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Rising Labor Cost in China Shifting Focus on Vietnam Footwear Industry

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Published on : Jun 19, 2014

Vietnam’s key market data agency, The General Statistics Office (GSO) has recorded a 21.9% growth in the country’s footwear industry exports. The agency reported that the total footwear exports by Vietnam were valued at USD 2.85 billion. This rise is partly on account of the growing consumption of footwear and the improved standard of living globally, especially in the European Union.

Other benefits that the Vietnamese footwear industry has been enjoying include favorable policies offered by the European Union under the Generalized System of Preferences staring January 2014. Moreover, the implementation of the Trans-Pacific Partnership (TPP) is also likely to offer lucrative opportunities to exporters of footwear over the next few years. This will ease access to large markets such as Japan and the United States.

In the meanwhile, labor in China is becoming expensive, forcing businesses to consider moving to other cheaper locations such as Vietnam. This exodus has exerted immense pressure on manufacturers, with order bottlenecks becoming common. The only way for businesses to deal with this backlog is by boosting their own production capabilities while bringing quality at par with international standards.

Market watchers, however, warn that the downside of this growth is that much of it has been brought about by foreign investors. As a result, a large chunk of profits from the expanding industry in Vietnam will be pocketed by these multinationals. There is a pressing need for the Vietnamese footwear industry to counter this trend by working on strategies to boost locally-owned enterprises and domestic brands. 

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