HANOI – The General Statistics Office of Vietnam (GSO) has announced that the country’s footwear exports have increased 21.9 percent year-on-year, reaching US$2.85 billion. This rise is attributable to rising consumption and improvements in the standard of living around the world, most notably in the European Union (EU).

The Vietnamese industry is also enjoying benefits from the Generalized System of Preferences (GSP) offered by the EU since January 2014. Furthermore, the Trans-Pacific Partnership (TPP) will present numerous opportunities for footwear exporters in the near future, allowing better access to markets such as the U.S. and Japan.

Rising labor costs in places like China are driving an exodus of businesses to low cost locations such as Vietnam. As a result of this influx, many local exporters say their orders are backlogged for the next six months. To deal with this bottleneck, Vietnamese businesses are expanding their production capabilities and working on improving product quality.

However, there is a potential downside to this rapid growth – the growth in footwear exports is partly the result of increased foreign direct investment, and this means that a significant portion of profits is going to multinational companies operating in the Vietnam.

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In order to counter this trend, Vietnam’s footwear industry needs to work on strategies to increase the amount of added value that locally owned businesses are able to put into their products. Additionally, the local industry must make the most of recent investments aimed at upgrading technology and modernizing production chains.

To aid in strengthening the local industry, the Vietnam Leather and Footwear Association (VLFA) has recommended that local businesses formulate specific production and business plans, upgrade production technology and upgrade production lines. However, the VLFA has admitted that local manufacturers currently lack the support and technology necessary to upgrade their operations at this time – which is why they have been forced to rely on foreign technology in this field.

Other improvements suggested by the association were to improve marketing activities based on market research and increase trade promotion activities.

The footwear industry’s 2014 objective is to achieve a turnover of US$12 billion from US$10.3 billion in 2013.

An additional opportunity for Vietnam’s leather industry lies in the recent global trend of leather interior products becoming more popular than wooden products – making this a huge market that the country can take advantage of. In order to fully realize this opportunity, the Ministry of Industry and Trade has recommended that local enterprises work to improve their management abilities, build strong trademarks, and develop key export products.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email vietnam@dezshira.com or visit www.dezshira.com.

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