A worker makes shoes for export at the Ha Tay Chemical & Knitting Co. — VNA/VNS Photo Tran Viet

HCM CITY (Biz Hub)  — Leather footwear and handbag exports are expected to top US$12 billion this year, achieving the target, the Viet Nam Leather and Footwear Association (Lefaso) said.

They were worth $10.4 billion last year to rank third in the country's list of key exports, Diep Thanh Kiet, Lefaso's deputy chairman, said, adding, "The exports were very good in the first half of the year, with footwear exports going up by more than 14 per cent and handbags by over 18 per cent."

But Kiet and others at a seminar in HCM City yesterday agreed that small-scale production, poor development of supporting industries, and lack of skilled workers are making the leather industry's growth unsustainable.

The industry imported nearly $4.2 billion worth of leather and other raw materials last year, which accounted for 40 per cent of its total export revenues, Kiet told the seminar organised by Lefaso, the Viet Nam Chamber of Commerce and Industry (VCCI), and VPBank.

Up to 70 per cent of the leather needed for footwear and handbag production was imported, mainly from South Korea, Taiwan, Italy, and Thailand.

Asked whether the problem with China is affecting the industry, Kiet said leather imports from China account for just 6-7 per cent, too little to have an effect.

Only 40 per cent of fabric and other raw materials can be sourced locally, and the country spent more than $3 billion to import fabric and other raw materials last year, mostly from China.

But there is a growing trend of shifting production of fabric and others from China to Viet Nam to take benefit of the free trade agreements the latter is negotiating.

In the next few years local production can supply more than 50 per cent and the rest can be procured from Taiwan, Thailand and Indonesia, he said.

With lower production costs compared with China, high demand both in the local and foreign markets, and advantages from the upcoming Trans-Pacific Partnership, the industry continues to have great potential for development, Dr Pham Thi Thu Hang, general secretary of the VCCI, said.

To capitalise on development opportunities, companies should focus on improving the skills of their workers, diversify their export markets, and pay more attention to the domestic market, she said.

They also need to restructure their organisation based on competitive advantages, strengthen their design capabilities, build brands, and improve technologies to reduce energy consumption and protect the environment, she said.

Most importantly, firms should concentrate on developing their supply chain, with a focus on feedstock, delegates said.

Kiet said the Government should be more pro-active in setting up industrial parks for leather tanning, a key material for the industry.

Phan Chi Dung, director of the Ministry of Industry and Trade's Light Industry Department, said under the development plan for the footwear industry, the Government wants to raise local content in production to 60-65 per cent by 2015 and 75-80 per cent by 2020.

The targets are hard to realise, he admitted, but the signing of the FTA with the EU and the TPP is expected to provide a boost to the rate.

There are 812 firms are in the country's leather and footwear industry, he said. — VNS