Despite exporting well, domestic leather and footwear firms are losing out to the foreign competition in their own backyard.
Vietnam is now among the Top 4 leather and footwear exporters in the world, with $10 billion worth of goods shipped overseas every year, but in the domestic market foreign firms hold a market share of 60 per cent.
Asia Shoes PTE is one of major players in the domestic market but only sells 1 million products a year, or 50 per cent of its manufacturing capacity. As with many other local producers, it suffers from the fact that the price of its products are higher than imports.
“Domestic firms don’t have the opportunity or the need to be dominant in the domestic market,” said Ms. Van Thuy Hanh, Sales Director in Domestic Markets at Asia Shoes PTE. “One factor that greatly affects the price is the cost of input materials.”
The lack of planning for support industries has also made domestic manufacturers be passive in supply chains and increasing added value. “We have proposed a decree on support industries many times but one is still to be introduced,” said Mr. Nguyen Duc Thuan, Chairman of the Vietnam Leather, Footwear and Handbag Association (LEFASO). This is at the root of the problems facing domestic firms, he added.
According to the Master Plan for Developing Vietnam’s Footwear Industry to 2020 and Vision to 2025, the industry should have localization ratios of 65 per cent by the end of 2015 and 80 per cent by 2020. Sectoral planning, especially in support industries, would be a solution for domestic firms to seize the opportunities from trade agreements Vietnam has signed or is about to sign.