More foreign investors have set up production bases in Vietnam to capitalize on huge export potentials from free trade agreements, especially the EU-Vietnam Free Trade Agreement (EVFTA).

Vietnam’s footwear exports to the EU will benefit from tax breaks

According to Lee Young Man, president of the Korean footwear association in Vietnam, footwear enterprises from the Republic of Korea are operating effectively in Vietnam and their investment flows to the country are expected to increase strongly once the EVFTA is signed.

More than 100 Korean businesses are operating in the field in Vietnam, with nearly 80% of them active in the southern province of Binh Duong, Lee said.

Diep Thanh Kiet, vice chairman of the Vietnam Leather, Footwear and Handbag Association (Lefaso), also said that footwear producers in Vietnam will benefit from tax breaks accorded by several FTAs.

For example, Kiet said, under the EVFTA, which is expected to be ratified this year, a zero percent tariff rate will be applied to around 50 types of Vietnamese-made footwear products exported to Europe.

Export tariffs for footwear code 6402 with rubber or plastic outer soles and uppers will be slashed to zero percent, while half of footwear with leather uppers, code 6403, will enjoy tariff exemptions following the EVFTA. 

The tariffs on other footwear types will gradually be reduced to zero percent in the next three to five years, Kiet said, adding that the EU has also offered unilateral preferential treatment to a large number of commodities originating from Vietnam under the Generalized System of Preferences (GSP). 

“This scheme, coupled with tariff reductions brought by the FTA, will help Vietnamese footwear become more competitive than Chinese products in the EU,” Kiet said.

In this new landscape, Kiet predicted that Vietnam’s footwear export turnover to Europe will grow significantly in 2019.

In fact, experts said that made-in-Vietnam brands have gained European customers’ trust. This, coupled with a low-cost base and improved infrastructure, will make Vietnam an ideal destination for foreign investors. More foreign footwear manufactures will relocate their businesses from China to Vietnam to enjoy the advantages of EVFTA. 

FDI firms make growth

With the rising foreign investment, Vietnam’s footwear industry has emerged as the second biggest footwear exporter in the world, just behind China.

According to statistics of the World Footwear Magazine, of 27 billion pairs of shoes exported worldwide last year, 1.02 billion pairs were from Vietnam, equivalent to 7.4% of the global footwear market share.

Statistics from the General Department of Vietnam Customs also showed that the value of Vietnam’s exported footwear products have surged consecutively in the past years. Accordingly, the product’s export revenue was US$8.4 billion in 2013, US$10.3 billion in 2014, US$12 billion in 2015, US$13 billion in 2016 and US$14.6 billion in 2017.

Foreign firm play a key role in the industry’s export as they accounted for more than 80% of the industry’s total export value last year, or US$11.78 billion.

Vietnamese footwear products exported to more than 100 markets worldwide, of which the US was the largest export market with turnover of US$5.1 billion last year, up 14% against 2016.

According to Kiet, Vietnamese leather and footwear producers are focusing on adding value to their export products and promoting the development of supporting industries. The export value of a Vietnamese pair of shoes averaged at more than US$15 last year while the world’s rate was at only nearly US$9.

It is forecast that the country can supply 60% of leather materials for domestic footwear and handbags by 2030 compared to roughly 45% at present, he said.

Hanoitimes