TPP and Regional FTAs to Boost Vietnam’s Leather Industry

March 17, 2014 Posted by Vietnam Briefing Reading Time: 3 minutes

HANOI – The end of February saw a conference organized by Vietnam’s Department of Light Industry, in coordination with the Leather and Footwear Research Institute and the Leather, Footwear and Hand-bag Association. Discussed at the conference were the challenges and possible advantages to the industry arising from the Trans-Pacific Partnership (TPP) and the free trade agreement (FTA) with the EU.

Deputy Minister Ho Thi Kim Thoa was in attendance at the conference. During a speech, the Minister explained that as part of the country’s TPP and FTA negotiations, Vietnam had given priority to footwear, garments, and aqua-products.

Among the expected benefits arising from the TPP to Vietnam are:

The penetration of large foreign markets;
A preferential tariff which has been reduced from 14.3 percent to zero percent; and
Improved competitiveness for the Vietnamese leather industry within TPP markets.

While the country has seen a three-fold increase in its production capacity (since 2006) in the leather industry, Vietnam currently has only been able to satisfy 40 percent of the export demand for tanned leather. The Vietnamese government has correctly recognized that in order to enjoy the possible benefits arising from the soon-to-be-completed FTAs, a number of changes must be implemented within the country’s leather industry – these include:

Improve the quality of the products;
Increase the local content of the products;
Increase investment in waste water treatment facilities for tanneries; and
Promote the development of industries that support the leather industry.

According to statistics provided by Vietnam’s Ministry of Industry and Trade, the country is seeing strong growth throughout the leather industry. Key statistics of the country’s leather industry can be viewed below:

In 2013, the export value of footwear was US$8.3 billion (over 50% of the products used tanned leather) – a 15.2 percent increase year-on-year;
Exported US$1.7 billion worth of hand-bags;
Domestic production capability is 350 million sqft/year, (three times the capacity of 2006) – 60 percent of which is intended for export; and
The largest importers of Vietnam’s products are the EU, the U.S., Japan, China, and Brazil – in 2012, total export turnover to these markets reached US$5.77 billion.

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