FDI firms hold lion’s share of footwear exports
Foreign direct investment (FDI) firms, rather than the domestic ones, are able to fully tap the production shift of large brands, according to industry insiders.
Statistics from the Ministry of Industry and Trade show that footwear shipments in the first quarter surged 13.5% year-on-year to US$4.74 billion.
Vice President of the Vietnam Leather, Footwear and Handbag Association Phan Thi Thanh Xuan said however, that the sector’s growth did not reflect the sector’s health situation as 80% of the export turnover was contributed by foreign players. She added only a small number of domestic firms are capable of manufacturing for large brands like Nike and Adidas, with stable orders.
Small companies, which do not have advanced production technologies, have been fraught with difficulties.
Chairman of Hanoi Rubber Joint Stock Company Pham Hong Viet said that most local footwear firms have suffered order shortage, increasing material prices, and rising transportation costs, which eat into their profit.
Nevertheless, Xuan believed in a bounce back of the footwear sector in the second quarter, as stable orders from major brands show signs of a recovery in consumption demand.
Experts agree that domestic firms need to capitalise on the preferential treatments brought by new-generation free trade deals such as the EU – Vietnam Free Trade Agreement (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
The main hurdle for local firms is the rule on origin of the materials.
“Opportunities from FTAs are huge. However, if local firms fail to meet requirements in materials, sustainable development, technologies and human resources, they will be out of the playground”, Xuan stressed.