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Leather and footwear industry after Covid-19: Is it 'easy to eat' before the 'new wind' EVFTA?

  • 02/08/2021

The Vietnam-EU Free Trade Agreement (EVFTA) is expected to create a great competitive advantage for Vietnam's leather and footwear industry compared to its competitors, but businesses are not "easy to eat" when they are still surprised at all. The "rules of the jungle" are full of strict rules.

Expecting a 'miracle'

According to the Vietnam Leather - Footwear - Handbag Association (Lefaso), in the first 5 months of the year, the export of handbags, wallets, suitcases, hats and umbrellas only reached 1.3 billion USD, down 15.5% compared to the previous year. same period, was the deepest decrease due to the impact of the Covid-19 pandemic. Similarly, footwear exports only reached USD 6.8 billion, down 5%.

In April and May, leather and footwear exports recorded a sharp decline of 21% and 50% respectively and based on the number of orders signed and canceled orders, Lefaso expects the export situation to decrease further in the month. 6, more worrying is that the orders for the year-end season have not been closed.

After completing $ 22 billion in export turnover in 2019, the leather and footwear industry set an export target of $ 24 billion in 2020. But under the impact of the Covid-19 pandemic, it is expected that the industry must adjust its export target. exports this year, with a decrease of over 10%.

In that context, with the EVFTA Agreement just approved by the National Assembly and expected to take effect from August, the leather and footwear industry expects the EVFTA will bring many opportunities for businesses when exporting goods to the EU market.

Ngành da giày hậu Covid-19: Liệu có 'dễ ăn' trước 'luồng gió mới' EVFTA

Leather and footwear industry after Covid-19: Is it "easy to eat" before the "new wind" EVFTA?
Lefaso's leadership representative said that leather and footwear businesses are looking forward to the benefits brought by EVFTA, because at present, leather and footwear businesses are "hungry" for orders. Currently, the EU market accounts for 30% of the industry's export turnover and Lefaso believes that, with the EVFTA taking effect, the EU market will help the industry grow by about 10% in the last months of the year.

In the immediate future, when the EVFTA comes into effect, it will help businesses both release their previous inventory, open up opportunities with new orders, and restore the production market. Because, as soon as EVFTA is applied, 37% of tax lines on leather and footwear will enjoy import tax to 0% and the rest will gradually decrease to 0% according to the roadmap from 3-7 years depending on each specific item.

Items with a tax rate of 0% as soon as the EVFTA comes into effect focuses on sports shoes, canvas shoes and rubber shoes. These are items that are Vietnam's export strengths.

According to the Import-Export Department, Ministry of Industry and Trade, the EVFTA Agreement is a new generation FTA that brings many positive impacts to many aspects of the Vietnamese economy, all of which have an impact on the import and export growth of Vietnam. Vietnam to the EU market such as: opening the EU market for Vietnamese goods; attracting investment, developing domestic production; supporting industry development; restructuring production and export; create more jobs, improve labor productivity...

The EVFTA is expected to increase Vietnam's export turnover to the EU by 42.7% in 2025 and 44.37% in 2030 compared to no agreement.
Regarding the opportunities that the EVFTA Agreement brings to Vietnam's leather and footwear industry, a representative of the Import-Export Department said, although some other countries have advantages in EBA incentives (there are 49 countries under the EBA program - program import tax exemption program for all goods imported from less developed countries into the EU except arms), GSP (the new EU preferential tariff program for developing countries) but with the EVFTA, Vietnam has great strength. Countries that have FTAs ​​with the EU are very few, in Asia, the EU only signed cooperation agreements with South Korea and Singapore, however, these two countries do not have a production structure for Vietnamese varieties. Therefore, in the long run, the Agreement will create a stable advantage for Vietnam's exports.

In particular, the EVFTA also creates a great competitive advantage in the short and medium term for Vietnam compared to ASEAN countries in the EU market. The EU is also a major trading partner with many ASEAN countries. With its position as the second country in ASEAN to have an FTA with the EU, businesses can take advantage of this to penetrate the market, build a brand name for Vietnamese goods in the EU market, and serve as a stepping stone to further their business. access to other developed markets.

How to understand and implement the “rules of the game”?

Although that is expected, according to economic experts, the "worries" that EVFTA brings to the leather and footwear industry are not few. Entering the new playground with many surprises and rules, how to make businesses understand and take advantage of opportunities is quite a headache.

The first is that the rules of origin under the EVFTA Agreement are still a short-term challenge for the Vietnamese leather and footwear industry. Leather and footwear tanning is one of the stages of environmental pollution. Leather in the leather and footwear industry is similar to the origin requirements of fabrics in the textile dyeing industry. Therefore, the industry faces difficulties in the supply of raw materials to meet the requirements of origin materials when exporting under EVFTA.

To solve this difficulty, the Ministry of Industry and Trade is encouraging domestic supporting industry enterprises, especially those producing input materials. At the same time, the Ministry also strengthens connections with enterprises producing finished products (especially FDI enterprises) to partially meet domestic demand.

Another "worry" is that there are many regulations in the EVFTA that have changed so far compared to the previous training for businesses by the Ministry of Industry and Trade. Therefore, Lefaso hopes that the Ministry of Industry and Trade will coordinate with relevant ministries and sectors to continue organizing specific training and instructions so that businesses can take full advantage of opportunities from EVFTA in the most effective way.

According to a recent survey with the leather and footwear industry, over 70% of enterprises in the small and medium-sized industry will find it very difficult to invest and apply new technologies. Only 30% of enterprises, including foreign-invested enterprises and large domestic enterprises, have applied automation at each production stage, of which less than 5% have plans to deploy automation technology. connect.

Meanwhile, the implementation of the EVFTA needs a long-term strategy to help businesses in the industry deeply participate in the regional value chain, improve production capacity for export and competitiveness. But with most of them being small and medium-sized enterprises with limited resources, the production process is not up to EU standards, there is no proper investment in R&D, and the effective exploitation of intellectual property and brand assets has not been made. .. Lack of human resources with foreign languages ​​and professional trade promotion negotiation skills, it will be difficult to carry out export activities to the EU market.

Therefore, in the coming time, one of the things that footwear businesses need to do right away is to invest in improving the value and quality of their products to strengthen the competitiveness of their products in the EU market. Enterprises also need to focus on meeting the standards and management processes prescribed by the EU, attaching importance to social responsibility, transparency of information about labor, production environment, etc. export market with very extensive commitments as well as high market access conditions like Europe.

In the long term, the leather and footwear industry also needs the State to have supportive policies to develop supporting industries to be autonomous in the production of raw materials and accessories in Vietnam. On the other hand, enterprises need to participate in domestic and foreign linkage chains, especially in the supply of domestic and foreign raw materials to have timely responses to fluctuations. Only in this way will leather and footwear businesses be able to take advantage of the opportunities brought by the EVFTA in the coming time.


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