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Economic crisis hits leather, shoe exports

The economic crisis at home and abroad has affected export activities and business results related to the leather and footwear industry this year.

The industry currently faces many challenges, ranging from macroeconomic policies and trade barriers to the world market, in hitting its export targets while continuing to develop. Nguyen Thi Tong, general secretary of the Viet Nam Leather and Footwear Association, spoke about these issues.

What challenges do you think leather and footwear enterprises are likely to face by the end of this year?

Challenges are likely to include high input prices, low domestic support products and increasing minimum wages, which have all caused pressure on production and business activities, especially among firms specialising in exports.

The selling and processing prices of exports will not be able to increase at the same rate as input costs, which means continued loss on expanded production.

Additionally, export enterprises have to depend on material assigned to them by foreign partners due to domestic material only capable of meeting 40 per cent of industry production demand. With import prices related to materials having increased recently, enterprises make little profit from processing.

An increase in minimum wages would greatly affect the industry seeing as enterprises make use of large labour numbers which need sufficient compensation.

Enterprises and joint ventures often employ preferential salaries to keep them in production.

How could enterprises hit their yearly export targets this year?

Results would largely depend on how enterprises overcome challenges and on macroeconomic policies.

Initially, input costs need to be lowered via deals based on material, while trademarks need better promotion alongside much needed improvement in product quality.

There are currently enough export orders for the third quarter, which could be hampered by high input costs.

In the first eight months of this year, export value reached US$4.1 billion out of an expected $6 billion for the whole year.

What is the export potential on the European market following the removal of anti-dumping tariffs on leather-upper footwear?

Global trade has opened many doors for Vietnamese leather and footwear exports.

The EU economy has been faced with many difficulties of late with the volume of exports to its market having shrunk. It has remained, however, one of Viet Nam’s traditional export targets.

To sustainably export to the EU, footwear enterprises must come to grips with regulations and market development in the face of possible, sudden growth.

The association has discouraged sudden growth in the EU, however, due to the potential risk of anti-dumping lawsuits and trade remedies.

EU inspection systems include high standards, necessitating Vietnamese enterprises having to meet tough market requirements related to labelling and the use of harmful substances.

Could you comment on the positive effects of the Trans-Pacific Partnership (TPP) on Vietnamese leather and footwear exports?

The Trans-Pacific Partnership (TPP), also known as the Trans-Pacific Strategic Economic Partnership Agreement, is a multilateral free trade agreement aimed at further liberalising the economies of the Asia-Pacific region.

Viet Nam, and other countries, have negotiated on reaching consensus on the agreement in the near future.

During negotiations, the association co-operated closely with the textile and garment association and other relevant offices to ensure the interests of all the involved.
If Viet Nam joins the TPP, domestic exporters would enjoy zero export tax rates to other countries signed up to the agreement, especially the US, to which 30 per cent of Vietnamese leather and footwear exports are sent.

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