In 2017, leather and footwear exports increased by 10.7% to US$17.93 billion, of which footwear made up US$14.67 billion (a year-on-year rise of 12.8%) and bags and suitcases accounted for US$3.26 billion (up 2% compared to the previous year).

Last year, the foreign direct investment (FDI) sector remained on upward trend and contributed a whopping 80.6% to the industry’s total export revenue.

The US topped the importers with US$5.835 billion in the first 11 months of 2017, trailed by the EU with US$4.949 billion. China surpassed Japan to become the third largest consumer of Vietnamese products with a value of nearly US$1.2 billion. Exports to Germany and Japan reached US$1.046 billion and nearly US$1 billion, respectively.

Vietnamese footwear and handbags have made a foray into more than 100 countries in the world with 72 markets having an import value of over US$1 million each.

However, Lefaso Secretary General Phan Thi Thanh Xuan says the industry still faces four major challenges in the coming time, namely high labour cost, industrial automation trend, protectionism trend and fiercer market competition.

Xuan analyses that the minimum wage tripled while GDP doubled in the period between 2010 and 2017. Meanwhile, the industrial automation will help raise productivity and stabilize labour forces but it also presents challenges to businesses, especially small-and medium-sized enterprises.

According to a Lefaso survey, 75% of businesses find it difficult in investing in and applying the automation process while only 25% start the process in a small scale and below 5% plans to apply.

Besides, protectionism acts like Brexit and the US withdrawal from the Trans-Pacific Partnership (TPP) agreement have made a considerable impact on the leather and footwear industry. For instance, the number of orders received from the UK by businesses dropped by 50% last year.

Furthermore, businesses faced with fierce competition from Myanmar and Bangladesh, countries with lower labour costs and enjoying the Generalized System of Preferences (GSP) from the EU like Vietnam.

Basing itself on the world market trend and domestic situation, Lefaso forecast that the industry’s manufacturing index will grow 5% while exports will surge 10% to US$19.5-20 billion, accounting for 9% of the country’s total exports this year. Domestic resources will make up 55% of raw materials. Footwear will remain in top four and handbags and suitcases rank 10th among top ten export products of Vietnam.