Negotiations over Vietnam’s joining the Trans-Pacific Partnership (TPP)are underway. General Secretary of the Ho Chi Minh City Leather andFootwear Association Nguyen Van Khanh spoke with Vietnam InvestmentReview about the possible implications of the TPP on the local leatherand footwear industry.
* You have worked in theindustry for over 20 years, what would be the major effects of the TPPon leather and footwear businesses’ performance?
For yearsthe local footwear industry has relied on leather imported mainly fromChina, Korea and India which are not TPP members. To be eligible for TPPbenefits after joining the partnership, local businesses would need toimport materials from other member countries or report a 40 percentlocalisation rate.
With this understanding, major exporterssuch as Thai Binh, Dong Hung, An Lac, and Vinh Thong footwear companieshave been busy preparing. However, not many firms will be eligible forTPP benefits. Most notable is the zero percent duty on exporting tomember countries. Few firms would benefit from this move.
Foreign investors in the footwear industry have the most to gain.
* What challenges may local firms face if Vietnam joins the TPP?
The greatest challenge is right here at home. Once Vietnam joins theTPP, import duties would fall to zero percent and local firms will findit very difficult to compete if other members such as Japan, the US,Mexico, Brazil, and New Zealand started bringing their products intoVietnam.
Foreign invested businesses may set aside part oftheir production for sale in the domestic market and this could cripplelocal leather and footwear producers.
* Can you outline the current production structure?
Vietnam is home to 500 footwear businesses with 30 percent focusing onexport; though 70 percent of these simply do export-processing work forforeign partners.
* How will local firms be supported in taking advantage of TPP incentives and solving problems?
Vietnam is only in the negotiation stage and both the association andfootwear companies are awaiting direct guidance from the Ministry ofIndustry and Trade. We are proposing that authorities and economicresearch institutes help lead businesses toward the right path. It couldbe a major problem if each individual business operates in its own way.One important factor is local firms’ brand building, as this will beessential to fully realising TPP advantages.
* What measures has the footwear sector taken recently to anticipate potential TPP membership?
For one, the Thai Footwear Association just brought in 30 businessesto network with their Vietnamese counterparts. In addition, the ThailandResearch and Development Institute met with us to discuss cooperationopportunities.
Taiwanese firms, although they are engagedmostly in export processing, have also mulled expanding into Vietnam totape the country’s growing potential. Hong Kong Leather and FootwearAssociation members held field visits to eight local firms and someassociation members are planning to fly to Hong Kong next year to visitand discuss investment and cooperation.-VNA
* You have worked in theindustry for over 20 years, what would be the major effects of the TPPon leather and footwear businesses’ performance?
For yearsthe local footwear industry has relied on leather imported mainly fromChina, Korea and India which are not TPP members. To be eligible for TPPbenefits after joining the partnership, local businesses would need toimport materials from other member countries or report a 40 percentlocalisation rate.
With this understanding, major exporterssuch as Thai Binh, Dong Hung, An Lac, and Vinh Thong footwear companieshave been busy preparing. However, not many firms will be eligible forTPP benefits. Most notable is the zero percent duty on exporting tomember countries. Few firms would benefit from this move.
Foreign investors in the footwear industry have the most to gain.
* What challenges may local firms face if Vietnam joins the TPP?
The greatest challenge is right here at home. Once Vietnam joins theTPP, import duties would fall to zero percent and local firms will findit very difficult to compete if other members such as Japan, the US,Mexico, Brazil, and New Zealand started bringing their products intoVietnam.
Foreign invested businesses may set aside part oftheir production for sale in the domestic market and this could cripplelocal leather and footwear producers.
* Can you outline the current production structure?
Vietnam is home to 500 footwear businesses with 30 percent focusing onexport; though 70 percent of these simply do export-processing work forforeign partners.
* How will local firms be supported in taking advantage of TPP incentives and solving problems?
Vietnam is only in the negotiation stage and both the association andfootwear companies are awaiting direct guidance from the Ministry ofIndustry and Trade. We are proposing that authorities and economicresearch institutes help lead businesses toward the right path. It couldbe a major problem if each individual business operates in its own way.One important factor is local firms’ brand building, as this will beessential to fully realising TPP advantages.
* What measures has the footwear sector taken recently to anticipate potential TPP membership?
For one, the Thai Footwear Association just brought in 30 businessesto network with their Vietnamese counterparts. In addition, the ThailandResearch and Development Institute met with us to discuss cooperationopportunities.
Taiwanese firms, although they are engagedmostly in export processing, have also mulled expanding into Vietnam totape the country’s growing potential. Hong Kong Leather and FootwearAssociation members held field visits to eight local firms and someassociation members are planning to fly to Hong Kong next year to visitand discuss investment and cooperation.-VNA
