Lefaso, Vietnam’s Leather, Footwear and Handbags Association, expects its industry to achieve exports of more than $20 billion this year after suffering from a decline last year due to the impact of the Covid-19 pandemic on supply chains, consumption and trade. They could double in three to four years’ time thanks to efforts to become more self-suffient in terms of R&D and the supply of raw materials and components.

In 2020, Vietnam’s export turnover for footwear and handbags decreased by 9.6 percent as compared to 2019, down to $16.6 billion. The U.S. market and the European Union accounted for 37.5 percent and 25.4 percent of its total footwear exports, which represented more than 90 percent of its output.

Lefaso noted that, from the end of the first quarter of 2020, the supply of raw materials for footwear manufacturing was interrupted due to a reduction in production capacities in China and South Korea. Many clients postponed or cancelled orders with Vietnamese manufacturers. The industry also faced harsher demands by clients, who required suppliers to shorten delivery times by 30 percent, reduce prices and increase the transparency of supply chains to facilitate quality inspection.

Lefaso claims that the local industry has managed to relaunch itself thanks to good health control, a deeper participation in the global supply chain and an increase in domestic consumption. According to Vietnam’s General Statistics Office, in January 2021, the manufacturing index of the leather and footwear industry was up by 20.8 percent year-on-year and monthly exports of footwear were estimated at $1.8 billion, up by 26.4 percent from the previous year.

Lefaso noted that, because of the pandemic, Vietnamese enterprises have proven their ability to do research and development and sample design in-house. In the past, footwear brands had to send their own experts to Vietnam to design their products. On the other hand, reports indicate that the local R&D employees were generally supported in their work by interacting with their counterparts in the Western World over the internet.

Lefaso also noted that the domestic supply of raw materials and components has increased and is currently estimated to satisfy 50-60 percent of the local demand. Lefaso claims that now “almost all shoe sole production, from sole molding, sole finishing, or packaging stages, can be wholly supplied in Vietnam.” The association reported that Gia Dinh Shoe, a company in Ho Chi Minh, has established an industrial cluster to attract investments to produce raw materials for the leather and footwear industry, such as textiles and polyurethane.

Combined with efforts to take advantage of free trade agreements, improved manufacturing efficiency and increased digital transformation, these initiatives are expected to help Vietnam’s leather and footwear industry to maintain high growth in the coming years,” said Lefaso.

While Vietnam’s population is limited, the trade association expects the leather and footwear industry to benefit from the ongoing transfer of production out of China to other countries. It noted that the country’s leather and footwear exports could reach $30-40 billion within three to four years if only 5-10 percent of Chinese trade moves to Vietnam.

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