The modest local content is hindering Vietnamese leather and footwear products from accessing markets with high requirements

Low local content

Vietnam is home to over 1,700 leather-footwear and handbag businesses, 85 percent of which are facing limitations in terms of capital and technology, and unable to proactively source raw materials and accessories. The modest local content of product is an obstacle hindering Vietnamese leather and footwear products from accessing markets with high requirements.

While leather, sole and insole are totally made in Vietnam, decorative devices and accessories are imported. Vietnam-based support industry enterprises have set a target of increasing the local content rate of Vietnamese footwear products to 75-80 percent in 2025 to help domestic manufacturers reduce product cost. A number of companies have begun to exploit domestic raw materials and accessories.

Phan Thi Thanh Xuan, General Secretary of the Vietnam Leather, Footwear and Handbag Association (LEFASO), said that 10 years ago, the local content rate of footwear products was only 40 percent, and it has increased to 55 percent, with that of sports shoes reaching 70-80 percent, and fabric shoes almost 100 percent. Advanced technology application and creation of high-quality raw materials and accessories are crucial for Vietnamese leather and footwear businesses to make products of higher grades and higher quality.

According to the General Statistics Office of Vietnam, Vietnamese companies exported footwear products worth more than US$2.46 billion from January 1 to February 15, 2024, 16 percent higher than the same period last year - photo: Thy Thao

Support industry development

Consistent policies, as well as solutions to attract investment from multinational corporations, connecting domestic enterprises to foreign-invested enterprises’ raw material and accessory supply chains are important to ensure the long-term development of the leather and footwear industry and its supporting industries.

Leather and footwear businesses should continue to restructure production while reducing operating costs. They should also improve design capabilities, develop branding, apply new materials and improve competitiveness to create medium- and high-grade products, including leather shoes, bags and fashion items meeting importers’ strict standards.

Leather and footwear enterprises should shift from conventional product manufacturing to medium- and high-grade product creation, better serve the domestic market through following fashion trends, and market and new material research. They need to develop complete, consistent supply chains throughout the country, giving priority to facilitation of investment in key economic zones.

The LEFASO representative suggested that the government support the formation of leather and footwear support industry industrial zones, and have policies to attract enterprises with advanced wastewater treatment technologies to the leather and footwear sector.