Producers told to raise efficiency

Vietnamese leather and shoe producers have been told to raise their operational efficiency to better compete in the regional and world markets. The industry must make continued efforts to expand new export outlets, obtain direct export contracts, and raise the competitiveness of Vietnamese-made footwear. To this end, local producers should focus on intensifying investment in developing the production of material, additives and chemicals, and in purchasing machinery and new technologies. This will help local businesses to be more active in material supply, ease dependence on sub-contracts while boosting direct exports. Local producers are also required to offer a wide range of choices to consumers. Drastic efforts should be made to boost export promotion activities, not only in existing markets but also in seeking new outlets as well. The move will enable local producers to conduct negotiations for direct contracts. Apart from investment in human resource development, producers should also focus on improving the working environment to meet international criteria. The country is currently ranked fourth among the world's top ten footwear exporters with its export earnings registered at US$1.65 billion last year from just US$118 million in 1993 and US$1.47 billion in 2000. Vietnamese-made footwear is available in more than 40 countries and territories. Local footwear exporters earned US$708 million in the first five months of this year, or a year-on-year increase of 10%. Last year, footwear exports were the third largest foreign currency earner of the country after crude oil and, garments and textiles. The industry currently employs about 400,000 workers with women making up 85%. It has an annual production output of 422 million pairs of shoes, with foreign-invested enterprises turning out almost 202.6 million pairs, state-owned enterprises 115 million pairs, and private enterprises 104.4 million pairs. Sports shoes made up almost 57% percent of the total output. A majority of made-in-Vietnam sports shoes were turned out by foreign-invested businesses. World-renown conglomerates, including Nike, Reebook, adidas, Diadora, Timberland, and Clarks, have signed sub-contracts with Vietnamese partners. However, the profit obtained by local producers was very modest, accounting for between 15-20% of the product. Every year, local businesses have to import a large amount of material, additives, and chemicals necessary for making shoes. As a result, local production has been overly dependent on foreign material supply. This restricts the profit capacity of local producers as well. Another difficulty currently facing Vietnamese shoemakers is their obsolete machinery and limited technology. There are now 233 leather and shoe businesses in the country, including 76 state-owned enterprises (SOEs), 80 private enterprises, and 77 foreign-invested companies. Ha Noi's Thuong Dinh Shoe Company, an SOE, is an example of success for having obtained direct export deals. Thuong Dinh registered an export value of US$5.5 million and a net profit of US$150,000 last year. By investing in purchasing advanced technology, as well as reforming their work style, the Da Nang Friendship Company earned US$15 million from exports, and provided stable jobs for more than 3,000 workers last year. Meanwhile, Biti's trademark has succeeded in the market by making use of available domestic material supplies and working out an appropriate marketing strategy, said Vuu Khai Thanh, general director and chairman of the executive board of Binh Tien company that produces Biti's footwear. Biti's sandals and shoes have found profitable market in more than 40 countries and territories. Binh Tien is one of a few successful footwear makers in Vietnam operating independently rather than relying on sub-contracts.