Bags / Shoes & Accessories

Companies in the Vietnamese leather industry that have been unable to maintain production due to the epidemic are struggling to find ways to maintain production, and many companies have received many orders.

Mr. Dang Van Ngoc, the head of Tan Phat Company in Ho Chi Minh City, said: “Since the outbreak of the new crown pneumonia, European customers in particular have cancelled nearly 80% of their orders. The remaining few customers asked for payment delays or price reductions. Subsequently, Vietnamese companies In trouble, the company had to maintain production at a loss. Fortunately, we have re-established contact with customers and reached an agreement. In the case of a complex epidemic, both parties will share difficulties and profits. Therefore, we have obtained enough production by the end of the year Orders."

According to Nguyen Duc Thuan, chairman of the Vietnam Leather, Footwear and Handbags Association (Lefaso), more and more footwear and handbag orders are being transferred to Vietnam. This is a time and opportunity for companies to resume production and rebuild their supply chains. Although the production and operation conditions of all enterprises have not returned to normal levels, in general, most enterprises have maintained good performance, overcome difficulties, and seized market opportunities. For example, at the beginning of 2020, as consumer spending in Europe and the United States began to cut, and supermarkets were closed due to epidemic prevention, Vinh Yen Shoe Company encountered unprecedented difficulties. However, from the end of 2020 to the present, with the implementation of a number of flexible administrative solutions, the company's production and business activities ushered in a vigorous development. It is expected that the company will achieve sales of 380 billion VND this year.

According to the General Administration of Customs of Vietnam, in the first five months of this year, Vietnam's footwear exports totaled nearly US$8.4 billion, a year-on-year increase of 25.5%. It is worth noting that in the first five months of this year, footwear products accounted for 6.4% of Vietnam’s total merchandise exports, ranking among the top five exports of Vietnam, second only to mobile phones, computers, machinery, clothing and textiles. The three traditional markets for Vietnamese footwear exports are the United States ($3.35 billion in exports), the European Union ($1.92 billion) and China ($83.94 million).

According to an official report from the Ministry of Industry and Trade (MoIT) of Vietnam, due to the full use of tariff preferences and rules of origin in the EU-Vietnam Free Trade Agreement (EVFTA), the leather and footwear industries have achieved impressive growth recently. In the first quarter of this year, the proportion of footwear products exported to the EU market in the form of EUR.1 C/O was as high as 98.98%. However, the Ministry of Industry and Trade also acknowledged that the EU's origin standards for footwear products are relatively flexible, allowing the import of raw materials from outside the EU to produce products. Affected by the new crown pneumonia epidemic, the global supply chain has been disrupted, which has sounded the alarm for the domestic leather shoe industry, which is heavily dependent on imported raw materials. Therefore, if companies want to develop sustainably, they need to make full use of tariff preferences and the opportunities brought by EVFTA, focus on the production and development of domestic raw materials, and serve domestic production and export.

Currently, the raw materials for the leather and shoe industries in Vietnam are mainly imported from China (60%), followed by South Korea and Taiwan (China). In recent years, as companies have gradually shifted their raw material supply chains to the domestic market, the autonomy of raw materials has been greatly improved. But this is only limited to large enterprises. Due to limited resources, small and medium-sized enterprises cannot obtain the supply of domestically produced raw materials.

The Vietnam Leather, Footwear and Handbags Association recommends: “To develop supporting industries, enterprises need to provide financial support. Specifically, they should enjoy preferential mechanisms for loans or tax reductions. Tax reduction policies for enterprises investing in supporting industries will be implemented. To help improve the export competitiveness of footwear products. We hope to establish a special industrial park for supporting industries in the leather and footwear industry.

According to Nguyen Thi Xuan Thuy, director of the Vietnam Institute of Industrial Policy and Strategy, out of 3,000 leather and footwear companies, only 17 are engaged in design business, and 400 companies produce accessories and accessories or parts processing. The production of leather and shoe-making raw materials and accessories is mainly aimed at middle and high-end footwear products. Therefore, if the leather and shoe industries want to make breakthroughs, domestic supporting industries are still industries that need to be developed.