Footwear sector out of step

October 20, 2011 | 17:03

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The local footwear industry faces missing its master plan targets due to capital distress.

illustration photo

In late 2010, the Ministry of Industry and Trade (MoIT) gave the go-ahead to Vietnam’s footwear industry master planning to 2020 with a vision towards 2025 which envisages around VND60 trillion ($2.9 billion) in total investment capital ($1.37 billion for 2011-2015 and $1.5 billion for 2016-2020). Around 43 per cent of the capital will be sourced locally and the remainder to be offset by foreign loans.

This giant sum will be injected into building tanning factories, material centres and specialised industrial parks. However, escalating inflation, extensive public investment cuts and declining foreign investment make sourcing this sum almost impossible.

The plan to raise capital for materialising master planning targets had flown into turbulence against the backdrop of a worsening global economy, said Lefaso deputy general secretary Nguyen Thi Tong.

Reality shows though the sector’s production was significantly boosted in the past years, its capacity relative to material production is nearly the same as this requires enormous investment which is beyond the scope of most local firms.

Meanwhile, foreign-invested firms are just interested in footgear production with lower investment and quicker yields.

Local materials could only meet around 40 per cent of the demand with a limited range of products such as shoe soles, fabrics, adhesives and some accessories whereas various kinds of shoe uppers were almost imported from Taiwan, South Korea or China.

Lefaso’s chairman Nguyen Huu Thuan assumed the sector’s development in the next five years would be heavily reliant on local tanning industry growth. However, the sector was yet to build a tannery.

Since materials represent 68-75 per cent of the sector’s total production cost, it holds a decisive role to the sector’s development.

Thuan said the footwear sector and businesses must come up with concrete investment projects and programmes in the coming period focusing on setting up central industrial clusters to lift competitiveness.