FTA ecosystem - a stronger driving force and foundation for footwear exports

If successful, the FTA ecosystem for the footwear industry will help Vietnamese businesses maximize the benefits from the FTA and create a solid foundation for the footwear industry.

Existing barriers

Branch shoe leather is one of the key economic sectors of Vietnam, with a large contribution to the country's export turnover. Vietnam is currently the second largest footwear exporter in the world, after China. This increase is not only due to production capacity, but also thanks to Vietnam's participation in Free Trade Agreements (FTAs) that bring many great export opportunities for the industry.

However, according to Dr. Le Huy Khoi - Deputy Director of the Institute According to the Institute for Strategy and Policy Research on Industry and Trade, the development of the leather and footwear industry is still not really sustainable. The growth of the industry is greatly affected by external factors and the global economic cycle. One typical example is that the production growth rate has decreased sharply from 17.8% in 2015 to a lower level in 2020, and continued to be affected by the international situation in the following years.

The development of the leather and footwear industry is still not really sustainable. Illustrative photo.

Mr. Nguyen Cong Han - Deputy Director Department of Industry and Trade of Hai Phong city - said that FTAs have created many favorable opportunities for the leather and footwear industry in Hai Phong city to expand export markets.

According to statistics from the issuance of preferential Certificates of Origin (C/O) at the Department of Industry and Trade of Hai Phong, in the first 8 months of 2024, the total export turnover of footwear products to markets with FTA of enterprises in the city and some neighboring provinces increased by 8% over the same period.

Some markets have growth rates of over 10%, such as: Europe (13%), Korea (13%), CPTPP (15%), ASEAN (17%), Hong Kong (27%). In terms of turnover proportion, C/O granted to the European market accounts for 52.28%, China 11%, Japan 8.9%, CPTPP 8%...

However, Mr. Nguyen Cong Han also pointed out many challenges, including the difficulty of enterprises being self-sufficient in finding sources of raw materials, being dependent or being assigned by import partners. There is even a lack of information and foreign regulations, including factors related to taking advantage of FTAs and difficulties in building brands.

" Most of them are still processed for foreign shoe companies. Vietnamese branded shoes are still exported in small quantities, the domestic rate is low, so the added value is not high, " the Deputy Director of the Department of Industry and Trade cited.

According to Ms. Nguyen Thi Ngoc Mai - Center for Product Design and Development - Footwear Research Institute, private enterprises and craft villages all want to bring their products to the international market. However, they face major technical barriers, from raw materials to final products, causing many products to not meet export standards. " Therefore, building a technical standards system for the footwear industry becomes a key factor to control input materials and improve the quality of exported goods " - Ms. Nguyen Thi Ngoc Mai said.

Take advantage of opportunities from market opening

To solve bottlenecks in leather and footwear production and export such as: Self-sufficiency in raw materials, technology conversion to meet high market standards... according to experts, building an FTA ecosystem for the leather and footwear industry is a practical solution to help businesses optimize benefits from FTAs, as well as sustainable exports.

Building an FTA ecosystem for the footwear industry is a practical solution to help businesses optimize benefits from FTAs. This will facilitate exports and bring great benefits to businesses and production facilities when participating in this ecosystem.

Mr. Nguyen Cong Han emphasized that if the ecosystem is successfully built, it will be a comprehensive support not only for Hai Phong’s footwear industry. At that time, Vietnam will have an independent, sustainable manufacturing industry, no longer too dependent on a number of foreign markets. From there, it will be able to take better advantage of the benefits brought by FTAs.

Key challenges in building an FTA ecosystem for the footwear industry include applying international standards and ensuring compliance with environmental and labor requirements. Illustrative photo

Similarly, Ms. Nguyen Thi Ngoc Mai also said that participating in the FTA ecosystem not only helps businesses deal with difficulties in the export process, but also helps develop the production of localized raw materials and supplies, while improving the production capacity of businesses to meet the export requirements of international markets.

However, according to Mr. Ngo Chung Khanh - Deputy Director of the Multilateral Trade Policy Department (Ministry of Industry and Trade), for this ecosystem to operate, the organizational structure must have an executive board operating in the form of an independent company, with a board of directors, departments and divisions. The executive board will be the "soul" to operate, helping the initiatives and connections of the subjects come to life.

To have an executive board, there must be staff, offices, headquarters, and financial resources to operate. In addition, for the ecosystem to operate, the subjects must work together and comply with regulations and laws.

"There must be principles, "rules of the game" that anyone who violates those "rules of the game" will be eliminated. But how to ensure that entities comply with those regulations is also a challenge. More importantly, how to encourage and mobilize businesses and entities to participate voluntarily and effectively? To encourage them, we must first show them the benefits of participating in the model, " Mr. Ngo Chung Khanh shared.

The main challenges in building an ecosystem to take advantage of FTAs for the leather and footwear industry include applying international standards and ensuring compliance with environmental and labor requirements. However, if successful, the new ecosystem will help Vietnamese businesses improve efficiency, maximize benefits from FTAs and create a solid foundation for the long-term development of the leather and footwear industry.

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