Bonus for footwear companies

According to the Vietnam Leather and Footwear Association (Lefaso), a jump in the labour and the production costs in China, the world’s largest footwear exporter, had made many importers of made-in-China footwear shift their attention to Vietnam.

Lefaso’s chairman Nguyen Duc Thuan revealed that the situation presented a golden opportunity for the footwear industry which posted an export turnover of more than $3.65 billion in the first nine months of 2010, a jump of 18 per cent on-year.

“The footwear industry looks at achieving $4.6-4.7 billion worth of exports for 2010, 13 per cent more compared to that of 2009. However, with a large amount of orders being placed with domestic companies the footwear industry hopes it will exceed the set target and reap more than $5 billion in total,” Thuan said.

The sharp rise in the export orders and value of the footwear industry was attributed to the world market’s increasing demand in the post-recession period and China’s higher labour and production costs.

Taiwan Leather & Footwear Association general secretary David Jiang said it was hard for Taiwanese companies to place orders with Chinese counterparts as China was critically short of skilled workers and labour cost was rising sharply.

Besides, the Chinese government’s proposal to relocate footwear businesses to rural and remote areas was against the will of most producers, thereby a lot of Taiwanese companies had decided to shift their orders from China to other countries including Vietnam, India, Myanmar and Cambodia.

Dong Hung Footwear Company, in southern Binh Duong province, currently employs 3,000 labourers and 11 footwear production lines and has completed all its orders at full capacity.

The company’s general director Ha Duy Hung said orders had risen phenomenally in 2010. “The company has had to refuse some orders due to low production capacity,” Hung added.

Thai Binh Footwear Company deputy general director Tran Ngoc Luan said: “Without preparedness, the company’s production capacity has been made a 150 per cent rise against last year.”

In Ho Chi Minh City, many footwear companies suffered an average employee turnover of between 30-50 per cent proving a  real headache for footwear companies, said Luan.

To address the situation, Thai Binh Footwear Company, like many others decided to out source parts of its work.

However, this is only a stopgap solution. In the long haul, businesses are encouraged to invest in equipment and technological innovations to enhance product quality and boost production for better profits.

Industry experts and big footwear businesses themselves share a common view that the Vietnam’s footwear industry may incur the same fate as China’s because according to a Lefaso survey of Asia’s top five footwear exporters – China, Vietnam, India, Bangladesh and Indonesia, Vietnam’s labour costs are just behind China’s.