Leather, footwear sector to regain growth momentum in 2024

Phan Thi Thanh Xuan, Vice President and Secretary General of the Vietnam Leather, Footwear and Handbag Association

What do you think of the leather and footwear sector’s export results in 2023 and its situation in 2024?

2023 was a difficult year for most export sectors of Vietnam, and the leather and footwear sector was no exception. Its export value decreased by about 10 percent compared with 2022, reaching nearly US$24 billion. Despite the decrease, we consider this a satisfactory result in the context of numerous difficulties facing businesses in the sector.

The top four export markets of the leather and footwear sector include the US which accounts for 35 percent of the total export value, followed by the EU 26 percent, Japan and the Republic of Korea. China currently accounts for nine percent and exports to this market keep increasing. In 2023, the value of exports to most markets decreased, except to China. The Chinese market gives room for the leather and footwear sector to increase exports in 2024.

Many experts believe that major economies which are potential export markets of Vietnam’s leather and footwear products will undergo positive changes in 2024. Meanwhile, Vietnam still has considerable competitive advantages compared with other leather, footwear and handbag manufacturers and exporters.

The tariff reduction roadmaps of 15 free trade agreements (FTAs) that Vietnam has signed will continue to help domestic leather and footwear businesses develop their markets. With a skilled workforce and more than 30 years of experience, the Vietnamese leather and footwear sector has affirmed the reputation of its products.

In 2024, along with promoting exports to countries having FTAs with Vietnam, the sector continues to diversify its export markets while maintaining exports to traditional markets such as the US and the EU where the purchasing power is high.

In the coming time, the sector will concentrate on making medium- and high-grade footwear products.

The Vietnamese leather and footwear sector won’t be able to make the most of FTAs if it does not meet green standards applied by major importing countries. What is your opinion in this regard?

Domestic leather and footwear companies for a long time have voluntarily developed sustainable production models to meet customer requirements. However, major importing markets such as the EU and the US will soon put in place new policies related to sustainable development. The EU’s policies related to ecological products, extended producer responsibility, supply chain traceability, and especially carbon emission mitigation, once effective, will challenge manufacturers, including those from Vietnam.

Importers’ new policies require businesses to upgrade their internal capacity through technological and management improvements. This is crucial for their participation in global supply chains.

How are businesses aware of the EU’s Carbon Border Adjustment Mechanism (CBAM)?

The footwear sector is said to be a major source of carbon emissions; therefore, businesses in this sector are among those affected by the CBAM. The EU is a large export market of Vietnamese footwear; therefore, businesses in this sector should be prepared for necessary changes to adapt to the mechanism.

They have to change almost the entire production system. The CBAM will possibly be applied to leather and footwear exports to the EU after 2030, and there will be five to seven years for businesses to prepare for this.

Do you have any suggestion for domestic leather and footwear companies to achieve better export results in 2024 and ensuing years?

Businesses should join networking activities to learn from each other’s experience and prepare for participation in supply chains.

In addition, businesses should apply digital transformation to management to help their leaders make timely decisions based on updated information. Notably, businesses should have a specific division responsible for passing accurate information about customer requirements to the manufacturing section.

The Vietnam Leather, Footwear and Handbag Association will act as a bridge to help businesses access financial resources to have capital for production and trade. The association will also assist businesses in their technological innovation efforts and help them access support from international organizations to improve management and technical skills to meet the growing requirements of export markets.