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Each day TFO Canada publishes a sample of trade news on the Canadian import market along with any new, updated or changed regulations and legislations regarding international trade; countries in which TFO Canada offers services and on the export sectors which it promotes.

 

Footwear giants shift outsourcing from China to Vietnam

Friday, June 01, 2018 > 10:56:48
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VN Express International



Gains likely to be short-lived, experts warn nation could turn into a ‘landfill.’



Major brands in the footwear industry are shifting their outsourced work to Vietnam instead of China, but experts doubt this will be a good thing in the long run.

Sneaker giant Adidas last year had 44 percent of its footwear produced in Vietnam, more than double the 19 percent made by suppliers in China. This figure also marked a 31 percent increase from 2012 for Vietnam and a 30 plus percent decrease for China.

A similar move can also be seen at Adidas’ rival Nike, which had 46 percent of its footwear made in Vietnam last year, against just 27 percent in China.

While China remains the top supplier in the fashion industry, Vietnam is now seen by major brands as a solid and critically important supplier in second place, according to survey results released by the United States Fashion Industry Association.

“We are reporting a change in the sourcing trend, from ‘China Plus Many’ to ‘China Plus Vietnam Plus Many,’” the association said.

The typical sourcing portfolio today is 30-50 percent from China, 11‑30 percent from Vietnam, and the rest from other countries, it added.

According to experts in the industry, China manufacturing has become more focused on high value, and with workers’ wages rising, low-cost manufacturing is no longer its priority, according to The Diplomat magazine.

This explains why Vietnam, Indonesia and Bangladesh are producing more shoes and apparel for export.

However, while this trend can yield short-term benefits to Vietnam, long-term consequences will be severe, Professor Nguyen Van Nam, former director of the Institute of Trade Research under the Ministry of Industry and Trade, told the DatViet (Vietnam’s Land) newspaper.

Since advanced technology is not widely applied in Vietnam, the manufacturing sector exploits labor and pollutes the environment, he said.

“Vietnam needs to push for the newest technologies in manufacturing, otherwise we will be a ‘landfill’ of other countries,” he added.

Nguyen Duc Thuan, president of the Vietnam Leather Footwear and Handbag Association (LEFASO), highlighted another challenging aspect of the shift at a conference earlier this year.

As workers in other countries are assisted by machines in the production process, each of them can make 1.2 pair of shoes in an hour, while their Vietnam peers can only manage 0.7, he said.

“Labor productivity obviously increases when technology and high management skills are used, and this is a challenge that Vietnam needs to meet,” Thuan said.

Vietnam’s footwear export value has been growing in recent years, from $8.4 billion in 2014 to $14.65 billion in 2017, a 42 percent increase. The country contributed a billion pairs of shoes to the 27 billion pairs produced globally last year.


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