Vietnam’s Leather and Footwear Industry: Aiming for $27 Billion in Exports
Strong Growth in 2022
In 2022, Vietnam’s leather and footwear industry witnessed remarkable growth, expanding by over 30%. This spike can be attributed to the effective utilization of free trade agreements (FTAs), particularly the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA). These agreements have created favorable conditions for Vietnamese exporters, allowing them to penetrate international markets more effectively.
Strategic Utilization of Local Raw Materials
Another significant factor contributing to the sector’s success is the industry’s strategic shift toward local sourcing of raw materials. This move is designed to boost the localization rate, which is vital for meeting the origin requirements stipulated in various FTAs. By doing so, manufacturers can ensure compliance while also promoting local economies and sustainability within the industry.
Challenges Ahead
Despite these positive trends, several challenges loom on the horizon for Vietnam’s leather and footwear sector. Experts, including Phan Thi Thanh Xuan, vice president and general secretary of the Vietnam Leather, Footwear and Handbag Association (LEFASO), highlight that inflation in major markets like the United States, EU, and Japan has diminished consumer purchasing power. Additionally, many businesses are grappling with high inventories, complicating their ability to meet export targets.
The Need for Competitive Innovation
Given the contraction of key export markets, there is an urgent need for businesses to enhance the overall competitiveness of their products. This includes investing in research and development to innovate product offerings and streamline supply chains to reduce costs. As the market evolves, companies must stay agile and adaptive to the changing landscape.
Expanding Market Opportunities
To counteract these challenges, the industry’s strategy involves seeking new sources of supply and exploring untapped markets. Xuan emphasizes the importance of leveraging existing FTAs to enhance market penetration. Vietnamese footwear has garnered a positive reputation, particularly in categories like sports shoes, where brands are becoming known for quality and reliability.
Export Trends and Future Expectations
Historically, the export of footwear and handbags to markets that have FTAs with Vietnam has experienced growth rates ranging from 10% to 20%. This trend provides a solid foundation for setting ambitious export targets, with the industry now aiming for $27 billion in exports for the current year. There is optimism that, despite current difficulties, demands for Vietnamese products will continue to sustain due to their established brand reputation.
Conclusion
As the leather and footwear industry gears up for 2023, the focus will be on innovative solutions and strategic partnerships to navigate the complexities of a fluctuating global market. With its established foothold and adaptability, Vietnam’s leather and footwear sector is poised for further growth, even amidst challenging external conditions.