45.0 million sqft

    VIETNAM LEATHER AND FOOTWEAR INDUSTRY OPPROTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO

  • VIETNAM LEATHER AND FOOTWEAR INDUSTRY OPPORTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO

    Table 1. Production capacity by economic sectors(Updated at the end of 2004)

    50,00022,00020,0008,0001.000 Sqft

    3.Finished leather

    45,00018,00020,0007,0001.000 pieces

    2.Different kinds of bags and handbags

    520,00034,000227,526147,474111,0041.000 pairs

    1. Different kinds of Footwear

    TotalJoint venture compan

    ies

    FDI compani

    es

    Non State owned

    Companies

    State owned

    companies

    Unit

  • VIETNAM LEATHER AND FOOTWEAR INDUSTRY OPPORTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO

    Table 2: FACT FIGURE THROUGH THE YEARS from 2000 - 2004

    39,00032,00025,00015,1001.000 Sqft

    3. Finished leather

    41,00035,00033,70031,3001.000 pieces

    2. Different kind of bags and handbags

    69,82970,77467,43375,220- Others

    93,40082,42371,71054,710"- Ladies shoe

    21,89628,64531,42834,080"- Canvas shoe

    256,125234,802189,429126,470"- Sport shoe

    441,250416,644360,000302,8001.000 pairs

    1. Different kind of Footwear

    2004200320022000Unit

    Note:: Others including leather shoe , sandals, slippers

  • VIETNAM LEATHER AND FOOTWEAR INDUSTRY OPPORTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO

    I.2.2. Economic sector structure:

    Table 3. Numbers of enterprises by economic sectors

    14014- Joint Venture companies

    14504141- FDI Companies

    19526169- Non - State Owned companies

    37235- Center State Owned companies and Local State -Owned companies

    Include:

    39132359Total

    TotalTanneriesFootwear, bags and handbags, Accessories

    Companies

    Enterprise divided by economic sectors

  • VIETNAM LEATHER AND FOOTWEAR INDUSTRY OPPORTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO

    I.2.3. Export Turnover of the Footwear Industry:

    Table 4 . Contribution of the industry to the country Export 2000 - 2004

    Unit: Million USD

    10.0011.0011.0510.4310.16Ratio %

    26,503.0020,600.0016,700.0015,100.0014,448.12The country

    2,640.262,267.001,846.001,575.001,468.12The Industry

    20042003200220012000Export turnover

  • VIETNAM LEATHER AND FOOTWEAR INDUSTRY OPPORTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO

    Table 5. Output and Export turnover by category in the period 2000 -2004

    Quantity: 1000 Pairs Value :1000 USD

    2,640,260420,2382,267,381392,9811,846,132333,1501,575,157291,8341,468,000276,600Total

    153,.60866,502133,74168,19688,90258,531213,81768,176187,81075,220Other

    575,.91188,953438,12878,681262,31366,690283,94264,189231,84054,710Ladies shoe

    83,45620,85456,27925,78189,16627,97175,64431,582155,71030,670Canvas shoe

    1,827,285243,9291,638.025220,3221,392.775179,9581,001.753127,887892,64116,000Sport shoe

    ValueQuantityValueQuantityValueQuantityValueQuantityValueQuantity

    20042003200220012000

  • VIETNAM LEATHER AND FOOTWEAR INDUSTRY OPPORTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO

    Table 6. MARKET SHARE OF VIETNAM EXPORT FOOTWEAR IN 2004

    Unit: USD 1000

    100.02,640,260.0Total13.2348,514.0Other markets42.872,964.0Japanese market3

    16.0423,110.0US market268.01,794,576.0EU countries1

    %ValueExport turnover by main markets

    No

  • VIETNAM LEATHER AND FOOTWEAR INDUSTRY OPPORTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO

    68%

    16%

    3%

    3%10%

    EU Market United States Japan Asia countries Other countries

  • VIETNAM LEATHER AND FOOTWEAR INDUSTRY OPPORTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO

    Table 7. Export turnover by economic sectors 2000- 2004Unit: mill USD

    100,002.640,26100,002.267,38100,001.846,00100,001.468,00Total

    6,40169.566,60149,196,70123,405,6083,09- Joint venture enterprises

    52,41.383,0648,401097,5745,40838,6541,30605,96- FDI enterprises

    58,801.552,6255,001.246,7652,10962,0546,90689,052. 100% foreign capital enterprise-(FDI), joint venture enterprises

    26,80721.3928,00636,8329,10536,2226,73392,34- Private companies

    13,6366.2517,00383,7918,80347,8626,37386,61- State companies

    41,201.087,6445,001.020,6247,90884,0853,10778,951. Vietnamese enterprises, includes:

    %2004%2003%2002%2000Enterprises by economic sectors

  • VIETNAM LEATHER AND FOOTWEAR INDUSTRY OPPORTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO

    Table 8. EXPORT TURNOVER BY PROVINCEUnit: USD million

    100.002,640.00Total4.71124.27Others81.2432.87 Da nang City71.4438.06Vung tau, Ba ria Province62.9377.45 Hanoi City5

    10.47276.46 Hai Phong City416.09424.67 Binh Duong Province322.44592.36 Dong Nai Province240.681,074.00Ho Chi Minh City1

    %ValueCity, ProvinceNo

  • 1.2.4. Labor forces Up to the year of 2004, there are nearly 600,000 workers

    working in the industry, consist 6.5% from the whole industry sector labor force.

    The main labor force of the industry are mainly at lower level of skill, variable and frequently moving. The variety of labor forces was very high since late 2004 to early 2005, in some particular companies this rate was at 35- 40%.

    The main part of labor forces was trained in the production line. Most of them are women - 85%. Immigrant employment take the ratio of 70% from the whole labor force of enterprise.

    VIETNAM LEATHER AND FOOTWEAR INDUSTRY OPPORTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO

  • 1.3. Disadvantages and difficulties: Most of companies are operating at the processing contracts,

    therefore they have less interests as well as dynamic.

    Value - added of footwear still at low rate (less than 40%). The uncomprehensive development between raw material production and footwear production. A lot of raw materials still have to import, especially materials for the upper shoes

    Facing with pressure from labor force: lacking, unstable, low level of skill and technique, lack of high tech workers, engineers, and management staff.

    VIETNAM LEATHER AND FOOTWEAR INDUSTRY OPPORTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO

  • 1.3. Disadvantages and difficulties (continue):

    Marketing, market development, shoe designing and products development are also at the poor situation. The potential markets can not be approached because of companies marketing capacity.

    Infrastructure and service works still limited, not all meeting requirement of importers and consumers

    Companies also have to deal with competition in term of products price, processing cost are narrowed when high input cost (cost of materials, other issues as: production cost, transportation cost...)

    Other limited of Enterprises

    VIETNAM LEATHER AND FOOTWEAR INDUSTRY OPPORTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO

  • II. OPPOTUNITIES & CHALLENGES OF THE INDUSTRY ON THE WAY OF VIETNAM ENTERING WTO:

    II.1. Opportunities:

    The demand of footwear from most of countries in the world is now highly increasing because of the living conditions improved with the time being.

    The ratio of products exporting into US market has been increasing since 2002. There are many of companies focus their production to this potential market, specially FDI and joint venture companies

    VIETNAM LEATHER AND FOOTWEAR INDUSTRY OPPORTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO

  • II.1.