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Vietnam’s footwear sector likely to attract FDI in 2018

The Vietnam Leather, Footwear and Handbag Association (LEFASO) has invited Skechers, a major footwear manufacturer in California, to study the possibility of investing in the country’s northern province of Hai Duong, according to association chairman Nguyen Duc Thuan, who is also the chairman of the TBS Group based in the southern province of Binh Duong.

This project may need 20,000 workers, a report in a Vietnamese news website said.

A rival to Nike and Adidas, Skechers wants to shift investment from China to Vietnam and its investment might be between $700 million and $1 billion, said Thuan.

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Vietnam sold more than one billion pairs of shoes and sandals in the global market last year, ranking second behind China, which sold 13.8 billion pairs. It raked in $18 billion from footwear and handbag exports last year.

Idea Ltd, part of Taiwan’s Pou Chen Group, the largest branded athletic and casual footwear manufacturer in the world, is constructing a factory in Ho Chi Minh City’s Tan Tao Industrial Zone, according to a Vietnamese news website report. The factory, with an investment of $22.7 million, is expected to offer jobs to more than 100,000.

Pou Chen opened its first factory in Vietnam in 1994 in the southern province of Dong Nai. The group has expanded production to many other locations in the country with big production units since then.

US withdrawal from the Trans-Pacific Partnership agreement in late 2016 was a primary reason behind last year’s slowdown in foreign direct investment (FDI) capital flow into the country’s footwear sector, according to LEFASO.

The import value of machinery and equipment into the sector decreased to $146 million in the first 11 months of last year compared to $170 million a year during the 2015-2016 period, according to LEFASO general secretary Phan Thi Thanh Xuan. Similarly, import value of tanned leather was reduced to $1.5 billion, compared to nearly $1.6 billion in 2016.

The likely Vietnam-EU free trade agreement this year, however, is expected to boost FDI capital flow to the sector. The Vietnam Footwear Summit 2018, to be held in Ho Chi Minh City on March 21-22 with the theme ‘Development model for footwear factories in the new context’, is also expected to draw more than 300 domestic and international participants.

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