Workers produce footwear at Pou Yuen Viet Nam Co. Exports of the country's leather and footwear sector have long depended on FDI businesses, as foreign enterprises account for 77 per cent of export value. — VNA/VNS Photo Thanh Vu

HA NOI (Biz Hub) — Exports of the country's leather and footwear sector have long depended upon foreign direct investment (FDI) businesses, as 77 per cent of the total export value came from foreign enterprises.

Phan Thi Thanh Xuan, general secretary of the Viet Nam Leather and Footwear Association (Lefaso) told news portal ndh.vn that domestic leather and footwear firms have mainly manufactured for exports.

Competitive labour costs have attracted FDI inflows, as well as orders from Taiwan and South Korea.

Xuan said it could not be denied that contributions from the FDI sector promoted export growth in the industry and provided jobs for labourers.

Local firms have received management experiences, modernising technologies and deeply joining in the value chain.

However, she said the significant presence of FDI companies in footwear exports reflected the low level of competition exhibited by domestic businesses.

The sector should put in place effective and long-term solutions to balance the portion of exports between Vietnamese and FDI enterprises, as the FDI sector has an advantage in capital, experience and technology.

In addition, these businesses have markets they supply throughout the world.

Viet Nam has been negotiating several trade pacts, which were expected to bring benefits to the sector. This was the reason that local footwear firms should take advantage of such trade pacts to promote their exports.

Diep Thanh Kiet, the association's vice chairman, was reported as saying by the newspaper that another reason for the situation was the limited support industry in the sector, noting that the industry supplies only 30 per cent of its needed raw materials, while spending US$1.1-1.5 billion each year for imports of leather for production.

Kiet said local producers should be more active in supplying materials, while setting strategies and studies to meet consumers' tastes, thus increasing the value of exported products.

Phan Chi Dung, head of the Ministry of Industry and Trade's Light Industry Department, said commercial agreements have strict regulations about the origin of products.

Dung proposed that localities should provide favourable conditions for the footwear industry to build concentrated industrial parks and become involved in supplying materials.

Lefaso's figures revealed that the leather and footwear sector has always had high growth rates, with export values at the top of the processing group.

In the first half of the year, the sector earned $6.09 billion from exports, of which shoes reached $4.84 billion, increasing 22 per cent, and the value of exported bags was $1.25 billion, posting a 38 per cent year-on-year increase.

It added that the target of export revenues of $12 billion this year would be possible. — VNS