Vietnam's leather and footwear industry was on course for a strong recovery as more international fashion brands were valuing the country as an important part of the global supply chain, according to the Vietnam Leather, Footwear and Handbag Association (LEFASO).

Workers on an assembly line at a footwear factory in Dong Nai province
(Photo: baocongthuong.vn)

Phan Thi Thanh Xuan, Vice President of LEFASO, said many Vietnamese leather and footwear producers had secured enough orders to keep production running until the end of the year. This was due in no small part to the country's successful effort to contain and fight off the COVID-19 pandemic.

In addition, the country has become a popular destination for foreign investment after signing a number of historic trade deals such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA). A recent survey by LEFASO showed that more than 40% of international buyers said they were either placing additional orders or planning to do so in the near future. 

Domestic firms, in light of the disruption caused by the pandemic and drastic falls in demand in traditional export markets such as the EU (-27%) and the US (-21%) compared with the previous year, were seeking new buyers and pushing for cost-cutting restructuring measures.

As a result, Vietnam's localisation ratio among leather and footwear producers has seen an improvement to average 30-40%, with key export products including sportswear and footwear up to over 50%. 

"As we enter the last quarter of the year, there have been many positive signs of a strong recovery for leather and footwear makers," Xuan said. 

Statistics from the General Department of Vietnam Customs and the Ministry of Industry and Trade appeared to support the idea with export volume showing a strong recovery in September, posting a 4.5% increase from August and only a slight 0.4% decrease from the same period last year despite the ongoing pandemic. 

Leather and footwear producers have also been recruiting additional workers as production starts kicking back into high gear.

This rosy picture, however, had not been seen by everyone in leather and footwear. 2021 remained unpredictable even for those who were doing well at the moment, said Xuan.

Free trade agreements and preferential policies, while giving some advantages for Vietnamese products, could not decide the outcome of the competition. 

Vietnam's leather and footwear industry was still struggling to deal with a host of problems, including its reliance on imports of raw materials and tightened labour regulations.

Xuan said firms must start investing in new technology, improving the labour force and building contingency plans in order to stay quick on their feet and ready to respond and adapt to changes in the business environment. 

Vietnam has over 1,700 leather and footwear makers with a total production capacity of 1.1 billion pairs of footwear, and 400 million bags and backpacks a year.

Footwear exports alone were estimated at US$12.8 billion in the first nine months of the year, an 8.8% decrease compared to the same period last year, and only half of the industry's target of US$24 billion set for 2020.