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Jul 18, 2015 / 11:00

FTAs bear both opportunities and challenges for footwear sector

The signed and pending free trade agreements (FTAs) will not only provide benefits for the Vietnamese footwear and bag sector, but also a number of challenges due to export goods now requiring clear information on product origin, a conference in Ho Chi Minh City heard on July 15.

In the past five years, the Vietnamese Government has actively negotiated FTAs with numerous countries, with most of them impacting significantly on the development of the footwear sector, including the Trans-Pacific Partnership agreement and FTAs with the European Union and the Eurasian Economic Union. 
According to the Deputy Head of the Ministry of Industry and Trade’s Import-Export Department Tran Thanh Hai, the footwear sector will be a priority during the negotiation process since it is one of Vietnam’s three key exports to the EU and the US. 
In 2014, these two markets accounted for 67 percent of Vietnam’s total exports. However, the export tax currently imposed on footwear by the US remains high at 60 percent, and 3-17 percent in the EU. 
Once the agreements are signed, export tax could be eliminated entirely, opening up more opportunities for the sector to increase its exports and expand its market shares, Hai said. 
Additionally, the Association of Southeast Asian Nations (ASEAN), which includes Vietnam, has also signed FTAs with China, Japan, the Republic of Korea, India, Australia and New Zealand, and is currently negotiating a Regional Comprehensive Economic Partnership (RCEP) with the six aforementioned countries. This will establish a free trade area comprising 16 states and a total population of over 3 billion. As such, Vietnam will also have the chance to boost its exports to these countries. 
Deputy Minister of Industry and Trade Ho Thi Kim Thoa suggested businesses anticipate and grasp the opportunities provided by the signed and pending FTAs to expand their export markets. Furthermore, Vietnamese footwear businesses should observe the domestic market, since supply only meets 50 percent of demand at present. 

 
According to the ministry, the sector’s export turnover is estimated at 7.35 billion USD in the first half of 2015, up by 18 percent compared to the same period last year. Vietnam’s footwear export value totalled 5.9 billion USD and bag exports accounted for the remaining 1.45 billion USD. 
Vietnam is the world’s third largest exporter of leather and footwear products, following China and Italy. Vietnamese products are available in more than 50 countries and territories throughout the world. 
The ministry approved a master plan on the development of the sector until 2020 with a vision to 2030, with a focus on developing the support industry. Accordingly, several footwear and material processing industrial zones and complexes will be built with the purpose of providing materials and increasing the sector’s competitiveness.