Building an Ecosystem to support footwear businesses to better utilize EVFTA

Increasing competitive advantage for the footwear industry

According to the General Statistics Office, the leather and footwear industry currently has more than 3,000 operating enterprises with more than 1.5 million employees, contributing about 8% of the country's GDP.

In particular, since coming into effect, the Vietnam - EU Free Trade Agreement (EVFTA) has opened a new era, bringing positive changes in the export of Vietnamese goods to the EU, including the leather and footwear industry.

According to the General Statistics Office, in 2023, Vietnam's footwear exports brought in more than 20.2 billion USD, down 15.3% compared to 2022. Vietnam is currently ranked 2nd in the world in footwear exports with an estimated export volume accounting for 10% of the world. Vietnamese footwear products have been exported to more than 150 markets around the world, focusing on major markets such as the US, EU, China, Japan, UK, etc.

In the first 7 months of 2024, the export turnover of the leather and footwear industry reached about 13 billion USD, an increase of 10% over the same period. Illustrative photo

In the first 7 months of 2024, the export turnover of the leather and footwear industry reached about 13 billion USD, an increase of 10% over the same period in 2023. With the current growth rate, the export turnover for the whole year of 2024 will reach about 26 - 27 billion USD. Vietnam aims to have the domestic supply rate of the leather and footwear industry support industry reach 75-80% by 2025 with high value-added products serving export production.

According to the Ministry of Industry and Trade , in recent times, the domestic footwear industry has made good use of incentives from new-generation free trade agreements (especially the CPTPP and EVFTA) to boost exports. EVFTA is not only a driving force for bilateral trade, but according to statistics from the Import-Export Department (Ministry of Industry and Trade), footwear - one of Vietnam's key export items to the EU market, has a rate of granting EUR.1 preferential C/O of up to nearly 100%. In the first quarter of 2024, the rate of using EUR.1 C/O is 34.3%.

Ms. Phan Thi Thanh Xuan - Vice President and General Secretary of the Vietnam Leather, Footwear and Handbag Association (Lefaso) - also assessed that with EVFTA, leather and footwear exports to the EU will have many advantages and the tax rate will be reduced to 0%; in which, the tax rate on key products such as sports shoes (accounting for 2/3 of the total amount of shoes exported to the EU) will be reduced immediately and will not be subject to the 7-year protection level like leather shoes. Compared to other competitors, Vietnamese footwear products will enjoy a tax difference of 3.5-4.2% when exported to the EU, creating a huge competitive advantage.

Identifying the leather and footwear industry as one of the traditional and key industries, in recent years, Hai Phong city has implemented many solutions to build an ecosystem to take advantage of FTAs, including building an ecosystem to maximize incentives from the EVFTA.

With EVFTA, leather and footwear exports to the EU have many advantages, creating a huge competitive advantage. Illustrative photo

Mr. Nguyen Cong Han - Deputy Director of the Department of Industry and Trade of Hai Phong City - said that in the first 8 months of 2024, the export turnover of the leather and footwear industry in the city is estimated at 1.150 million USD, accounting for 5.01% of the city's total export turnover, up 11.4% over the same period in 2023. In the opposite direction, the import turnover of the leather and footwear industry is estimated at 106.07 million USD, accounting for 0.67% of the city's total import turnover, up 28.57% over the same period in 2023.

Notably, taking advantage of incentives from Free Trade Agreements, including the EVFTA, in the first 8 months of 2024, Hai Phong city's leather and footwear exports to a number of markets had a growth rate of over 10%, namely Europe (13%), Korea (13%), CPTPP markets (15%), ASEAN (17%), Hong Kong (27%)...

“Thanks to taking advantage of tariff incentives from EVFTA, Hai Phong's main footwear export markets are Europe, followed by China, Japan, Korea, Australia and New Zealand...” - Mr. Nguyen Cong Han informed and said that currently, footwear export activities in the city still face many difficulties and limitations, so building a footwear ecosystem will be an important premise to better utilize FTAs ​​and boost exports.

Building an ecosystem to support businesses to take advantage of FTAs

According to Ms. Phan Thi Thanh Xuan, the footwear industry is facing many major challenges. Many major footwear importing countries have put forward a series of new requirements for the import of products with increasing social and environmental responsibility.

Typically, the EU, since March 2024, this market has begun to introduce new requirements such as eco-design with sustainable designs. Or the issue of traceability and transparency of the supply chain. If importing raw materials from abroad, businesses will have to be transparent about the entire production process in the production area. Changing policies of the import market will have a strong impact on businesses in the industry.

Therefore, exporting countries, including Vietnam, need to quickly improve and make transparent information about their product supply chains, starting from raw materials, sustainable production towards a circular economy, and responsibility towards society and the environment.

“Footwear businesses cannot stay out of the 4.0 revolution, apply automatic production lines, artificial intelligence (AI), and green development if they do not want to be eliminated from the global supply chain,” Ms. Phan Thi Thanh Xuan warned.

To promote exports, businesses need to coordinate to accelerate the process of building an ecosystem to take advantage of FTAs, including the EVFTA. Illustrative photo

In reality, Mr. Ngo Chung Khanh - Deputy Director of the Multilateral Trade Policy Department (Ministry of Industry and Trade) said that the source of raw materials for the leather and footwear industry is still largely dependent on imports, making it passive and difficult to meet orders. Not only that, domestic leather and footwear exports also lack market information, regulations and requirements of foreign markets.

Many leather and footwear manufacturing and exporting enterprises are small and medium-sized enterprises, so the lack of capital and difficulty in accessing capital sources... are still present. Not to mention, many leather and footwear enterprises have not yet built a brand...

To overcome and improve the above shortcomings as well as create leverage, promote development and remove difficulties in connecting the production and export chains of the footwear industry... it is necessary to strengthen the building of close connections between central management agencies; local management agencies; enterprises, associations, organizations; raw material suppliers, manufacturers... From there, build an Ecosystem to take advantage of FTAs ​​for the footwear industry as well as localities that have strengths in this product.

Mr. Ngo Chung Khanh emphasized that building an Ecosystem to take advantage of FTAs ​​helps businesses optimize FTA benefits (including the EVFTA); build a culture of connection and cooperation; promote cooperation between management agencies and businesses. All entities participating in this ecosystem benefit.

The benefits for businesses, establishments and associations when participating in the ecosystem of taking advantage of FTAs ​​to promote leather and footwear exports are to help businesses optimize FTA benefits; build a culture of connection and cooperation; promote cooperation between management agencies and businesses; and receive support in handling problems encountered in the production and export process.

Meanwhile, manufacturing and exporting enterprises... will receive capital support from credit institutions participating in the Ecosystem; receive advice on accessing support measures from the Government; receive support with market information, customer connections, contracts...; receive support in handling difficulties encountered in the process of doing business domestically and internationally; expand customer base instead of focusing on a few previous customer groups; can expand connections with local and central organizations and agencies; receive support in handling difficulties encountered in the process of doing business domestically and internationally...

Enterprises participating in the ecosystem to take advantage of the FTA in the leather and footwear industry need to ensure basic criteria such as: Having a source of potential customers, prioritizing enterprises with stable and sustainable export contracts; enterprises with commitments to sustainable development, commitments to not compete unfairly; enterprises with a system of factories and machinery that meet the requirements of the export market and are reputable enterprises with stable finances.

The leader of the Multilateral Trade Policy Department affirmed that the Ministry of Industry and Trade will continue to accompany the Association and enterprises in the footwear industry to promptly remove or advise competent authorities to remove difficulties and obstacles of enterprises in investment, production, business, import and export activities. At the same time, research and advise competent authorities to amend, supplement or issue new policies and mechanisms to encourage, facilitate and promote the development of industries in general and the footwear industry in particular, contributing to promoting the industrialization and modernization of the country.

Source: https://congthuong.vn/xay-dung-he-sinh-thai-ho-tro-doanh-nghiep-da-giay-tan-dung-tot-hon-evfta-343246.html