Due to a severe reduction in orders caused by economic concerns in Vietnam's main export markets, the leather and footwear industry has been compelled to once again scale back its labour force.
Due to a decline in orders, PouYuen Vietnam, a shoe manufacturer whose clients include Nike and Adidas, has announced it will eliminate nearly 6,000 permanent positions between late May and early June. This will be the largest series of terminations since the corporation began operations in Ho Chi Minh City in 1996.
With an estimated 50,000 employees, the company is one of the commercial capital's largest employers. However, it made a similar move in February, laying off nearly 3,000 permanent employees and not renewing the contracts of another 3,000 temporary workers.
Pham Hong Viet, president of the Hanoi Leather and Footwear Association, said, "The export market has experienced a grave decline in orders."
The size of the drop-off in orders ranges from 50 to 70 per cent, with some domestic companies suspending production entirely, with currently no orders for export.
The market has shown little sign of recovery thus far. "Even though Nike and Adidas are such well-known brands, they have so much inventory that there is no need to place new orders," Viet explained.
Indonesia's leather and footwear industry is a major competitor for Vietnam. Wages in Indonesia are approximately $150 per month, in Bangladesh approximately $120 per month, while the Vietnamese industry pays approximately $350 per month. In the context of a lack of orders and the current economic climate, businesses are likely to choose Indonesian or Bangladeshi suppliers.
In light of the global market's declining consumption, Phan Thi Thanh Xuan, general secretary of the Vietnam Leather, Footwear, and Handbag Association, said, "The association's export target of $27 billion for 2023 has become more daunting. When the main markets for export, such as the United States, the EU, and Japan, battle inflation concerns, purchasing power reduces and the appetite for holding large fashion product inventories decreases. These factors have had a significant impact on orders."
"Businesses will make every effort to retain competent employees, and forego short-term financial benefits to maintain labour stability, but if the situation fails to improve, there will inevitably be a reduction in labour," added Xuan.
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