According to the President of the Hanoi Shoes Leather Association, Pham Hong Viet, Vietnam’s leather industry is benefiting from the shift of orders away from China, which is reducing its investment in the garments and leather industries and is focusing instead on the production of high-tech goods.
Pham also said the signing of a number of trade agreements like the Vietnam – EU Free Trade Agreement (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is ushering in development opportunities for Vietnam, especially in attracting investment and boosting export to EU and CPTPP member markets.
According to the European Commission, the deal with Vietnam, a fast-growing and competitive economy whose bilateral trade with the EU has quintupled over the past ten years, could potentially boost the country’s GDP by 15%.
Pham affirmed that the export activities of Vietnam’s leather industry are seeing stable growth and the forecast for the country’s economy in 2019 is optimistic as orders for footwear and handbags are expected to keep moving from China to Vietnam in anticipation of opportunities created by those trade agreements.
However, rising labour costs, challenges raised by the Fourth Industrial Revolution and low productivity in comparison to regional competitors means the industry will have to invest in modern machinery to reduce its labour force, improve its productivity and the quality of its products and increase its range of services.
Pham, who was leading a delegation of Vietnamese manufacturers and buyers at the All China Leather Exhibition (ACLE) in Shanghai last fall, is also the owner of the Hanoi Rubber Joint Stock Company (HARCO JSC) formerly known as the Hanoi Rubber Company, a major producer of shoes and leather accessories in Vietnam. In order to respond to the growing demand for shoe production in the country, HARCO JSC is expanding and building a new factory in Hung Yen, Hanoi’s newest industrial area. The plant which will span 50,000 sqm will feature 10 different production lines and will host up to 2000 workers, according to Pham. His objective in visiting ACLE was to find machinery, equipment and material for the new plant.
Pham said he was impressed by the sheer size of the ACLE fair, its safe and secure environment and the support that was provided by the organization. “I made valuable contacts and met potential suppliers to equip our future factory,” Pham declared.
Vo Thi Thu Suong, director and founder of the Balotui Xach company, a manufacturer of backpacks and handbags and a supplier of accessories to GE and Sanyo, was also looking for modern machinery as well as leather and PU suppliers for the six factories the company owns in Vietnam. Vo said she hoped to forge direct contacts with suppliers and avoid going through agents.
Offering competitive prices is another challenge that Vietnamese manufacturers will increasingly have to face, according to another member of the delegation, Phan Xuan Huy of Phuan Phat Shoes Company who was looking for ideas to increase the company’s range of services. “The time has come for Vietnam to audit its production of shoes and accessories in order to face future opportunities and challenges,” Phan said.