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Dependence on imported materials trips up footwear industry
Despite being a key player in the Vietnamese economy, the footwear industry still depends too much on imported materials, which hinders its development, insiders said.
Nguyen Van Khanh, General Secretary of the Shoes and Leather Association of Ho Chi Minh City, said many companies in the US and Japan, the two biggest markets for Vietnamese-made footwear, wanted to place more orders with Vietnamese producers instead of doing business mostly with Chinese exporters.
But when they visited Vietnam and found that local firms import most of the materials from China, they gave up on the plan, he said.
Vietnam Leather and Footwear Association, or Lefaso, said in a report released last month that raw material costs account for as much as 80 percent of the value of the finished products.
But domestic suppliers only produce some parts – like shoelaces and labels – with everything else needing to be imported.
The association said 80 percent of the leather the industry needed, estimated at 350 million square feet, had to be imported in 2007.
Lien Anh Company, a garment and footwear producer, opened a VND100 billion (US$5.56 million) center in Binh Duong Province last week to supply raw materials for the garment and footwear industries. But of the 650 stalls available for rent, only 50 have been taken, deputy director Truong Thi Thuy Lien said.
Many foreign suppliers said they do not see good business prospects in Vietnam, she said.
Many footwear and garment producers said most of the time they only do contract work for foreign partners, who import the raw materials themselves, Lien said.
Lefaso said the footwear industry posted an average annual growth rate of 23 percent in the last seven years.
Footwear exports were worth $4.77 billion last year, accounting for 8 percent of all exports. But the industry’s local content ratio is around just 40 percent, Lefaso said.
The association called for more investment in the production of raw materials so that the local content ratio reaches 65-70 percent by 2010 as planned.
thanhnien, tbktsg
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