VIETNAM LEATHER AND FOOTWEAR INDUSTRY - OPPORTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO

Transcription

1 VIETNAM LEATHER AND FOOTWEAR INDUSTRY - OPPORTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO Speech of: Dr. Nguyen Thi Tong General Secretary of LEFASO Vietnam

2 I. OVEREVIEW OF VIETNAM LEATHER & FOOTWEAR INDUSTRY: I.1. Specifications: I.2. Overewiew of Vietnam Leather and Footwear Industry: I.3. Disadvantages and difficulties:

3 I.1. Specifications: Leather and footwear industry attracts a huge amount of employment of society Beside getting a lot of priorities from exporting, also has export potential It has to face direct pressure from the regional and international economic integration. Therefore, the industry gains a lot of opportunities as well as facing with more challenges.

4 I.1. Specifications (continue): In the industry, operate enterprises from all economic sectors, the numbers of State - Owned enterprises are being narrowed with the privatization process The industry are now taking advantages and opportunities together with countries in Asia region for development. Vietnam today is one of the top 10 leading countries in footwear production and exporting in the world.

5 OPPROTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO I.2. Overwiew of Vietnam Leather and Footwear Industry: I.2.1. Production Capacity and fact figure: a. Different kind of footwear: million pairs Including: - Sport shoe: million pairs - Canvas shoe: million pairs - Ladies shoe : million pairs -Other(slippers and sandals) : million pairs b. Different kind of bags and handbags: 45.0 million Pieces c. Finished leather: 45.0 million sqft

6 Table 1. Production capacity by economic sectors (Updated at the end of 2004) Unit State owned compani es Non State owned Companies FDI compani es Joint venture compan ies Total 1. Different kinds of Footwear pairs 111, , ,526 34, ,000 2.Different kinds of bags and handbags pieces 7,000 20,000 18,000 45,000 3.Finished leather Sqft 8,000 20,000 22,000 50,000

7 Table 2: FACT FIGURE THROUGH THE YEARS from Unit Different kind of Footwear pairs 302, , , ,250 - Sport shoe " 126, , , ,125 - Canvas shoe " 34,080 31,428 28,645 21,896 - Ladies shoe " 54,710 71,710 82,423 93,400 -Others 75,220 67,433 70,774 69, Different kind of bags and handbags pieces 31,300 33,700 35,000 41, Finished leather Sqft 15,100 25,000 32,000 39,000 Note:: Others including leather shoe, sandals, slippers

8 I.2.2. Economic sector structure: Table 3. Numbers of enterprises by economic sectors Enterprise divided by economic sectors Footwear, bags and handbags, Accessories Companies Tanneries Total Total Include: - Center State Owned companies and Local State - Owned companies Non - State Owned companies FDI Companies Joint Venture companies

9 I.2.3. Export Turnover of the Footwear Industry: Export turnover Table 4. Contribution of the industry to the country Export Unit: Million USD The Industry 1, , , , , The country 14, , , , , Ratio %

10 Table 5. Output and Export turnover by category in the period Quantity: 1000 Pairs Value :1000 USD Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value Sport shoe 116, ,64 127,887 1, ,958 1, ,322 1, ,929 1,827,285 Canvas shoe 30, ,710 31,582 75,644 27,971 89,166 25,781 56,279 20,854 83,456 Ladies shoe 54, ,840 64, ,942 66, ,313 78, ,128 88, ,.911 Other 75, ,810 68, ,817 58,531 88,902 68, ,741 66, ,.608 Total 276,600 1,468, ,834 1,575, ,150 1,846, ,981 2,267, ,238 2,640,260

11 Table 6. MARKET SHARE OF VIETNAM EXPORT FOOTWEAR IN 2004 No Export turnover by main markets EU countries US market Japanese market Other markets Total Unit: USD 1000 Value % 1,794, , , , ,640,

12 3% 3% 10% 16% 68% EU Market United States Japan Asia countries Other countries

13 Table 7. Export turnover by economic sectors Unit: mill USD Enterprises by economic sectors 2000 % 2002 % 2003 % 2004 % 1. Vietnamese enterprises, includes: 778,95 53,10 884,08 47, ,62 45, ,64 41,20 - State companies 386,61 26,37 347,86 18,80 383,79 17, ,6 - Private companies 392,34 26,73 536,22 29,10 636,83 28, , % foreign capital enterprise- (FDI), joint venture enterprises - FDI enterprises 689,05 605,96 46,90 41,30 962,05 838,65 52,10 45, , ,57 55,00 48, , ,06 58,80 52,4 - Joint venture enterprises 83,09 5,60 123,40 6,70 149,19 6, ,40 Total 1.468,00 100, ,00 100, ,38 100, ,26 100,00

14 Table 8. EXPORT TURNOVER BY PROVINCE Unit: USD million No City, Province Value % 1 Ho Chi Minh City 1, Dong Nai Province Binh Duong Province Hai Phong City Hanoi City Vung tau, Ba ria Province Da nang City Others Total 2,

15 Labor forces Up to the year of 2004, there are nearly 600,000 workers working in the industry, consist 6.5% from the whole industry sector labor force. The main labor force of the industry are mainly at lower level of skill, variable and frequently moving. The variety of labor forces was very high since late 2004 to early 2005, in some particular companies this rate was at 35-40%. The main part of labor forces was trained in the production line. Most of them are women - 85%. Immigrant employment take the ratio of 70% from the whole labor force of enterprise.

16 1.3. Disadvantages and difficulties: Most of companies are operating at the processing contracts, therefore they have less interests as well as dynamic. Value - added of footwear still at low rate (less than 40%). The uncomprehensive development between raw material production and footwear production. A lot of raw materials still have to import, especially materials for the upper shoes Facing with pressure from labor force: lacking, unstable, low level of skill and technique, lack of high tech workers, engineers, and management staff.

17 1.3. Disadvantages and difficulties (continue): Marketing, market development, shoe designing and products development are also at the poor situation. The potential markets can not be approached because of companies marketing capacity. Infrastructure and service works still limited, not all meeting requirement of importers and consumers Companies also have to deal with competition in term of products price, processing cost are narrowed when high input cost (cost of materials, other issues as: production cost, transportation cost...) Other limited of Enterprises

18 II. OPPOTUNITIES & CHALLENGES OF THE INDUSTRY ON THE WAY OF VIETNAM ENTERING WTO: II.1. Opportunities: The demand of footwear from most of countries in the world is now highly increasing because of the living conditions improved with the time being. The ratio of products exporting into US market has been increasing since There are many of companies focus their production to this potential market, specially FDI and joint venture companies

19 II.1. Opportunities (continue): Most enterprises recognize the important of being equip with knowledge of technical requirements, production management, business morals, good working conditions,... In order to meet requirement of importers and consumers. The government issues, policies on promoting to speed up export and production, giving more advantages to the leather and footwear companies, specially exporting companies. Non trade barriers will created more favor conditions for business on products of industry

20 II.1. Opportunities (continue): The infrastructures of production are being concerned and improved day by day giving more good conditions for working environment. Continuing process of production transfer from countries to countries in the region Other opportunity from inside of country and enterprises

21 II.2. Challenges: Competitive capacity of footwear enterprises is at low level. Therefore they have to face a lot of difficulties with stronger competitors from the region and China. The main reason could be understood as lacking resources of raw materials and low price of products from other competition countries. Staffs for shoe designing and product development are also limited. Companies don t have enough talented and skilled staff for its production management as well as to develop the potential markets. Advantage of Vietnam regarding labor forces still is factor of competition, but there are some difficulties and have big changes. Training labor forces and skillful workers are not meeting requirement of demand of production.

22 II.2. Challenges (continue): Numbers of enterprises have small capacity, not active with changing of the markets, they must receive processing contracts via third partners, so effective of production is very limited, production face with difficulties because of without potential customers. Numbers of enterprises in the industry still not ready and prepare for integration process Pressure with non trade and technical barriers (Technical barriers, Protection policy from potential footwear import countries, CSR requirement, Good working place and environment requirements.) Pressure for footwear enterprises regarding labor, works, salary and income of workers

23 III. EFFECT OF ANTI DUMPING CASE OF CERTAIN SHOES WITH UPPERS FROM LEATHER ORIGINETED FROM VIETNAM AND CHINA EXPORT TO EU COUNTRIES: III.1. Reasons: Because of China became full fledged member of WTO China footwear export to EU countries without quota and without anti dumping duty. Export turnover of footwear exported to EU countries with very low average price per pair (Even lower than production cost per pair), because of processing production, footwear enterprises receive only labor fee (Processing fees), not participate in process of distribution and trading the products, so with mention fact footwear enterprises fall into indeliberating situation of anti dumping case

24 III. 2. Anti dumping happenings: Starting from July 7, 2005, with Notice of Initiation of an anti dumping proceeding concerning of imported of certain footwear with uppers of leathers originating in People s Republic of China and Vietnam At the end of October, 2005, the investigation experts finished directly investigation works with 8 footwear enterprises (Mention enterprises from all economic sectors) Base on result of direct investigation, pressure, requests and comments of interesting parties:

25 III.2. Anti dumping happenings (continue): * November 18, 2005, EU Commission has sent letter to all interesting parties regarding excluded STAF footwear from the scope of proceeding * November 23, 2005, EU Commission had conclusion: all 8 enterprises of direct investigation are not meeting 5 criteria of market economy status (Note Verbal D/14110 dated November 23, 2005) because of :. Some of enterprises can t approve that they are operating under market economy status

26 III.2. Anti dumping happenings (continue):. Some enterprises are counting that their Accounting system is not following International Accounting Standardization (IAS). The using land right of some enterprises are counting not suitable the condition of market economy status.

27 VIETNAM LEATHER AND FOOTWEAR INDUSTRY - OPPORTUNITIES & CHALLENGES ON THE WAY OF VIETNAM ENTERING WTO III.3. Effect of anti dumping case: As a result, although the case is under the process of investigation, the footwear industry of Vietnam has to bear considerable consequences: The most serious one is that partners have reduced orders and are considering to move factories to other countries since footwear of Vietnam are at risk of being applied anti- dumping duty by EU. Order for 2006 still not sign because of most partners waiting result of investigation In this circumstances, Vietnamese footwear industry are at risk of huge decline since 70% of total volume of the industry is exported to EU in which up to 60% are the objects of complaints.

28 III.3. Effect of anti dumping case: Psychology effect makes enterprises, workers and partners in the industry worry, if the anti dumping duty be the enterprises will meet more difficulties, effect in living conditions of nearly workers, to raise social problems and impact on export development and country economy Export turnover into EU countries will reduced compare with planning at beginning of 2005

29 III.4. LEFASO Vietnam points of view: This is the second anti dumping case for Vietnam footwear products with specifications and essence very different. Through the time of the past EC investigation, all enterprises have cooperated very active with EC experts.

30 III.4. LEFASO Vietnam point of view (continue): Leather and footwear Industry play very important role in the country economy, if being applied anti dumping duty by EU, the social problems will raise and strong impact on the industry and country economic development In fact, footwear enterprises really operating at market economy status, they in charge of result of their production and trading and to assume responsibility for workers living conditions according to the law in force. Vietnam Leather and Footwear Industry develop in recent years, still very weakness, numbers enterprises are very small, weakness in technical, management, technology, low effectiveness of production, high input cost of production so they can t dumping

31 III.4. LEFASO Vietnam point of view (continue): Main points written in the documents of complaint and conclusion of not to acknowledge market economy status for 8 enterprises unreasonable, wrong with targets of participating in free trading process (Vietnam is trying the best for early entering into WTO) and equality of competitiveness in the globalization process, expanding with the time being. Any impose anti dumping measure ill annul legitimate benefits of 450 million consumers of the EU who are entitled to access to cheap and good quality products and at the same time, will be able to make negative result towards sectors participating in European market including designers, importers, wholesalers and retailers.

32 III.5. Solutions and comments regarding reserve problems relating anti dumping case: To assume responsibility for equality, LEFASO Vietnam requested EU Commission reconsider the conclusion on market economy status for 8 enterprises before final decision regarding Vietnam footwear enterprises fall in dumping or not? EC consider possibility to stop the anti dumping investigation because most of Vietnam footwear enterprises are operating under processing contracts.

33 III.5. Solutions and comments regarding reserve problems relating anti dumping case: Enterprises must have knowledge of international and region integration, knowledge on commercial dispute in order to act in their own initiative LEFASO Vietnam and footwear community ready to cooperate with EU Commission and interesting partners to find objective, clearly and right solutions in order to protect benefits of enterprises of two sides

34 Thank you very much