Last year, while exporting 450 million pairs of shoes, the footwear industry earned US$2.8 billion, making Vietnam the world’s fourth-largest exporter in this regard. Domestically, footwear ranked third in export revenue after crude oil and garments.

The footwear industry is also one of the two industries that attracts the largest number of workers. Along with the garment business, hundreds of shoe factories across Vietnam are providing jobs for millions of workers.

The high growth rate registered by the industry in recent years prompted authorities to set ambitious goals this year. The Ministry of Trade put 2005 sales of footwear exports at US$3.3 billion, setting a tough goal for the industry.

Experts pinned high hopes on production of competitive products such as sports, leather-top and high-class shoes, satchels and handbags. The European Union was expected to take the lion’s share of Vietnam’s footwear as it accounted for up to 75% of the total sales of the industry last year, partly due to the General System of Preferences it has granted Vietnam.

Unexpected fall

Results achieved by the footwear sector during the first four months of this year show that the picture is not all that rosy. Overall, the growth rate of footwear exports was only 3.5% year-on-year, while turnover from the EU, Vietnam’s biggest footwear market, dropped by 7.5%.

Footwear exports to two of the largest EU markets, Germany and France, are facing hurdles due to a slow growth rate and lower unit prices. During the first four months, exports to Germany reached only US$71 million, down by 27.65% compared with the same period last year. Sports shoes remained the mainstay of Vietnam’s footwear exports to Germany. However, the unit price was lower.

Exports to the French market suffered the same downward trend when they plunged by 24.55%, earning US$32.71 million. Similarly, unit prices of fabric shoes - the main export product to France - were lower than the average level.

Taking into account the new situation, some experts worry that the US$3.3 billion-target might not be reached as the footwear industry is still plagued with prolonging weaknesses that have existed for years.

According to local sources, 90% of the total export footwear sales in 2004 stemmed from processing jobs for foreign companies. Although the fourth largest exporter in the world, Vietnam has yet to create its own footwear trademark.

Aside from the trademark issue, the footwear industry relies heavily on imported materials and designs. All three main materials used to produce shoes, namely leather and imitation leather, heels and accessories, are imported in great quantities since local supplies are inadequate or substandard. “Some local supplies are more expensive than imports,” says a shoe manufacturer.

Up to 70% or 80% of footwear accessories such as glue, thread, and buttons are of Asian origin, mostly from South Korea, Taiwan and China. Vietnamese suppliers do their best in the field of making heels. However, what they can do so far meets only 30% of the demand. Up to 80% of imitation leather, especially important for sports shoes, which account for 50% of the total value of footwear exports, must be imported.

Vietnam’s animal husbandry provides an ample supply of pig and cattle hide. However, the small scale of animal farms and a lack of standard rearing techniques have raised considerably the costs spent treating hide at tanneries. These factors have raised the price of local leather above imports.

Soaring world prices of materials is another mounting pressure on the footwear industry. Despite the price rises, local footwear manufacturers have to keep their prices unchanged under another pressure: competition from Chinese rivals.

Is there a way out?

The future for the footwear industry is not smooth, but requires tremendous efforts from both manufacturers and authorities. For the immediate future, exporters should join forces in trade promotion, specially attending specialized footwear fairs, to impr