In 2023, Vietnam’s footwear industry has become a critical player in the global market, with exports reaching an impressive $18 billion. The country has positioned itself as the second-largest exporter of footwear worldwide, contributing to 10.2% of the global supply. This remarkable growth can be attributed to several key factors: supply chain resilience, labor cost advantage, investment incentives, sustainable manufacturing, and market accessibility.
Supply Chain Resilience
Vietnam’s geographical location and proactive government policies have established a resilient supply chain that is critical for attracting foreign investments. During the COVID-19 pandemic, many manufacturers faced disruptions, but Vietnam managed to maintain operational continuity due to its robust logistics and transportation networks.
In 2021, Vietnam’s logistics sector was valued at approximately $41 billion, projected to grow at a CAGR of 14% through 2025. The government’s commitment to upgrading infrastructure, including roads, ports, and airports, has further bolstered the country’s supply chain capabilities. For instance, the Hai Phong Port, one of the largest in northern Vietnam, has invested in modernizing its facilities to enhance cargo handling efficiency. This strategic focus on infrastructure not only reduces lead times for manufacturers but also ensures that products reach international markets swiftly.
Supply Chain Resilience
Moreover, Vietnam has been actively diversifying its supplier base, reducing dependency on single sources. By forging trade relationships with countries such as Japan and South Korea, Vietnam can offer a more secure supply chain that minimizes risks associated with geopolitical tensions or natural disasters. This flexibility has garnered trust from global brands like Nike and Adidas, who rely heavily on Vietnam for their production needs.
Labor Cost Advantage
Vietnam’s labor market is another compelling reason for foreign investment in the footwear sector. The country boasts a young, dynamic workforce with over 60% of its population under the age of 35. This demographic dividend presents a significant opportunity for companies seeking skilled yet affordable labor.
As of 2023, the average monthly wage for workers in the textile and footwear sectors is around $180, considerably lower than in neighboring countries like China, where wages can exceed $500 per month. This labor cost advantage allows companies to maximize profitability while maintaining competitive pricing in the global market.
Labor Cost Advantage
In addition to low labor costs, Vietnam has been investing in vocational training programs aimed at improving workforce skills. Initiatives such as the Vietnamese National Vocational Training Strategy focus on equipping workers with technical skills relevant to modern manufacturing processes. This alignment between education and industry needs enhances the overall productivity and efficiency of the workforce, making Vietnam an even more attractive destination for footwear manufacturing.
Investment Incentives
The Vietnamese government has rolled out several investment incentives to attract foreign direct investment (FDI) in the footwear industry. These incentives include tax breaks, reduced land lease rates, and simplified administrative procedures.
For instance, under the Law on Investment 2020, foreign investors can enjoy a corporate income tax rate of 15% for the first 15 years of operation in certain sectors, including textiles and footwear. Additionally, companies that invest in high-tech production methods may qualify for even lower tax rates and other financial incentives.
Vietnam’s participation in various free trade agreements (FTAs), such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the European Union-Vietnam Free Trade Agreement (EVFTA), further enhances its attractiveness. These agreements not only eliminate tariffs on a wide range of goods but also provide market access to countries with significant consumer bases.
Investment Incentives
According to a report by the Ministry of Industry and Trade, Vietnam’s exports to the EU are expected to increase by 20% annually, thanks to the EVFTA. This surge in trade opportunities makes Vietnam an appealing hub for footwear manufacturers looking to expand their global footprint.
Sustainable Manufacturing
As the world shifts towards more sustainable practices, Vietnam is emerging as a leader in sustainable manufacturing within the footwear industry. Many global brands are prioritizing sustainability in their production processes, and Vietnam is responding to this demand.
The Vietnamese government has set ambitious goals to achieve net-zero emissions by 2050 and has been encouraging manufacturers to adopt environmentally friendly practices. Initiatives such as the Vietnam Sustainable Development Goals (SDGs) and the Circular Economy Action Plan aim to reduce waste and promote resource efficiency in industries.
In 2023, several Vietnamese footwear companies have started implementing sustainable practices, such as using recycled materials and adopting cleaner production technologies. For example, Biti’s, a well-known Vietnamese footwear brand, has launched a line of shoes made from recycled plastic bottles, showcasing the potential for sustainable innovation in the industry.
Sustainable Manufacturing
According to a study by the World Bank, adopting sustainable manufacturing practices can lead to cost savings of up to 20% in operational expenses. This financial incentive, combined with growing consumer awareness regarding sustainability, positions Vietnam favorably as a production hub for environmentally conscious brands.
Market Accessibility
Vietnam’s strategic location in Southeast Asia offers unparalleled market accessibility to both regional and global markets. With a population of over 97 million and a rapidly growing middle class, Vietnam itself represents a substantial consumer market for footwear products.
The country’s membership in regional trade agreements facilitates easier access to neighboring markets, including ASEAN countries, which have a combined population of over 660 million. This access allows companies operating in Vietnam to tap into a broader consumer base and respond quickly to market demands.
Additionally, Vietnam’s logistics capabilities are continually improving. The government has earmarked over $5 billion for upgrading its logistics infrastructure in the next five years, further enhancing the country’s position as a regional logistics hub. This investment will facilitate smoother trade routes and reduce transportation costs for companies exporting goods from Vietnam.
Market Accessibility
Conclusion
Vietnam’s emergence as an attractive destination for investors in the footwear industry is underpinned by its supply chain resilience, labor cost advantage, investment incentives, sustainable manufacturing practices, and market accessibility. As the industry continues to grow, foreign investors can leverage these factors to build successful operations in Vietnam.
For those looking to explore the Vietnamese market further, we invite you to connect with VietThai Sup Man. Visit our factory to witness firsthand the advantages of manufacturing in Vietnam and discover the potential that awaits you in this dynamic market.
