Footwear sector: low-cost labour no longer advantage

Researchers have warned that low-cost labour will not be a competitive advantage for Vietnam’s footwear sector by 2030.

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  • More than 700,000 people are currently working in the sector and most of them are not well trained. As a key export earner, the sector contributes to bringing in a large amount of foreign currency.

    Nguyen Duc Thuan, Chairman of the Vietnam Leather and Footwear Association, says in the first six months of this year the sector earned as much as US$3.8 billion from exports, up 25 percent against the same period last year.

    He is confident that the sector will be able to meet the yearly target of US$7-7.3 billion.

    He also says the sector’s surplus increased sharply from 38-40 percent in 2011 to 40-45 percent in the first half of 2012.

    Some businesses even enjoyed a surplus of 50 percent.

    This indicates that the sector’s strategy to increase its value is on the right track, Thuan stressed.

    However, he points out a number of difficulties facing the sector such as a recent reduction in orders and the failure of enterprises to sign enough orders for production from now until the end of the year.

    Other factors affecting business operations include unstable supply of human resources and higher wages for workers.

    Over the past three years, their minimum wage has doubled to VND3.8-5.5 million a month, Thuan says.

    The low quality of the workforce is also a big problem. Most businesses have to retrain their staff in design, sales and marketing.

    As the cheap labour force is no longer its advantage, he says, the sector will have to find ways to resolve the issue.

    The Ministry of Industry and Trade has asked other monistries and agencies to provide support for vocational training.

    According to foreign experts, it is essential to take advantage of skilled workers instead of just cheap labour, as many Vietnamese workers still fail to meet employers’ requirements.

    Therefore, they suggest, Vietnam should encourage labour associations and businesses to participate in vocational training to improve the quality of the workforce.