Domestic footwear companies are struggling with the strong market penetration of FDI firms.

The opened door for FDI footwear businesses

Vietnam's leather footwear exports have always reached the top of the world in recent years. However, nearly 80% of the export turnover belongs to FDI enterprises, while the percentage of FDI enterprises accounts for less than one fourth of total footwear enterprises in the country. In addition, this structure is continuing to change in the direction of increasing the FDI enterprises and gradual decreasing of the domestic enterprises. If domestic enterprises make no change to increase the proportion, it can lead to the risk of being removed from the market.

It is recommended that domestic footwear enterprises have to focus on investing and increasing productivity to compete with FDI enterprises. Many domestic enterprises said that FDI enterprises are receiving more preferential treatment from local as well as industrial parks. It is indicated in the licensing or deduction of expenses which is wider than the domestic enterprises. In that case, most Vietnamese footwear enterprises are producing in small-scale, so they are not focused on investment and development. Moreover, domestic enterprises are under strong pressure from FDI enterprises. They not only have strong finance and business potential but also receive more incentives.

In many places, FDI enterprises are offered to invest with many incentives and supports. In many industrial parks, as FDI enterprises often invest heavily in big factories, their future revenue is high, so they are more favorable when the renting cost is cheaper and the renting time.

Difficulties for the domestic footwear business

Attract FDI is a right policy of the State, especially when the capacity of Vietnamese enterprises is still lacking to reach the scale of FDI enterprises. Over the past few years, many big corporations in the footwear industry from Taiwan, Korea and the US have invested millions of dollars to build a leather footwear factory in Vietnam.

Recognizing the opportunities from the Vietnamese market, FDI enterprises are investing increasingly and have a great growth. These businesses are making a large number of orders from many world famous brands, while local companies can only make small ones. With the business situation is increasingly difficult, domestic enterprises only produce modestly and is not enough conditions to expand the factory or market development.

In terms of quality, the products of domestic enterprises are equivalent to that of FDI enterprises. Therefore, if there is more capital to buy equipment, expand the factory, the domestic enterprises also have the opportunity to compete with FDI enterprises.

Actually, big brands always choose the best and most prestigious production units, so Vietnamese enterprises can not compete with FDI enterprises. But this is not a disadvantage for domestic enterprises, because they can accept orders for the FDI enterprises. In this way, they not only have more orders of goods but also can learn from foreign companies.

In general, local footwear enterprises have the potential to receive large orders, but with current capacity, they need to invest more capital and production space to compete. The consideration should also be given to the development of domestic enterprises.