Footwear industry eyes UKVFTA to bolster exports

Việt Nam's footwear exports to the UK have been rising thanks to the United Kingdom–Vietnam Free Trade Agreement. — VNA/VNS Photo

HCM CITY — Việt Nam’s footwear industry is utilising the United Kingdom–Vietnam Free Trade Agreement (UKVFTA) to increase exports, according to the Việt Nam Leather, Footwear and Handbag Association (Lefaso).

Phan Thị Thanh Xuân, deputy chairwoman and general secretary of Lefaso, said that in the first eight months of the year, Việt Nam’s exports of footwear to the UK grew by 25 per cent, and accounted for 8 per cent of total exports to the EU.

Xuân also said that in the first nine months, footwear exports grew by 17 per cent year-on-year to US$16.54, thanks to the increase in exports across many markets such as the US, the EU and China.

Before leaving the EU bloc, the UK was Việt Nam’s main export market for leather and footwear products. Then, during the period from 2019 to 2020, exports saw a light dip, but since then they have picked up remarkably.

Even during the challenging COVID-19 period, exports of footwear to the UK still saw growth, and in 2023, when exports of the product to most countries dropped (especially the EU), export turnover to the UK still grew, she said.

Thanks to the UKVFTA, which came into effect in 2021, many Vietnamese products benefit from favourable tariffs such as footwear, textiles and garments, and agricultural produce, with up to 99.2 per cent of all import taxes to the UK to be eliminated in the first six years of the agreement.

Footwear is currently Việt Nam’s third largest export product group to the UK, a long-standing traditional market for Vietnamese exports where many local consumers are familiar with Vietnamese footwear. Footwear accounts for around 13 per cent of total exports, behind mobile phones and components, and machinery.

It is also among the top 10 product groups with the highest export turnover to the UK, making the country an important market for footwear.

Thanks to the UKVFTA, Việt Nam has a competitive edge compared to other suppliers, according to Xuân.

Since last year, the footwear industry began working with SATRA (a leading research and testing organisation based in the UK), which provides testing methods for footwear products to assess their quality and adherence to export criteria. This has helped small to medium-sized businesses improve their products, obtain certifications and export not only to the UK but also other markets around the world.

According to the Ministry of Industry and Trade, Việt Nam is currently the second largest exporter of footwear in the world, thanks to double-digit growth of exports for many years in a row.

Nevertheless, the UK is a highly competitive market for footwear due to its high import requirements, and many exporting countries are also eyeing this market.

These include China, whose footwear exports account for 40 per cent of the world’s, along with the Netherlands, Italy and Germany, who are highly capable in terms of design.

After joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the UK is also opening its markets to other member countries, including ones that make similar products to Việt Nam.

This means that Vietnamese businesses have to improve their competitiveness, invest in better model designs and have easy access to raw production material.

Businesses are urged to pursue green production and be self-reliant in getting production materials to satisfy rules of origin. — VNA/VNS Photo

The leather and footwear industry targets exports of around $27 billion worth of goods in 2024.

Businesses are focusing on diversifying their markets while maintaining traditional ones such as the US, the EU and the UK, as well as being self-reliant in sourcing raw materials so that they can satisfy rules of origin requirements and benefit from free trade agreements, including the UKVFTA.

It would also allow them to fulfil green and sustainability requirements. Xuân said that green production was becoming an inevitable requirement for footwear products to be exported to the UK and other markets.

Businesses should have a suitable roadmap to gradually transform their production so they can firmly partake in global supply chains.

Lefaso has proposed that the Ministry of Industry and Trade build a trading centre for raw materials for Việt Nam’s fashion industry, which would allow businesses to be more proactive in sourcing materials that fit an export market's criteria and complete their production orders quickly.

Other experts noted that Vietnamese footwear businesses should ultilise e-commerce platforms and other digital means to expand their search pool, gain access to more markets and better connect with buyers, as well as applying digital technology in supply chain management and customer relations management.

They should also actively partake in trade fairs and industry events to network with potential partners from the UK who wish to do business with Việt Nam; raise their awareness of intellectual property rights before exporting; and even co-operate with UK footwear design companies to gain access to new technology or product design processes, which would improve their value chains.

A thorough understanding of different free trade agreements, their benefits and requirements on traceability and rules of origin is a must, accordingto experts.

Việt Nam’s leather and footwear industry has over 1,000 factories and contributes around 8 per cent of the country’s GDP.