Exports of leather and footwear: removing obstacles to grow

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Contributing tens of billions of dollars per year with an average growth rate of about 15% per year, leather and footwear industry is one of Vietnam’s key export industries. However, before the industrial revolution 4.0, in order not to regress, the investment to improve internal resource, especially labor productivity cannot be delayed

Exports of leather shoes and bags will be targeted at US $ 20 billion this year. Photo: Nguyen Hue.

Fierce competition

Commenting on the fashion industry in general, Nguyen Duc Thuan, Chairman of Leather, Footwear and Handbag Association (LEFASO) said: "The market’s demand is increasing. More than 70% of the fashion output is produced in Asian countries such as China, Vietnam, Indonesia, Philippines, Bangladesh, etc. In particular, China accounts for about 50%. In 2017, export value of the whole industry reached nearly US $ 18 billion. The target set for 2018 in comparison with 2017 is that exports of leather and footwear earn US $ 19.5 - 20 billion, up 10%; leather and footwear production rise by 5%; localization rate of leather and footwear account for 55%. Export of footwear continues to rank No. 4 and export of bags ranked No. 10 in the TOP 10 of export commodities of Vietnam.

In terms of challenges of the leather and footwear industry, Mr. Thuan said that one of the major problems was labor productivity. At present, the overall labor productivity is divided into 3 levels. Of which, productivity of large enterprises is about US $ 25,000-27,000/person / year; for an average company it is about US $ 18,000 / person / year and of small and medium enterprises is about US $ 12,000 / person / year.

"In 2018 as well as in the future, enterprises in the leather, footwear and handbag industry will have to face with fierce competition from the enterprises in the same industry in the world. Today, the world is calculating labor productivity hourly. According to this calculation, the Vietnam’s productivity reached about 0.6-0.7 pairs / hour, while enterprises with advanced technology and machinery can produce 1.2 pairs / hour, " Mr. Thuan said.

Regarding this matter, Mrs. Phan Thi Thanh Xuan, Vice Chairman and Secretary General of Lefaso, said that if applying management methods as well as applying technology to solve the problem of labor productivity, the growth rate of leather and footwear industry is expected to increase by 1.5-2 times compared to the current rate. This process will help businesses replace part of labor, improve product quality as well as control the uniformity of the product. Although the investment will be quite expensive, but to ensure long-term, sustainable development, enterprises also need to seriously consider and make an appropriate investment.

Set up a Council on productivity statistics

According to Mr. Thuan, the problem of productivity is the responsibility of not only leather and footwear industry but also other industries.It is necessary to set up a council on productivity statistics to know the position of Vietnam’s industries,thereby, introducing effective measures to enhance the competitiveness of the industry. The goal is that if not reaching the rate equal to other countries, it must reach at least 90% of the rate.

"The Ministry of Science and Technology always talks about the industrial revolution 4.0, but it should not mention it in general. Vietnam has about 30 export industries with turnover of more than US $ 1 billion/ year, so we need to consider each specific industry to improve labor productivity,"he stressed. The leather, footwear and handbag industry in particular, Lefaso has established a Research and Development Centre and found a direction to raise productivity. Accordingly, the foundation of corporate governance must be based on artificial intelligence, science and technology application and administration such as the stock market. Accordingly, leaders of enterprises understand targets, performance results and situations for introducing reasonable solutions. "The Ministry of Science and Technology should coordinate with industries to pilot this model, if the results are good, then we will multiply it," he added.

In terms of the labour source, according to some experts, the Ministry of Labor, Invalids and Social Affairs as well as the Ministry of Education and Training should standardize training programs. After that, colleges should train the trainees on that standardized program. The training orientation should be close to actual needs of enterprises and industries. Post-trainees can immediately work at enterprises without a re-training program.

In terms of the export market, most enterprises in the footwear and handbags industry expressed their wish that besides supporting them to make good use of the existing Free Trade Agreement (FTA), in 2018, the state management agencies should accelerate the EU-Vietnam FTA to come into effect soon. Because, this FTA will significantly rise the export turnover of the industry.

By Thanh Nguyen/ Huyen Trang

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