Footwear Industry in Vietnam

Opportunities – Challenges

and Actions

1

Contents

• Overview current status– World Footwear market– Vietnam Status– Footwear Industry Status

• Opportunities and Challenges– Opportunities and Challenges– Key trends of Vietnam Fashion Industry

• Actions• Development scenarios

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OVERVIEW CURRENT STATUS

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Distribution of Footwear Production by Continent

87 %4 %

2 %

2 %

4

IncreasedDecreased

By Quantity

Previous year

Source: World Footwear

Trend of World Footwear Production (2010-2017)

World Footwear Production (2010-2017)

5Source: World Footwear

Top 10 Footwear Producers

6Source: World Footwear

Top 10 Footwear Exporters

7Source: World Footwear

Trend of Footwear Export in ten years 2007-2017

8Source: World Footwear

Distribution of Footwear Consumption by Continent

7 %7 %

9

IncreasedDecreased

By Quantity

Previous year

Source: World Footwear

Top 10 Footwear Consumers

10Source: World Footwear

Top 10 Footwear Importers

11Source: World Footwear

Overview of Vietnam economy 2018

Indicator Unit 2018 2017 2018/2017

GDP growth Bil. USD 241 223 +7,08%

Foreign investment Bil. USD 35,46 35.8 - 1%

Ranking by business sphere Ranking 69/190 68/190 -1

Ranking by competitiveness Ranking 77/140 74/135 -3

Inflation % + 3,59% + 3.53% +0,85%

Export value Bil. USD 239 214 +11,68%

GDP per capita USD/person 2.540 2.385 6,5%

Source: General Statistics Office12

The Free Trade Agreements with Vietnam

Signed and Executed

(11)

Under negotiation

and/or signing (5)

1- Asean (AFTA)

2- Asean + China

3- Asean + Korea

4- Asean + Japan

5- Asean + Australia & New Zealand

6- Asean + India

7- Japan

8- Chile

9- Economic Communities Eurasian (Russia, Kazakhstan,

Belarus, Armani, Kirghizstan) ratified on 29/5/2015

10-Korea – ratified on 20/12/2015

11- CPTPP – effective from 14/1/2019

12- EU – finalized on 2/12/2015 – waiting for signing

13- RCEP (16 countries)

14- Asean + Hong kong

15- Israel

16- EFTA (Switzerland, Norway, Ireland, Licktenstein) 13

Export Markets of Vietnam Footwear Industry 2018

N.A. ASIA LATIN AM. OTHERS

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Structure of export footwear

15Source: World Footwear

Structure of export by Enterprises

0

20

40

60

80

100

120

2013 2014 2015 2016 2017 2018

Local Ent.

FDI Ent.

25% 25,7% 21.4% 19.2%

75% 74.3% 78.6% 80.8%75%

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19.5%

80.5%

10.4 12.8 14.9 16.2 18.0 19.5

21,2%

78.8%

CHALLENGES – OPPORTUNITIES

17

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Opportunities of Vietnam Footwear Industry

Inside the country:

➢ 2018 – 2019, macroeconomic stability; Institutional reforms and administrative procedures help improve the investment-business environment and reduce costs of business.

➢ The government continue to maintains a policy towards export.

➢ Gold population structure, young, abundant and skillful human resources.

➢ Infrastructure develops, facilitating movement to labor resources

Out of the country:

➢ Vietnam has succeeded in multilateral relations policy, opening up many great opportunities for export.

➢ The US-China economic war, many US brands shift orders to Vietnam, especially tourism products, bags and backpacks.

➢ CPTPP and EV FTA will be big opportunities.

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Challenges of the IndustryInside the country:

➢ The level of technology application in management and production is still inferior to the regional enterprises and FDI enterprises.

➢ Productivity is just 60-70% compared to the FDI.

➢ Most of local enterprises are not strong enough to join the global supply chain.

➢ Labor costs are increasing.

Out of the country:

➢ Trade protection policies from US, EU... are causing difficulties for many export countries.

➢ Ability to satisfy to the orders shift to Vietnam.

➢ Ability to capture opportunities from CPTPP and EV FTA.

1- Moving to the areas where there are abundant and low-cost labor sources (Southwestern and Northwestern regions).

2- Supporting industry has a rapid growth rate.

3- Manufacturing complex products with high prices.

The key trends ofFashion industry in Vietnam.

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✓ The average of global export price increased 3% from 8,84 to 9,18 USD/pair.

✓ Average export price from Vietnam increased 17% from 15,04 to 17,71 USD/pair.

✓ The average export price from VN is 1.9 times higher than average price of the world.

Manufacturing products with high export value

23.02

19.86

16.26

11.29

7.80

6.45

17.71

Source: World Footwear Yearbook 2018

Unit: USD/pair

9,18

0 5 10 15 20 25

Vietnam

World average

Asia

South America

Africa

North America

Oceania

Europe

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Export of footwear and handbagfrom 2013 to 2018 – Forecast year 2019

0

5

10

15

20

25

2014 2015 2016 2017 2018 2019(est)

Bags

Footwear

Unit: Billion USD

14.6

3.3

13.0

3.2

12.0

2.9

10.3

2.5 17.4

4.2

21.6

12.814.9 16.2

18.0

22

16.0

3.5

19.5

2018: Footwear increase 8,5% - All kind of bags increase 15% -Whole industry increase 11%

ACTIONS

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Three Groups of ActionFrom Enterprises➢ Improve productivity➢ Enhance the technology of management and manufacturing➢ Change the business way

From Industry/Association➢ Assess the impact of Industrial Revolution 4.0

and recommend policies➢ Training and consult to the members and ents.➢ Consult the development strategy of industry➢ Consult wage policy to the Government

From Government➢ Policy to apply science – technology➢ Promote the ratification of EVFTA➢ Extend the conditions to access the US market➢ Upgrading foreign investment policy 24

Key actions from Industry/Association

When What Where

2019 Integrating Shoes and Bags Development Center Lefaso Center

2019 – 2020 Establish Testing Center for Shoe & Bag Industry Binh Duong

2019Assess the impact of Industrial Revolution 4.0 and recommend policy with the Government

Hanoi

2019Research the application the result of Industrial Revolution 4.0 in Italy and some Asian countries

Italia - China –Taiwan…

2019 Consult the national wage policy of 2020 Hanoi

2019Survey and build industry development strategy for the period of 2020 – 2030

Hanoi

2019Trade fairs and marketing oriented to the market of CPTPP and EU

CPTPP & EU

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Key actions from Government

When What Where Who chair

July 13th,18"Vision and strategy for breakthrough development of the 4th industrial revolution“

Hanoi PM

Sep 11th-13th, 18 World Economic Forum related to ASEAN. Hanoi PM

October, 2018Visit EU - The EU Committee agreed to present the FTA to the European Council.

Brussels PM

Nov 12th,18 VN Parliament ratified CPTPP. Hanoi Parliament

Dec 19th, 18Solutions to promote the development of Vietnamese supporting industry.

Hanoi PM

Feb 14th, 19Consult and orient to complete the institution and policy on foreign investment in new stage.

Binh Duong

Vice PM

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DEVELOPMENT SCENARIOS

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Development Scenarios

Scenario 1: NORMAL

• Conditions

– Current status

– There is no any crisis

• Rate of growth

– 11%.

– Export from $ 21.5 to $ 22 billion

Scenario 2: HIGH

• Conditions

– EVFTA will be ratified in 2019

– Better conditions to access USA

• Rate of growth

– 15% or more.

– Export reach over $ 22 billion

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Thank you for your attention

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