The country’s footwear industry has benefited from several favourable factors throughout its growth in the country. The EU-Vietnam free trade agreement (EVFTA) is expected to significantly help the sector. Top footwear exports were to China, the EU, and the US. Major US footwear companies such as Nike and Sketchers have already shifted production to Vietnam. The Producers Guild of America (PGA) is also working on a tax bill that will cut tariffs on several lines of imports that include footwear and textile produced from Vietnam.
Vietnam is able to supply leather materials and accessories for the footwear market. Its forecast that Vietnam will be able to supply 60% of the leather materials required domestically by 2030, compared to the 45% manufacturers sourced locally in 2018. Footwear and leather exports hit nearly US$16.5 billion in 2020, down 10 percent due to the pandemic.
Due to the disruption caused by the pandemic, Vietnam Leather, Footwear and Handbag Association (LEFASO) noted that local firms should take advantage of the opportunities such as the free trade agreements and US-China tensions to boost productivity and exports. The industry still needs to address increasing labor costs, and the Industry 4.0 question mark, but many analysts expect the industry to remain competitive for the next two decades.
Vietnam has approximately 6,000 garment and textile manufacturing companies employing 2.5 million people, and its top export destinations are leading consumer markets – the US, Europe, Japan, and South Korea. The industry’s growth is also being fuelled by increased domestic consumption, fuelled by a young demographic, and increasing urbanisation. Retail sales are growing at a rate of 20 percent annually and are forecast to expand, thanks to several free trade agreements. Germany-based Amann Group and US-based Kraig Biocraft Laboratories are among the companies that are poised to scale up manufacturing production in Vietnam. Due to the US-China trade war, the help of Vietnam’s FTAs, analysts believe the industry will maintain high growth potential, with a forecast export turnover of $200b USD until 2035.
