International Newsletter

N2 - 2006

> The shoe market in Vietnam

Vietnam is currently experiencing sustained economic growth, second only
to that of China, mainly due to exports and Foreign Direct Investments
(FDI). Even though France may only be the seventh largest investor in
Vietnam, it is nevertheless the leading western investor.
In order to facilitate its entry into the World Trade Organisation, since
2000 Vietnam has brought its legislation into compliance with the regulations
on international trade. The country may not, however, be able to join the
organisation until 2007 if Vietnam and the USA fail to reach an agreement
on the financial and telecom sectors. In only a few years Vietnam has
become one of the leading countries in the world for sports shoes in terms
of production and exports.

MARKET

ORGANISATION

Until recently the shoe industry was

dominated by the government
corporation Leaprodexim, which
placed it under the control of the
Ministry of Industry. However, in
recent years 70 % of government
corporations, including Leaprodexim,
have been privatised.

www.lib.utexas.edu

Vietnam is the fourth largest

producer of shoes in the world after
China, India and Brazil, just ahead of
Indonesia. With a 19 % increase in
value, production reached 470
million pairs in 2005, i.e. 2.3% of
world production.

> V IETNAM

IN

F IGURES :

Population: 81.4 million*

GDP: US$ 39 billion*
GDP per capita: US$ 480*
GDP growth: + 7.7 %
Inflation rate: + 7.7 %
FDI flow: US$ 4.1 billion
Foreign official development
assistance: US$ 1.8 billion
Transfers from Vietnamese abroad:
3 billion US$
Exports: US$ 26.3 billion
Imports: US$ 31.5 billion
Trade deficit: US$ 5.2 billion
Deficit of the current account
balance: - 4.4 % of GDP
Trade with France in 2004:
French exports: 0.15 billion euros
French imports: 0.45 billion euros

According to the authorities, 70 % of

production is apparently linked to
foreign capital. These producers
specialise in subcontracting sports
shoes and export their entire
production in order to take full
advantage of the conditions for
exemption from customs duties on
factors of production. Asian groups,
particularly Taiwanese, control over
40 % of the production. They are
usually bound by exclusive contracts
to international brands such as Nike,
Adidas, Reebok or Timberland which

The leather and shoe sector accounts

for
approximately
10 %
of
Vietnamese GDP. According to
sources, it employs between 600,000
and one million people (of which
80% are women), which makes it the
second largest sector after textiles.
Approximately 300 companies, three
quarters of which are concentrated in
the region of Ho Chi Minh City,
manufacture shoes. They produce
two thirds of the overall output and
create half the export revenue.

PRODUCTION

OF THE LEATHER AND SHOE SECTOR

2002

2005*

2010*

Production

350

470

720

Exports

290

428

655

Type of product

S HOE

Source: French Embassy

(2004, except*: 2003)

L EATHER

Production

34

52

81

GOODS

Exports

32

50.5

78

Sources for the article: the French Embassy

(PEE), the French Chamber of Commerce
and Industry Overseas (CCIFE)

F INISHED

Production

25

40

80

LEATHER

Exports

12

25

65

www.ctcgroupe.com

Source: Leather and Shoe Association (*: estimate).

Unit: millions of item

have their shoes produced in Vietnam

through Asian investors.
70 % of production is dedicated to sports
shoes, which makes Vietnam one of the
leading countries in the world in this sector.
Vietnam is, however, dependent on
foreign countries regarding capital, market
opportunities and due to its massive
imports of raw materials. In particular, the
imports of finished leather cover 80 % of
the industrys needs and those of the other
factors of production account for over
60 % of needs. Even though the official
objective is to drop the imports of factors
of production from 70 % in 2004 to 20 %
in 2010, this weakness is likely to constitute
one of the limits to developing shoe
production in the future.
The main local brand is currently Bitis
which employs 7,500 staff and produces
22 million pairs of town and sports shoes
and sandals annually. Other producers,
which are often positioned in the middle
range, have created their own brands and
shop names: Vina Giay, T&T, Pasteur,
Bitas, Long Thanh and Hong Thanh.
It has now become necessary for national
companies to create their own brands in
order to compete with the international
producers on the world market.

2004

TRENDS

IN FOREIGN TRADE

Vietnam is the worlds second largest

exporter of shoes, far behind China but
ahead of Italy. Exports totalled nearly 3
billion US$ in 2005, i.e. twice that of 2000,
which has made the shoe sector Vietnams
third largest export item for several years
now.
Exports account for over 90% of local
production of shoes by volume and
approximately 95 % in value compared with
70 % in the first few years of the century.
Vietnamese shoe exports increased by
19 % in value in 2005 compared with
9.3 % by volume. Moreover, there was a
55 % increase in value between 2002 and
2005 whereas the increase by volume was
39 %, which indicates a significant shift
toward higher quality exports.
In 2005 Vietnam exported 527 million
euros worth of shoes to France, i.e. a
figure that has increased eightfold in ten
years. Vietnam is Frances third largest
supplier after China and Italy and Europes
second largest shoe supplier.
Vietnam is also Japans third-largest
supplier and the country exported 392
million US$ worth of sports shoes to the
United States in 2005 (out of 620 million
US$ total exports).

CUSTOMS DUTIES ON PRODUCTS FROM THE

E XCLUDING ASEAN

EU

ASEAN

With certificate
of origin

Without certificate
of origin

2005

2006

G LUES

15

22,5

A CCESSORIES

25

40

10

F ABRIC

40

60

50

75

50

75

10

Category of product

L EATHER

SHOE

F INISHED L EATHER

Source: Ministry of Commerce and Information Service of the Central Post Office HCMC

CTC Vietnam

Footwear items are included in a list of

twenty products for priority export
intended, in order of priority, for countries
in the Asia-Pacific zone, European markets,
American markets followed by African
markets and those of south western Asia.
The authorities forecast increasing exports
to 720 million pairs worth 6.2 billion US$
by 2010.
Vietnam currently presents itself as a
subcontractor of developed Asian
countries (Japan, Taiwan, Korea) that are at
the origin of 46 % of FDI. Due to a
structural weakness in the availability of
raw materials, accessories and installations,
the investors import most of the factors of
production needed for their production.
Therefore, any export of finished goods
always results in an increase in imports.
They generally come from Asian countries
where most of the decision-making centres
are based and they are imposed on the
Vietnamese producers. It is therefore very
difficult for Western companies to enter
the market. Finally, because the goods are
imported for export purposes they are
exempt from customs duties.
In 2004, the imports of factors of
production in the shoe sector totalled
1.8 billion US$, i.e. 20 % of the total
Vietnamese imports.
European shoe manufacturers have
recently filed a complaint against Vietnam
for dumping, the goods concerned being
leather-topped middle-range shoes. The
measures proposed by the European
Commission (the progressive application
of tax up to 16.8 % by next October) are
to be discussed on 9 March at an antidumping committee of the 25 member
states and may take effect on 7 April 2006.
The Commissioner in charge of foreign
trade has also suggested that childrens
and high-technology sports shoes be
excluded from these measures because the
European production of these items is too
insignificant to have suffered a loss.

CONSUMPTION
The local market is only 70 million pairs
of shoes per year, i.e. 0.8 pairs per person
per year. 60 % of consumption is covered
by local production and the rest by
exports from China.
In 2004 only 26 % of the population
lived in towns. The proportion of urban
population is, however, increasing by
0.5 % each year under the effect of the
mass rural-to urban migration which has
begun and of the 1.18 % annual
population increase (i.e. one million
additional inhabitants each year).
Ten or so smaller cities are beginning to
have living and consumption conditions
similar to those of the two main cities:
Hanoi (3 millions inhabitants) and
Ho Chi Minh City (conurbation of 7 to
9 million inhabitants).
Ho Chi Minh City should reach the
threshold of 15 million inhabitants by
2020.
Approximately 40 % of the population of
the cities is either middle- or upper-class
and their numbers are increasing rapidly.
A city dwellers income is 2.3 times
higher than that of somebody in the
countryside (up to ten times higher
depending on the zones considered).
Moreover, the average income of urban
households has increased by 55 % in four
years, which means that a middle class is
currently developing.

Yoco Building, 5 Floor

41 Nguyen Thi Minh Khai Street
Dist. 1 - HO CHI MINH CITY
Tel.: +84 (0)8 827 44 67 / 827 44 65
Fax: +84 (0)8 827 44 68
ctcvietnam@ctcgroupe.com
www.ctcgroupe.com

ASSOCIATION
LEFASO VN (Vietnam Leather
and Footwear Association)
25, Ly Thuong Kiet Str. HANOI
Tel: 84 4 9349593 - Fax: 84 4 9345374
www.lefaso.org.vn
hhdg@hn.vnn.vn

Vietnam Leather and Footwear

Producers Association
Head Office: 26, Le Dai Hanh Str. HANOI
Tel: 84 4 8265715 - Fax: 84 4 8259216

PROFESSIONAL FAIRS
Saigon Leather & Shoes, May
31- June 4, 2006
(Garments, Textiles and Fashion Accessories)
www.bitec.net

International Shoes & Leaher

Exhibition, June 27-29, 2006
(Leather Products, Shoes & Bags, Accessories)
www.toprepute.com.hk

Vietnam Fashion Fair 2006, Sep

27-29, 2006
(Garments, Textiles and Fashion Accessories)
www.cpexhibition.com

BUSINESS INFORMATION
French Chamber of Commerce
and Industry in Vietnam
http://www.ccife.org/vietnam

Asian Development Bank

www.adb.org/VietNam/default.asp

Vietnam Trade Promotion

Agency
http://www.vietrade.gov.vn/

The State Bank of Vietnam

http://www.sbv.gov.vn/

General Statistics Office of Vietnam

http://www.gso.gov.vn/

Even though few imported shoes are

currently distributed in Vietnam, the
luxury sector, which is still at the
embryonic stage, should nevertheless
develop significantly with the emergence
of an upper class.

MEDIA
Vietnam News Agency

It is estimated that 30 % of the national

income is already held by 10 % of the
population.

http://lecourrier.vnagency.com.vn

www.vnanet.vn

Vietnam Economy
www.vneconomy.com.vn

Courrier du Vietnam
Vietnam Investment Review
www.vir.com.vn