Footwear enterprises have escaped from difficulties caused by the shortage of raw materials and orders during the first outbreak of the COVID-19 pandemic and they have so far gained the confidence to boost production in alignment with pandemic preventive measures as the demand in the world market has risen again.

Many enterprises have orders to fulfil until the third quarter

Director of Tuan Viet Shoes Co.,Ltd Tran Van Tac said that his company faced many difficulties during the first outbreak of the pandemic, including the shortage of materials and even the cancellation of 100% of export orders in 2020.

Facing the difficulties of the first wave of the pandemic, the company has actively diversified its customers in all markets to make timely compensation if orders are cancelled due to the pandemic. In addition, the company negotiated selling prices with its customers to support the consumption of products through tough times.

In the domestic market, the company has arranged flexible production while ensuring safe distance during the epidemic outbreak and optimising costs. These solutions have helped the company go through three waves of the pandemic.

“In 2021, the demand of partners is expected to increase, particularly customers in countries signing Free Trade Agreements (FTAs) with Vietnam, helping the company to gain relatively abundant orders,” Tac said.

According to the Ministry of Industry and Trade (MoIT), despite the difficulties caused by the COVID-19 pandemic, the export of footwear in the first five months of 2021 has been growing again at a rate of 26.4% compared to the same period in 2020.

Some of Vietnam's main export markets have gradually recovered and businesses have also taken advantage of opportunities from FTAs, helping to create a driving force for footwear exports.

In particular, the US, the EU, Japan, and the Republic of Korea markets have showed positive signs as many enterprises now have export orders to fulfil until the third quarter of this year.

The shopping demands of American and European consumers for clothing and footwear have also increased sharply when the economies are recovering due to the gradual removal of the blockade order, helping to raise the production index of the footwear and related products to over 12% in the first five months of this year.

Notably, after the EU-Vietnam Free Trade Agreement (EVFTA) took effect, 180,551 sets of C/O of the EUR.1 form have been issued from August 1, 2020, to June 4, 2021, to allow the export of US$6.6 billion worth of goods to 27 EU countries. In which, 98% of footwear products exported to the EU market use C/O of the EUR.1 form under the EVFTA.

Deputy Director of the MoIT’s Import-Export Agency Tran Thanh Hai said that in the early stage of the pandemic outbreak, garments and footwear were among the commodities facing many difficulties due to the disruption of raw materials and shortage of orders, but, so far, enterprises have mostly adapted to the situation and began receiving orders again. Although it has not been able to return to the “golden” period, this shows that enterprises have adapted well to the changes in the market and have solutions to deal with the pandemic and maintain effective production and business activities.

Solving the problem of materials

According to Vice President of the Vietnam Leather, Footwear and Handbag Association, Phan Thi Thanh Xuan, the footwear industry has experienced impressive growth at present thanks to making good use of tariff incentives in the EVFTA by meeting regulations on the rules of origin in this deal.

However, the interruption of the global supply chain due to the COVID-19 pandemic in the past time is an alarm bell for the domestic footwear industry because of its heavy dependence on imported raw materials.

In order to develop sustainably and make good use of tariff incentives as well as opportunities from the EVFTA, footwear businesses need to promote domestically produced raw materials to serve future production and export.

According to the Institute of Industrial and Trade Policy Strategy, only 17 out of 3,000 footwear enterprises have design activities while 400 others produce auxiliary materials, accessories or process intermediate stages.

Meanwhile, accessories for footwear products only focus on mid-range products while the rest still must be imported, leading to low added value to the products. Therefore, the domestic supporting industry needs to be promoted to create a strong breakthrough for the footwear industry.

Raw materials for the footwear industry in Vietnam are mainly imported from China (60%), followed by the Republic of Korea and Taiwan (China). In recent years, enterprises have gradually moved the supply chain of raw materials to Vietnam, which is mainly conducted by large enterprises.

“The FTAs with attractive tariff incentives that Vietnam has signed are attracting many foreign investors who wish to invest in raw material factories in Vietnam, mostly Chinese investors. However, FTAs are not a sufficient condition but only a necessary condition to attract foreign investment in the area. The sufficient conditions are the preparations from the Vietnamese side including planning for the development of raw materials, preferential policies on taxes and land, and openness with investors,” Xuan said.

Currently, the production of raw materials for the leather and footwear industry is still encountering difficulties regarding environmental treatment, especially solid waste and industrial waste. This is also a labour-intensive industry, causing many social problems. Therefore, it is important to boost management work and to create consensus from the central to local levels to build and develop the supporting industry for footwear.

Source: Nhan Dan Online

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