The global leather and footwear market is forecasted to recover strongly in the second half of 2021, helping Vietnam's leather and footwear exports have many favorable conditions and continue to accelerate. It is forecasted that this year, leather and footwear exports will reach the level of about US$22-23 billion, equivalent to the figure achieved in 2019.

Footwear exports in 2021 are expected to increase by 11-12% compared to 2020.
Photo: Nguyen Hien

Exploit the advantages of FTA

According to the latest statistics of the General Department of Customs, from the beginning of the year to the end of June 15, 2021, footwear exports reached US$9.37 billion, up nearly US$2 billion compared to the same period last year.

According to the Ministry of Industry and Trade, in the first half of this year, leather and footwear enterprises have actively grasped and exploited the advantages of the Free Trade Agreements (FTAs) to create a breakthrough in production and business of enterprises and promote exports. In particular, the Vietnam-EU FTA (EVFTA) which took effect from August 1, 2020, is the biggest driving force for the industry's growth in recent years.

In the special journal on the EVFTA, which was developed by the Import-Export Department in collaboration with the Center for Industry and Trade Information (Ministry of Industry and Trade), issued in early June 2021, these two units stated that, with the EVFTA, leather footwear is one of the items in the list of Vietnam's export products with the most positive changes.

Phan Thi Thanh Xuan, General Secretary of the Vietnam Leather, Footwear and Handbag Association (LEFASO), said: The traditional export markets of Vietnamese leather and footwear have rolled out vaccination programs, initially achieving herd immunity. Consumer demand started to recover, making export orders become positive. By the end of the second quarter of 2021, orders in the traditional export markets such as the US, EU had increased by about 10%.

Ms. Xuan also assessed that the export of leather and footwear products in the first half of 2021 could grow because Vietnam's leather and footwear has a distinct advantage over competitors.

For example, the high cost of Chinese labor causes customers to move a relatively large number of orders to Vietnam.

“For Myanmar, despite having competitive labor prices and good policies to attract foreign investment, political instability has affected production and orders. Cambodia was also strongly affected by the pandemic and had to implement social distancing, forcing importers to transfer orders. Meanwhile, Vietnam with good control of the disease is a reliable destination for importers,” said Ms. Xuan.

Target of US$23 billion

The world leather and footwear market is forecasted to recover strongly in the second half of 2021. The reason is because the major markets, namely the United States, Europe, China, Japan, South Korea, Australia, and Canada completed the plan to vaccinate people against the Covid-19 pandemic and open the economy. Meanwhile, the production and export of this item of South Asian and Southeast Asian countries are still heavily affected due to the Covid-19 pandemic.

A representative of the Ministry of Industry and Trade said that the situation of contract signing and export orders in 2021 had positive developments thanks to the advantage of production recovery after Covid-19 compared to other countries.

According to the reports of enterprises, most major exporters have had export orders for the whole of 2021. In addition, a notable factor is the impact of the Covid-19 pandemic, supply chains are being reset. This is an opportunity for Vietnamese leather and footwear enterprises to participate more deeply in the global supply chain.

However, leather and footwear exports are not limited to opening opportunities in the second half of the year. The whole industry is still facing difficulties.

Typically, the development of raw materials and accessories still calls for and depends on foreign investment. Domestic investors have weak resources, few businesses can afford to invest in the production of raw materials. In recent years, many domestic enterprises have focused on building brands. However, many businesses are still facing difficulties in implementation, especially in terms of resources.

It must also be added that in the first five months of the year, there were two outbreaks of the Covid-19 pandemic in localities where many enterprises producing leather and footwear were concentrated. Meanwhile, leather and footwear enterprises have many workers and are at high risk of infection. The pandemic prevention measures according to the guiding documents of the Ministry of Health applied to factories are also creating huge costs for businesses.

According to the preliminary survey, it is estimated that each enterprise needs from US$100,000-500,000 each month depending on the number of workers.

In the current context, the Ministry of Industry and Trade forecasts that this year, leather and footwear exports will reach about US$22-23 billion, up by 11-12% compared to 2020, equivalent to the export turnover of 2019.

The special journal for the EVFTA was developed by the Import-Export Department in collaboration with the Industry and Trade Information Center (Ministry of Industry and Trade) and issued in early June 2021, stating: From August 2020 to March 2021, there have been six months of Vietnam's footwear exports to the EU increasing (except in February 2021, footwear exports to the EU decreased due to the Lunar New Year holiday).

Notably, compared to the time before the Covid-19 pandemic, Vietnam's footwear exports to the EU market has seen remarkable growth in the first quarter of this year.

Specifically, in the first quarter of 2021, footwear exports to the EU increased by 19.2% compared to the same period in 2020 (in the first quarter of 2020 it increased by only 0.1% and in the first quarter of 2019 increased by 11.9%).

It can be said that leather and footwear is one of the goods that make good use of tariff preferences in the EVFTA by meeting the provisions of the corresponding rules of origin of goods in the agreement. From August 1, 2020 to December 31, 2020, the turnover of leather and footwear goods of Vietnam (including footwear and handbags, wallets, suitcases) exported to the EU, which is granted a C/O form EUR.1 by agencies and organizations under the EVFTA, is US$1.37 billion. This figure has reached US$1.17 billion in the first quarter of 2021.