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Email: [email protected]; Website: www.mutrap.org.vn
REPORT
Strategic considerations of sector upgrading with
special focus to export and competitiveness
ACTIVITY CODE: WTO-C2D
Ha Noi, 21.11.2011
Prepared by:
Mr. Wolfgang Wiegel (Dipl.-Ing.FH) MUTRAP
III International expert, in cooperation with:
Mr. Hoang Van Phuong , Ministry of Trade and
Industry
This document has been prepared with financial assistance from the Commission of the European Union. The
views expressed herein are those of the author and therefore in no way reflect the official opinion of the
Commission nor the Ministry of Industry and Trade
TABLE OF CONTENT
INTRODUCTION
EXECUTIVE SUMMARY ................................................................................................ 2
1. Trade partners EU and Viet Nam ................................................................................ 2
List of acronyms ................................................................................................................. 8
I. INTRODUCTION ....................................................................................................... 9
I.1. History and current situation of consultations between Viet Nam and the EU ..................... 9
I.2. Market attractiveness of EU-27 ............................................................................................. 9
I.3. Lessons learnt from WTO accession ................................................................................ 10
I.4. Other bilateral free trade agreements................................................................................. 11
II.
III.
BACKGROUND OF STUDY ............................................................................... 11
METHODOLOGY OF RESEARCH and SECTOR SELECTION....................... 12
III.1. Sector analysis methodologies .......................................................................................... 12
III.2. Sector selection ................................................................................................................. 14
IV.
SECTORAL ANALYSIS - VIET NAM ............................................................... 15
IV.2. Automotive sector........................................................................................................... 18
IV.2.1. Sector background in Viet Nam ......................................................................... 18
IV.2.2. Supply chain and analysis of the Viet Namese automotive sector ................................ 23
IV.3. IT and electronics sector ................................................................................................. 28
IV.3.1. Sector background in Viet Nam .......................................................................... 28
IV.3.2. Supply chain and analysis of the ICT sector.................................................................. 30
VI.4. Footwear sector............................................................................................................... 34
VI.4.1. Sector background in Viet Nam .......................................................................... 34
VI.4.2. Supply chain and analysis of the footwear sector .......................................................... 36
VI.5. Textile and Clothing sector ............................................................................................. 42
VI.5.1. Sector background in Viet Nam .......................................................................... 42
IV.5.2. Supply chain and analysis of the textile and clothing sector ......................................... 45
V. SECTOR AND SUPPLY CHAIN TRENDS IN THE EU ........................................ 51
V.1. General trends with adapted view to cooperation EU-Viet Nam ...................................... 51
V.2. Automotive sector ............................................................................................................. 55
V.2.1. Supply chain and trends in the EU ................................................................................. 55
V.2.6. EU legislation and directives for import of automotive products into the EU: ............... 62
V.3. Textile and Clothing sector ................................................................................................ 62
V.3.1. Supply chain trends in the EU........................................................................................ 62
V.3.3. EU legislation and directives for the garment sector: ..................................................... 64
V.4. Footwear sector .................................................................................................................. 65
V.4.1 Supply chain trends in the EU ........................................................................................ 65
V.4.2. EU legislation and directives for the footwear sector: ................................................... 66
V.5. IT and Electronics sector ................................................................................................... 66
V.5.1. Electronic sector in the EU ............................................................................................ 66
V.5.2. Sector related EU legislation and directives: ................................................................. 67
RECOMMENDATIONS .................................................................................................. 68
1
EXECUTIVE SUMMARY
1. Trade partners EU and Viet Nam
According to information from EU DG Trade from 8th June 2011, the bilateral trade
between Viet Nam and the EU reached 13,1 billion EUR in 2010, making the EU the
third largest trade partner to Viet Nam. The EU is Viet Nam´s second largest export
partner with 16,6% of total exports and sixth largest import partner with 7,1% of total
imports. 1
Studies and sector researches reveiled positive potential of further mutual increase of
trade figures as a result of the FTA between Viet Nam and EU.
The EU represents one of the most potential markets, worldwide with about 500 million
consumers with consumer buying power per year of up to Euro 32.000.
It can be observed that there are current ambitious efforts of Viet Namese government to
enter in FTA or other trade negations with numerous countries in order to promote its
worldwide trade. Although Viet Nam seemingly prioritizes other treaties, it should be
aware of the expected benefits of the FTA with the EU.
2. Background of study and research methodolgy
This study aims to provide more detailed information about FTA related issues in relation
to the sectors Textile/Garments, Footwear, Automotive and Electronics. This includes
considerations of required parallel sector and SME strategies for improved local content,
added value and competitiveness. The study reveals the importance of avoiding the image
of being only `low salary` and `low cost`, which to date is one the major arguments of
many foreign companies and FDI who have invested in production and assembling in
Viet Nam.
Effective and significant sector analysis and added value considerations are by large
based on availability of objective and valid micro, meso and macro data. The lack of
congruent data is considerable and elaboration of economic calculation on company and
sector level are very difficult or even impossible. The study implemented simple value
chain mapping and analysis based on available data. The SWOT analysis of the four
sector reveal internal strength and weakness at sector level and opportunities and threats
on macro and external level. Results of supply chain, value chain analysis and other
strategic and quantitative analysis methods, should be inserted into formulation of sector
masterplans, sector and SME development strategies. It seems useful and forwardlooking to initate in-depth value chain and base line studies along the industrial sectors.
3. Sustainable sector and SME development for successful trade
Competitive SME`s are the backbone of a healthy economy. It is important to boost the
integrating of local supply chains and increase local content in the scope of supply
management of international manufacturing companies in Viet Nam. Innovation and
technology adaptation as well as improved effectiveness of SME operations help to
substitute importation of consumer goods.
Upgrading in various competitiveness factors is important to avoid the `middle income
trap` and to become more independent from low salary and low added value
subcontracting in the footwear and textile/garment sector.
Important success factors for SME to attain, are:
1
http://trade.ec.europa.eu/doclib/html/113463.htm
2
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comparative advantage in the manufacturing sector
comparative advantage in price calculation and net profit margin
Potential of creating additional value while integrating supply chains
improved level of standards
Potential to improve on benchmarks in competitiveness, innovation, quality,
productivity and administrational procedures
achievable advancements related to local and international supply chain integration
existing national and international market potential of SME` products and services
4. Competitiveness of the Viet Namese export sector
The constant annual increase of worldwide export in various product groups, the regular
inflow of Foreign Direct Investment and the largely even trade balance (except with
China) confirms positive framework conditions for outbound and inbound trade.
Notedly, most of the export and internal supply revenues are connected with the
advantage of low labor costs and other services in the business environment of
subcontracting. Notwithstanding the positive development of export revenues, efforts are
recommended to initiate the shift from low-salary subcontracting to more added value
production, with the effect of a two-fold payoff, being high level of low salary based
subcontracting and more added value creation through added technology and design
input. This roadmap calls for intensive efforts to improve effectiveness, efficiency and
competitiveness of the local focus sector SMEs. Available competitiveness studies
(CIEM, 2010) should be taken as guidelines for upgrading. The FTA with the EU can be
one important building block not only for increasing inbound and outbound trade, but
also to be confronted with standards and other business requirements that would need to
be considered for upgrading competitiveness of Viet Namese sector SMEs.
5. Added value of Viet Namese main export product and sectors
All four sectors have in common that current added value is only about 10 – 15% of the
total value added. Up to 90% of the overall industrial value created in the four sectors is
based on subcontracting, CMT or assembly. In addition, technology transfer is hardly
taking place in subcontracted manufacturing. Most of the profits are absorbed by the FDI
companies. Approximately 10% of the total importation of pre-products in the garment
sector is directly sourced by the subcontracted companies, which grants some additional
margin for the sourcing company. Motocycle manufacturers are increasingly using at
least more than 50% parts and components at the local market. This speficically applies
to the national motorcycle brands.
It is notable that export similarity of Viet Namese manufactured products with other FTA
partners has increased (COMTRADE database), which also adds to comparability of
production setups, products and services with competing countries. This implicates strong
need to look into additional comparative value added in the future. Under the viewpoint
of increased comparability, also higher production output and scale effects, particularly in
the automotive sector, are of great importance.
Innovation, being one of the major benchmarks for international competitiveness in the
EU, is not yet much under consideration in Viet Nam`s innovativ sectors or in terms of
design development and branding, such as automotive and even more electronics and the
textile and shoe sector.
In contrary, after four years of WTO membership, requirements on trade related
Intellectual Property Rights are not enough implemented and the culture of counterfeiting
is not sufficiently tackled yet2. Registration of Vietnamese brands and innovation is still
2
Eurocham/Trade, Investment Issues & Recommencations, 2011
3
at low level. Vietnamese government should concentrate efforts to protect international
trademarks, brand names and intellectual property. In addition to infringement of the
lawful rights of IPR by its owner, more dangerous counterfeiting are automotive parts,
pharmaceutical products, fertilizer or building material.
6. The Automotive sector:
The automotive sector (motor vehicles) is considered as highly sensitive. The sector is
small with fewer than 30.000 units produced locally. Government has marked the sector
as key sector for Viet Nam. Within the ASEAN arena, Viet Nam faces strong competitive
pressure, especially after the reduction of the ASEAN tariff by 2018. Under tariff and tax
protection, the local market of domestically assembled CKD (complete knocked down)
was able to grow.
The preparation for the expected increasing competitive pressures calls for more local
content, technology application and stronger integration of supply chains for foreign
OEMs. This scenario favors integration of the automotive sector in the FTA. It also calls
for strong engagement of the Viet Namese government to facilitate CBU (completely
build up / imported new or used cars) and CKD. It is unlikely that imported cars from the
EU, which are mainly in the luxury segment, will negatively compete with local car
production. Importing CBUs from the EU even could constitute advantages for the local
sector as it necessitates the need to strengthen the maintenance sector, to improve
professional standards of labor, also increasing and increases the potential to provide for
after-sales market. The current introduction of additional technical barriers for importing
CBUs has already resulted in the closing down of a large number of car dealerships with
loss of employment.
With the signing of the FTA, potential improves to export aftermarket accessories, such
as gaskets, shock absorbers, wipers, air filters, exhaust systems, oil and air filters, v-belts,
batteries and spark plugs, besides other aftermarket accessories.
The motorcycle subsector is competitive and has immense growth and also export
potential, which would even be more improved by the FTA with the EU, when import
tariff into the EU may be reduced to 0%, providing for additional 6% tariff advantage.
Due to the lower technology requirements and lower unit costs, local tier already develop
and strengthen the local supply chain. As tariff was increasingly abolished or reduced in
various trade agreements in the ASEAN region, large Japanese motorbike OEM do not
consider it economically viable to install production sites in each potential market. Due to
more equality of tariff, other factors are more in the focus for location of their industry.
Duplication of production units is seen more critical and is not always economically
viable. In general terms, attractiveness of a Viet Namese hub improved.
Current and continuing conflicts and disadvantages in other countries do not favor
investment (India-high costs, China-strongly regulated, Indonesia-general safety,
Thailand-political unrest).
The automotive sector in the EU is one of the most important carriers of technology and
innovation. The share of labor in the automotive sector in EU countries, such as
Germany, is up to 13%. Most innovations, patents and technology improvements in the
manufacturing industries are instigated by the automotive sector. Expansion of the
international supply chain is increasingly important. The tier 1 and tier OEM market is
complicated and requires compliance in different aspects. Viet Namese options are more
into the aftermarket of spares and accessories.
7.
The Textile and Garment sector:
4
Viet Nam is the fifth largest producer of textiles and garments in the world with positive
outlook to growing turnover by CMT operations. Annual export turnover of the sector is
expected to reach about US$ 11 billion in 2011 with steady growth in the last 10 years.
Most of the turnover is originating from CMT with estimated 4-10% margin (trend
toward lower margins). Additionally about US$ 4.2 billion was sold in the local market,
assuming higher value added due to local production of yarns and fabrics. Exact
information is not available.
There are about 3.000 textile and garment companies in the country, including 2.000
large companies. About 75% of the companies are privately owned or shareholder
companies, 24.5% are FDI based companies and 0.05% represent state owned companies.
The garment sector grows based on “quantity” with high turnaround and best possible
capacity utilization and not much on “value creation”, based on per-unit profit margin
and added value along the supply chain. The predominant low margins amongst the
sector are not ideal for long term growth and realization of necessary investments. The
increasing number of annual fashion cycles in the EU with changing design and
manufacturing requirements and strict in-time delivery and short lead times put pressure
on administrational, production, organizational and transport performance of Viet
Namese firms.
The Textile and Garment association (VITAS) might get involved in step-by-step
analysis of benchmarks in order to improve the self-evaluation of textile and garment
companies. The same applies to the other sector associations in footwear, automotive and
electronics.
The total import of cotton, manmade fibers, yarns and fabric and accessories accounted
for US$ 8.9 billion in 2010 (including cotton import for local market products), leaving a
calculated balance of US$ 3.3 billion, which represents low margin of operations.
The margin, when put in relation to the large input factor of up to 3 million workers and
around 3.000 textile and garment manufacturing companies in the country does not much
allow for large investments in vertical operations, such as spinning, weaving and
finishing.
Investments into the textile industry is more likely by new FDI invested integrated plants.
Investment in old, existing factories with given layout and production technology,
lacking environmental systems and infrastructural limits is often complicated and less
viable. Some of the big local players may be successful to renew their integrated
operations.
Viet Nam exports garments to the US (55%), EU (18%), Japan (11%), Japan (11%),
South Korea (3%) and other ASEAN countries (2%). The EU market is the largest
market for ready-made garments in the world with 500 million consumers with promising
potential for more export of CMT into the EU after the signing of an FTA. Without the
signing of a FTA, the likelihood exists of loosing EU related market share to other
competing CMT countries in the ASEAN region.
The benefit of the EU-Viet Namese FTA for increasing CMT export to the EU can be
considerable. Taking the example of tax reduction by the FTA between the Republic of
Korea and ASEAN. As a result, Viet Nam was able to increase its export revenue to the
RoK by 240% within one year.
5
Under the assumption that the FTA reduces the EU tariff for garments to 0%, resulting
tariff advantage could be in the range of up to 12%.
8. The Footwear sector:
The leather and footwear sector in Viet Nam provides about 670.000 direct employments
and further 500.000 jobs in support industries along the supply chain.
According to a 2008 review by LEFACO, the sector comprises of 825 SME and further
estimated 1.000 small ´household-producers`.
The production capacity of about 1.600 complete production lines has potential for an
annual output of 800 million pairs of footwear, 120 million handbags, 270 million square
foot of finished leather and 1400 square foot of PVC and PU.
Domestic consumption was only 9% of total national production in 2010, which confirms
that the shoe sector is one of the important export sectors in the country. Most Viet
Namese companies operate on subcontracting and processing contracts, leaving it to
international FDI companies to provide raw material and accessories. About 80% of all
material is imported. Taiwanese and Korean FDI account for more than half of the total
export turnover.3
Considering the strong position in EU, US and Japanese markets, the sector is
competitive, although based on cheap labour and basic skills in the shoe production.
The subcontracting business model is strongly connected to renowned shoe brand
manufacturers, such as Nike. Nike represents about 25-30% of the foreign investment.
Leather import tariff is not a factor (approx. 5%) and is avoided through duty drawback.
The local Viet Namese footwear industry cannot compete with Chinese shoe production
in the low price sector for the local market due to high raw material purchase costs,
limited design capabilities and lower overall productivity. According to Ms.
Tong/LEFASO, Vietnamese footwear quality is at large better than Chinese shoe quality
Export turn over in the last 10 years was steadily increasing. The total share of footwear
export to the EU has declined over the last 10 years from about 75% to about 47%. The
USA accounts for about 27% of the total exports.
In 2010, the total EU import of footwear was € 13.5 billion (approx. US$18 billion at
current exchange rate), resulting in considerable 10% EU import share by Viet Nam.
Currently, 16.5% tariff EU import tariff is added to the dockside price of Viet Namese
footwear, leaving good leeway for more trade with potential FTA tariff benefits.
The EU imposed antidumping duties in 2006, which ended on 31st March 2011. Since
April 2011, export to the EU has increased considerably. Interestingly, the European
Footwear Association of Importers and Retail Chains (FAIR) considers the EU
commission´s anti-dumping investigation against Vietnamese footwear as “being faulty
and biased”. The association claims that large difference between an average import price
of € 9 and the average sales price of € 30 almost exclusively contain labor costs and
material. The more than 300% mark up compensates for FOB to CIF cost differences,
distribution, brand marketing costs, design work, technology development, quality
control and marketing activities to the points of sale and profit as well as margins of
importers and retailers.
3
LEFASO
6
FAIR represents more than 100 footwear importers and large retailers in France, USA,
UK, German, Austria, Netherlands and France with a total of about 90.000 employees.
9. The Electronic sector:
The electronic industry is one of Vietnam´s key focus sectors, but dominated by Japanese
and Korean FDI, providing more than 95% of the sector export and also dominating the
local products.
Since 2003, the Viet Namese government has put special attention to the sector. In the
scope of the ASEAN Free Trade Area (AFTA), Viet Nam reduced import and export tax
of 755 products imported from other ASEAN countries, including many electronic
products. Up to date, little investments have been made by EU FDI companies, except for
Siemens, Schneider and Phillips. EU companies in Viet Nam see the trans-ASEAN trade
perspective. Electrolux set a positive example by integrating local producers step-by-step
into their production process of household appliances, whereby investments of mainly
Japanese electronics companies in Viet Nam are booming. The main reasons given by
investors are low production cost, young urbanizing labor force with 60% under the age
of 30, low labor costs (35-45% cheaper than in larger Chinese cities). An important
reason for investments is political and social stability in the country.
The telecommunication sector is booming with many services provided by local
companies.
According to information from “The Nation”, the sector`s goals until 2015 are:
 Ranking list of the International Telecommunication Union = 70
 ICT industry contribution to the country´s GDP = 17-20%
 Coverage of broad band services to communes and wards nationwide, incl. TV
 broadcast technology = 70%
 Nationwide telephone coverage = 100%
With the overwhelming market and production power of foreign FDI companies, much of
the above mentioned goals will likely not be achieved by local electronic companies
alone. Cooperation between FDI and local suppliers must improve and local
manufacturers may concentrate to their strongholds and step-by-step delete products
without profitable margin. It is unlikely that non-profitable product lines will become
profitable in the future as technology gaps widen and production costs increase due to
low output.
The 400 SME companies have limited technology base. Smaller companies invest no
more than 0.5% in F&E compared to up to 10% in larger Asian multinationals, such as
the Japanese and Korean FDI companies in Viet Nam.
The sector has potential to develop software on small scale under license (e.g. embedded
software for automation systems, home security and smart devices could be a potential of
increased input by local software programmers).
10. Main recommendations:
- The Government to implement efficient public/private sector development platforms
with focus to trade and competitiveness. Such platforms consist of policy makers
representing the public sector and decision makers of major private sector companies
(representing the sectors) and from sector associations as well as trade support
organizations. The aim would be to find common grounds on pressing issues to be
solved in close cooperation between the private and public sector. Elected
7
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representatives will form a task force in order to tackle agreed priorities. One
objective is to better respond to diverging interest and to agree to priority areas.
carry out detailed sector value chain analysis
FTA dealings to be complemented with parallel realistic sector policy development
strategies measures in order to upgrade some of the analyzed short comings
The government to establish a fine tuned approach between urgently needed import
substitution and export growth across the sectors
CIEM (Central Institute of Economic Management) and other suitable private/public
institutes or organizations to execute overall and detailed base line studies in selected
offensive and defensive key sectors The analysis should cover the micro, meso and
macro level implications
Objectives and expected benefits are to describe and encompass value adding
functions, bottlenecks and economic as well as organizational potentials in the sector
Concerted realization of FDI promotion amongst industrial associations in the EU
countries, initiated by economic councilors in the Viet Namese embassies
Sector associations should be strengthened and better integrated as representative
body and service provider to Vietnam´s meso landscape
Improve export and trade fair promotion for the various sectors in EU markets
Conduct profound sector investment analysis, which are based on value chain
analysis.
Government to implement a “one-stop-shop” concept for EU investors and business
partners
List of acronyms
EU
SME
SWOT
European Union
Small and Medium Industry
Strength, Weakness,
Opportunities and Threats
analysis
Cutting-Making-Trimming
Completely knocked down
Original Equipment
Manufacturer
Viet Nam Leather and
Footwear Association
Free on Board
Asian Free Trade Agreement
Value Chain
Logistics Performance Index
Intellectual Property Rights
Ministry of Industry and Trade
Viet Nam Electronic Industries
Association
PolyVinylCarbonite
FTA
FDI
CIEM
Free Trade Agreement
Foreign Direct Investment
Central Institute for Economic
Management
WTO
CBU
VITAS
CIF
R&D
CSR
SPPP
World Trade Organization
Completely build up
Viet Nam Textile and Garment
Association
European Footwear Association of
Importers and Retail chains
Cost-Insurance-Freight
Research & Development
Corporate Social Responsibility
Salary Purchasing Power Parity
GSP
PU
General System of Preference
Polyurethane
VGCL
LLDC
RMG
SVA
International Labor
Organization
Readymade garments
Strategic Value Added
Viet Nam General Confederation of
Labour
Least developed countries
RAPEX
European Rapid Alert System
BSCI
CMT
CKD
OEM
LEFACO
FOB
AFTA
VC
LPI
IPR
MOIT
VEIA
PVC
ILO
FAIR
EVA
ISO
Economic Value Added
International Standards
Organization
Business Social Compliance
8
SA8000
VDA
CLEPA
ITA
OHS
I.
Corporate Social
Accountability Management
German Automotive
Association
European Association of
Automotive Suppliers
Information Technology
Agreement
Occupational Health and
Safety
QS
Initiative
Quality System
IT
Internet Technology
TEC
Transatlantic Economic Council
ES
Embedded Software Systems
EICC
Electronic Industry Code of Conduct
INTRODUCTION
I.1. History and current situation of consultations between Viet Nam
and the EU
The overall framework of EC-Viet Nam relations is based on the signing of a Framework
Cooperation Agreement on 17th July 1995, coming into effect on 1st June 1996.
On November 25-27th, 2007, both parties agreed on a further agreement with the
objective to further strengthen bilateral relations. The first negotiations of the Partnership
and Cooperation Agreement.
The annul bilateral trade between the EU and Viet Nam accounted for about 13 billion
EUR in 2010. In the ASEAN group of countries, Viet Nam is EU´s third largest trading
partner.
Government and EU resources expect a jump in FDI after the signing of the FTA.
According to the former Minister of Trade, Mr. Truong Dinh Tuyen, EU companies
invested about US$ 16 billion in 1079 investments in the country.
Viet Nam's main exports are textiles, footwear, seafood and coffee. The selected
technology sectors automotive and electronics/mechatronic are partly sensitive
(automotive) or increasingly engage strong competitive pressures
I.2. Market attractiveness of EU-27
According to a survey amongst Viet Namese businesses by the Viet Nam Chamber of
Commerce and Industry (VCCI), 97% of the interviewed companies (scope of sectors is
unknown) opt for soonest possible negotiation of an EU-Viet Nam FTA. The FTA with
tariff cut up to 0% to at least 90% percent of the export items would potentially exports to
27 EU member states, which represents a quite potential market with about 500 million
consumers with largely reasonable but also varying buying power throughout the EU
countries and Russia.
Buying Power of EU countries – including Moldowa, Russia
9
Country
BP per Year
Country
BP per Year
Country
BP per Year
Liechtenstein
32.203
Spain
12.997
Serbia
3.573
Luxemburg
22.331
Greece
12.447
Bosnia
3.306
Switzerland
19.658
Slowenia
11.614
Mazedonia
3.163
Austria
17.531
Portugal
11.115
Ukraine
1.853
UK
16.710
Malta
10.158
Belarus
1.815
France
16.706
Czech
Republic
8.265
Albania
1.482
Norway
16.559
Hungary
7.805
Moldova
783
Belgium
16.260
Lithuania
7.197
Germany
16.207
Poland
6.949
EU- Average
14.255
Italy
16.162
Croatia
6.313
Reference:
Ireland
16.050
Slovakia
6.267
Netherlands
14.696
Estonia
5.963
Iceland
14.687
Latvia
5.632
Sweden
13.975
Romania
4.567
Finland
13.886
Bulgaria
4.313
Denmark
13.634
Turkey
4.257
Cyprus
13.167
Russia
3.750
 Net Income + transfer
payments by government to
households
 Purchasing power adjusted for
price, with consideration of
living costs and different price
levels in the countries
Source: www.krone.at, 2011
The EU is Viet Nam´s second largest export partner with 16,6% of total exports and sixth
largest import partner with 7,1% of total imports. 4
It can be observed that there are current ambitious efforts of Viet Namese government to
enter in FTA negations with numerous countries and to promote worldwide trade.
Although Viet Nam seemingly prioritizes such newly initiated and intensified
negotiations and trade agreements, the Viet Namese government should be aware of the
expected benefits of the FTA with the EU. Bilateral trade, exchange of technology and
FDI is likely to further improve considerably throughout the researched sectors at
different levels and different intensity.
I.3.
Lessons learnt from WTO accession
CIEM5 summarizes some shortcomings after three years WTO accession and lessons
learnt. Post-WTO shortcomings were determined as follows:
 In policy making (to help create a sustainable environment for socio-economic
development, practical implementation of ambitious master plans)
 Lack of inter-ministerial coordination (“one face to the customer”)
 Low competitiveness of nation, enterprise and products (ASEAN benchmarking)
4
5
http://trade.ec.europa.eu/doclib/html/113463.htm
CIEM/Center for Information and Documentation, working paper 1-2010
10
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Inadequacies in FDI attraction (even though FDI disbursement levels hold steady
with target of US$ 11-11.5 billion, according to official sources6)
Rising social inequality
Interestingly, some of the issues mentioned were again prominent and on the agenda in
the consultant´s discussion with sector representatives.
On contrary, Viet Nam News, issued on 9th December 2011 reports about a research
among 3.300 Viet Namese small and medium enterprises by the Viet Nam Chamber of
Commerce and Industries in sectors including construction, textile/garment, agriculture,
seafood processing, electronics, pharmaceuticals, engineering, banking and real estate.
After four years of Viet Namese WTO membership 80% of the interviewed companies
commented on positive business development with higher profits and increased
sales/exports. 9% reported unchanged figures while 8% experienced unstable revenue
and 3% witnessed declines. The survey also revealed that the non-availability of market
information was the largest obstacle for most companies.
Summing up, trade agreements potentially increase business and improve national and
international competitiveness. Open markets stimulate social progress, enable sharing of
ideas and policies, support introduction of new technologies and its diffusion within the
sectors. Protective measures, such as introduction of technical barriers, hampering
importation of luxury cars from the EU or barriers in intermediate services (nondiscriminatory and discriminatory) can be impeding for free economic development of
sectors, aiming for increased competitiveness.7
Improving efficiency and international or national competitiveness often requires
pressures from markets and competitors. Protectionism and setting up of additional nontariff and technical barriers to protect volatile sectors or subsectors also cultivates a
culture of insulation within global competitive developments and impedes innovation and
renewal.
I.4. Other bilateral free trade agreements
Besides the attempts to start negotiating the FTA with the EU, Viet Namese government
is involved in numerous worldwide dealings of FTAs, bilateral trade arrangements and
partnership agreements.
Reference and more in-depth information of current status of proceedings and expected
impact on the Viet Namese economy is provided in the document `Regional integration
and opportunities/challenges for Viet Namese businesses` by Dr.Claudio Dordi and
Frederico Lup Pasini / 2011.
II.
BACKGROUND OF STUDY
Analysis of the impact or potential impact of the FTA on specific sectors has been carried
out in a number of other micro/macro economic impact studies, such as activity code
FTA/HOR/2010. This present study aims for more detailed considerations related to the
sectors including Textile, Footwear, Electronics and Automotive. It identifies the current
sector situation and supply chain issues and comments on sector´s viewpoints regarding
6
7
Viet Nam News, November 28th ,2011
The Kiel Institute for he World Economy/Germany, working paper 1293
11
the EU-VN FTA. It comments on recommended parallel SME policies and
recommendations for improving attractiveness to foreign investors and to satisfy the aim
for increased added value along the value chain. The study also itemizes technical and
non-tariff barriers and adherence to required standards, in connection to the researched
sectors. The study also reveals strengths and weaknesses and critical success factors of
the four sectors. It evaluates factors related to competitiveness and market attractiveness,
also in the light of trade with the EU.
III.
METHODOLOGY OF RESEARCH and SECTOR SELECTION
III.1. Sector analysis methodologies
The traditional approach on value chain analyses aims for upgrading of companies or
sectors with view to internal sector development, to external sector links as well as the
market place. Such analysis requires reliable data quality and objective input related to
generic actors (e.g. input providers, producers, logistical support structures, traders and
sales outlets, final consumers), involved channels (e.g. research and F&E, producers,
tiers, processing companies, industrial clusters with supply and service management,
importers, exporters, retailers, consumers). Required data for analysis
include
statistically valid research at company and market level, such as number of players in the
value chain, number of jobs or wage sums, volume of production and import of supplies,
bottleneck information, costs/unit, distribution of costs within the chain, input providers,
primary producers, logistic centers, distribution and final consumers. This information is
required in order to be able to at least identify the value added, loss factors and profit
margins within the chain and to objectively identify intervention points along the
corresponding sector value and supply chain.
The view on global value and supply chains often only indicates integration of local
production in global markets. These are often coordinated by certain lead firms.
Perspectives of global value chains are result of industrial and contractual relationships in
the area of supply management, production, processing and marketing of products and
services on a global basis8.
In the view of a global perspective, as indicated by the FTA between the EU and Viet
Nam, the value and supply chain approach implies that trade, exchange of technology and
manufacturing are organized across borders. It also implies that main Value Chain (VC)
actors are often located far away from the origin of the product.
Ideally, the following steps are performed according to data availability:
 VC mapping (visual representation of the value chain system, identifying the
main business operations or functions, chain operators and linkages as well as
chain supporters)
 Quantifying and describing value chains in more detail (attaching numbers to the
basic chain map, e.g. actors, volume of produce or market shares. Zooming in on
specific issues of interest or connected to FTA factors, such as characteristics of
actors or political, institutional or legal framework conditions enabling or
hindering the chain development
8
UNIDO / Humphrey and Schmitz 2008
12


Only limited information available and seemingly complicated “netting” of
jurisdiction and responsibilities
Economic analysis of value chain (assessment of chain performance in terms of
economic efficiency, value added along the stages, production costs, income of
operators. Another aspect is transaction costs/costs of making business. In the
best-case such economic analysis can be benchmarked against other competing
countries in the ASEAN region.
Even though most required, the economic analysis cannot be performed because
of non-availability of reliable information or no information at all.
Constraint analysis (prepares formulation of an upgrading strategy – on macro or
micro considerations.
Constraint analysis will be limited to potential interventions related to the FTA
environment.
(source and methodology: GIZ ValueLink approach and own adjustments)
For inquiry of the minimum required economic information on value chain input/output
factors, a predetermined cross section of VC operators need to be visited and interviewed.
This includes analysis of:
 Suppliers of raw material and sub-products, defined according to sector and
subsector requirements and origin of supply.
 Manufacturing companies, representing pre-defined subsectors within each
selected main industrial and service sector; furthermore differentiated by company
size and location, reflecting and representing the different supply stages or tiers;
differentiation between local and foreign supplier and OEM company. All
together a few hundred visits in each sector will be required in order to get a clear
and founded layout of the value chain operators.
 Trading companies and sales outlets (according to the sector-typical marketing,
local sales and export organization and orientation.
 Service sector, business services, associations, with specific view to each sectors
reality (e.g. certification institutes and companies, banks, BDS suppliers, business
associations).
In the light of this study, focus is on both, the production-driven approach (e.g. high
capital intensive and more sensitive sectors) and the buyer-driven approach (e.g.
commodity products, CMT, subcontracting and low capital operations). Observations on
buyer driven commodity chains include the Textile/Clothing and Footwear VC. The
objective of this study is not related to tangible or non-tangible chain upgrading activities,
but to focus on whether or where cooperation arrangements or trade facilities from Viet
Nam into the EU and vice versa may be favored by the FTA between Viet Nam and the
EU.
As basic and advanced data on company and sector level is hardly available, a more
practical and simple approach was selected in order to cover four sectors in the available
time frame. Additional micro level data, such as profit margins, added value of VC
operators, etc. would need to be collected by separate baseline studies, including
extensive visits to companies in all sectors in the regions (1-4), to tiers or sub-suppliers.
Asian FDI, being major players and producing most of the sector output, specifically in
the automotive, electronics and partly the footwear sector are very restrictive in providing
sensitive information. The Viet Namese administration and sector associations do not
possess information about cost structures, profit margins, cost structures and value adding
within the supply chain. The vice president of the leather and footwear association
13
mentioned that such information can only be gathered when visiting companies and based
on long standing trustful relationship between interlocutors.
The study will be based on 3 qualitative analysis methods, supported by quantitative
information, if available:
Value chain plotting/supply chain analysis. The analysis shall focus on:
 Qualitative issues, supported by available quantitative information
 Value chain stakeholders in the sectors
 Main value chain actors
 Business linkages between suppliers and known existing international alliances
 other supply chain issues
SWOT analysis of the current sector and possible consequences to the FTA:
Reflecting the Strength, Weakness, Opportunities and Threats linked to the sector,
supplemented by remarks in respect to potential FTA topics from an Viet Namese and
European view point.
Analysis of important success factors:
Disclosing important preconditions for the sectors to positive development, upgrading
and successful trade.
III.2. Sector selection
Selection criteria:
The selection of sectors in focus for most successful in and outbound trade after the
introduction of the FTA have been analyzed and determined in former studies. According
to the report on `Impact Assessment of Free Trade Agreements on Viet Nam`s Economy`
- Activity Code: FTA-HOR, sectors are identified as:
- Products of interest to Viet Nam
- Products with revealed comparative advantage
- Products with revealed comparative advantage in the manufacturing sector
- Challenged sectors
Only sectors with comparative and competitive advantage, either based on strategic or
economic consideration will be able to utilize long term advantages deriving from the
FTA, in both, subcontracting or value adding manufacturing and export to the EU.
The textile and footwear sectors, offensive in the view of trade agreements, are already
very successfully exporting to the EU. The automotive and electronic sectors remain
defensive, even though medium to long term sector strategies intent to upgrade these
sectors and improve export capability and competitiveness.
Sustainable SME and sector development calls for upgrading in various competitiveness
factors in order to prevent the ´middle income trap´ and growing dependence from low
salary subcontracting.
14
Some of these success factors are:
 Comparative advantage in the manufacturing sector
 Comparative advantage in price calculation and net profit margin
 Potential of creating additional value while integrating supply chains
 Level of standards (social and environmental compliance – CSR) to be attained
along a specified roadmap and time frame
 Potentially existing reserves and benchmarks for increasing and improving
indicators, such as: competitiveness, benchmark of quality level of product and
services, productivity, administrational procedures in view of lead times,
adjustments in design and raw-material mix requirements, marketing intelligence
efforts, access to finance, shipment and infrastructure, labor and training9
 Considerations and achievable advantages related to local and international value
chain and supply chain options, including improved integration of national supply
chains
 Existing and potential national, ASEAN or EU markets, suitable for existing product
ranges, content and objectives of existing or future (without or with FTA)
cooperation between EU and Viet Namese companies and services. Without doubt,
EU originating and other FDI or cooperation is based on expected specific
advantages for those companies investing capital in Viet Nam (win-win)
IV.
SECTORAL ANALYSIS - VIET NAM
IV.1. International competitiveness of Viet Namese export sector –
focus to EU trade:
Competitiveness factors of Viet Nam´s export industries:
Competitiveness in export sectors becomes an increasingly important success factor.
Only when becoming more competitive, by increasing turnover, which is backed up by
added value and increased profit margin, forward oriented investments and innovation
will be possible.
The system map of competitiveness factors consists of interacting interventions in the
macro, meso and at enterprise level and includes the following driving forces:10






9
Capital accumulation – investment in process, R&D, production and marketing
Product innovation – introducing new products and innovative design with
attraction within supply chain and EU clients
Process innovation – introducing new production and value creating processes
Marketing focus – concentrate efforts to new market trends and adapt to EU client
requirements
Supply and services – optimize input supply, such as energy, business
development services, financial services
Business environment – optimize transactional costs and infrastructure, strengthen
export promotion services, improve access to finances, intensify public and
private dialogue platforms related to export
Report Activity code FTA-HOR, page 102
Europaid, Trade and Private Sector Policy and Development, 2010
10
15
Logistics and transport infrastructure:
A comparison of the logistics performance index (LPI) for Viet Nam and other Asian
countries 11 ranks Viet Nam in terms of logistics and trade facilitation on global basis
overall at position 53 and for the timeliness of logistics at position 65. The high score 5
denotes the best rating, which is let by Singapore. These evaluations do have impact on
Vietnam´s attractiveness toward post-FTA EU based FDI providers or contractors in the
textile/clothing and footwear sector. Amongst 10 Asian states, Viet Nam ranges on
overall position 7 in the Logistics Performance Indicator.
Logistics performance indicator:
Country
LPI
Customs
Infrastructure
International
shipments
Logistics
competence
Tracking &
tracing
Domestic
logistic costs
Timeliness
Singapore
4.19
3.9
4.27
4.04
4.21
4.25
2.7
4.53
Korea
3.52
3.22
3.44
3.44
3.63
3.56
2.73
3.86
Malaysia
3.84
3.36
3.33
3.36
3.4
3.51
3.13
3.95
China
3.32
2.99
3.2
3.31
3.4
3.37
2.97
3.68
Thailand
3.31
3.03
3.16
3.24
3.31
3.25
3.21
3.91
Indonesia
3.01
2.73
2.83
3.05
2.9
3.3
2.84
3.28
Viet Nam
2.89
2.89
2.5
3
2.8
2.9
3.3
3.22
Cambodia
2.5
2.19
2.3
2.47
2.47
2.53
3.21
3.05
Phillippines
2.69
2.64
2.26
2.77
2.65
2.65
3.27
3.14
Lao PDR
2.25
8
2
2.4
2.29
1.89
2.13
2.83
Source: World Bank, Logistics Performance Index (LPI) /
http://info.worldbank.org/etools/tradesurvey/modela.asp
Added value:
All four sectors have at least one common ground, depicting the current value creation of
the Viet Namese export capable sector operations. Only about 10 – 15% of the total value
produced in the country is manufactured in Viet Nam. Up to 90% of the overall industrial
value created in the four sectors is based on subcontracting, CMT or assembly. In
addition, technology transfer is hardly taking place in subcontracted manufacturing.
It is notable that export similarity of Viet Namese manufactured products with other FTA
partners has increased (COMTRADE database), which also adds to comparability of
production setup, products and services with competing countries. This implicates strong
need to look into additional comparative value added in the future. The generally used
argument on `low cost labor` is not sustainable as medium and long term development
criteria. It is said, that some of the international FDI`s from ASEAN countries are
purposely setting up operations away from industrial zones and major cities in order to
save labor costs. It is doubtful that full control of adherence to existing labor laws and
other standards are warranted.
11
EU report, project No 2007/146105 `Economic Integration and Viet Nam`s Development`
16
Quantitative information in terms of value added by VC actors with input costs and
output prices are not available. Such analysis seemingly has not been conducted in the
past. It was confirmed by interviewees that it is difficult to have access or receive
information from companies.
Raise of per capita GDP in Viet Nam: From the year 2000 – 2008, GDP per capita rose
continuously. Vietnam´s GDP per capita already surpassed the threshold level for lowincome countries, which may have impact on medium to long term on competitive CMT
capabilities (clothing sector being manpower intensive). This calls for a longer term
technology upgrading and resuming of own production and marketing into the EU,
besides the already strong and still growing CMT sector.
It can be assumed that the salary component is consistent with the increase of per capita
GDP. Further pressure to salary increases are the fast raising inflation rate of currently
18,5% in October 2011 compared to 10/2010.
20,000,000
18,000,000
16,000,000
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0
GDP per capita in VND, 2000-2008
(USD) - not corrected for inflation
2000 2001 2002 2003 2004 2005 2006 2007 2008
(source: VUFO and GSO data)
Country
USD
Group Rank
(SPPP)
World Rank
(SPPP)
Singapore
36.537
1
4
Japan
39.727
2
20
South Korea
17.078
3
26
17
Malaysia
6.975
4
49
Thailand
3.894
5
80
China
3.744
6
83
Indonesia
2.349
7
106
Philippines
1.745
8
110
Viet Nam
1.052
9
113
Lao
940
10
125
Cambodia
677
11
131
Source: World Development Indicators/Viet Nam Competitiveness Report-CIEM, 2010
SPPP= Salary Purchasing Power Parity Calculator)
It can also be assumed that growth of GDP per capita is also connected to national and
international competitiveness of the economy, especially in higher value creating and
technology minded sectors, such as textile (not garment) industry, automotive and
electronic sectors. Increasing sector competitiveness, upgrading trained labor in middle
income ranges and improvement of business environment, besides others, will also
provide positive FDI and supply chain integration impulses, supported by FTAs and other
trade arrangements.
Innovation as competitive benchmark12:
Besides other competitiveness benchmarks, it is the spirit of innovation, which boosts
new developments and makes companies unique. Branding of consumer products,
patents, trademarks and intellectual property rights are providing long term added value
to the innovation sources. The Viet Namese culture to `imitate rather than innovate` and
the IPR infringement does not improve the country`s image nor does it support
competitiveness. Missing own innovation among all the key industrial sectors creates a
defensive culture, which does not endorse creativity in product development and
technological improvement. In the EU, the number of patents registered in the various
innovative sectors is one of the economic indicators. Innovation is the key differentiator
for Europe.
Besides the legal aspects in non-compliance with WTO rulings on trade related issues to
Intellectual Property Rights, image and own innovative culture has negative impact to
trade partners and impedes value adding development of own brands, designs and
technologies.
IV.2. Automotive sector
IV.2.1. Sector background in Viet Nam
Car sector information:
According to information from the Viet Nam Automobile Manufacturers´ Association
(VAMA), the sector comprises of the following key data :
12
Input from Eurocham
18
Compared to other ASEAN states, such as Malaysia and Thailand, the sector is rather
small and does not reflect the same importance on GDP. The automotive sector is
considered sensitive in terms of import restrictions and protective measures and is partly
excluded in current trade agreements. It is the most protected compared to the other
ASEAN states.
In 2009 only 25.480 cars were locally produced. China produced in the same time almost
14 million units13. Thailand holds about 7 out of 11 of the largest car manufacturing
plants in Southeast Asia with annual production capacity of about 1.4 million vehicles.
The remaining 4 plants are located in Indonesia and Malaysia with an annual capacity of
about one million units.14
The three top car markets in ASEAN are Thailand (8.1% of GDP, about 1 million units
production in 2009, export rate at about 55%), Malaysia (489 tsd units in 2009) and
Indonesia.
The sector employs at least 60.000 people. Considering that ASEAN import tariffs into
Viet Nam will be abolished in 2018, action of the local automotive industry will be
important in order to prepare for expected strong inflow from other ASEAN countries.
Under the umbrella of taxes and tariffs, the local market for domestically assembled CKD
units (complete knocked down) was able to grow15.
The preparation for the expected increasing competitive pressures calls for more local
content, technology application and stronger integration of supply chains for foreign
OEMs. This scenario favors integration of the automotive sector in the FTA. It also calls
for strong engagement of the Viet Namese government to facilitate CBU (completely
build up / imported new or used cars) and CKD. Lead times for investment in the
automotive sector are critical to build a strong basis for the sector until the lifting of
protective tariff in the ASEAN arena.
It is unlikely that Viet Nam will be very successful in short to medium term in
international production/sales of passenger cars, except when following the model of
assembly for foreign OEMs. Added value can be created through higher and by
integrating supply chains. The FTA can be a positive contribution to help the sector to
overcome increasing competitive pressures.
According to the Deputy Minister of Industry and Trade, Mr. Le Duong Quang, the
development targets 2010 set in the Prime Ministerial Decision 177/2004/QD-TTg, dated
5th October 2004 (automotive sector development plan until 2010 with outlook to 2020),
Viet Nam only reached the goal of spares and car export revenue by FDI companies.
About 90.000 completely built units (CBU) stand against only 25.480 locally assembled
cars in 2009.16
EU based OEMs are not only looking into cheap labor or (potential) tariff reductions.
Cheap labor and tariff reductions only are not the warrants for sustainable growth of
investments in Viet Nam. They take a strong consideration into infrastructure, investment
13
MUTRAPIII report/Actity code FTA-9EU/Quantitative and qualitative impact analysis, 2011
MOIT
15
Eurocham
16
Viet NamNet, 29.11.2011
14
19
conditions, availability of technology, capability to green production, environmental and
social standards, etc.). This fact endorses the extremely important necessity for FTA
complementary action by government to support development of the automotive sector.
Protective measures will not have much impact on technology transfer and will not result
in strengthening the supply chain.
The sector can play an important role in Vietnam´s strategy to upgrade from dominance
of low income, high labor intensive industries towards middle income, capital intensive
and technological environments. As the car sector will face strong competitive pressures
after 2018 (AFTA), when tariff rates are expected to be reduced from 29.2 to 3.8%. It is
not expected that the sector will be able to competitively export manufactured units to
great extend until AFTA 2018 comes into force. Strengthening the local market base for
local cars might reduce the risk of losing market share with increased import pressures
from AEAN countries. Increased efforts of tier production will add local content to FDI´s
already overwhelming market power.
The following statistical information about the car sector from the “Industrial Policy
Department at the MOIT / Project to develop the automotive sector in Viet Nam until
2020/November 2011”. The information does not include the motorcycles subsector.
Number of companies involved in the automotive:
Year / Number of companies
2000
2005
2007
2008
2009
177
377
328
392
397
Increase
Increase
per year
per year
2001-2005 2006-2009
16.3%
1.36%
Source: MOIT 2011
Contribution of manufacturing companies to sector output (%):
120
100
80
60
78.16
80.31
69.04
66.21
Private
GoE
40
20
FDI
24.3
25.6
11.34
6.66
8.2
yr 2005
yr 2008
8.18
8.35
13.66
0
yr 2000
yr 2009
Source: MOIT, 2011
20
Total number of cars registered in Viet Nam:
Type of Vehicle
Total
2009
2010
1,510.891
1,624.406
Registered cars according car type (%)
9-seater
42,50
43,71
10-seater
9,10
7,65
Trucks
41,87
43,34
Special vehicles
3,99
1,33
Others
2,56
3,96
Source: MOIT, 2011
Export spare parts:
Country
2008
2009
2010
Japan
731,17
634,29
871,14
USA
173,65
192,43
315,69
China
12,74
40,26
59,45
Thailand
36,99
31,65
52,36
Indonesia
16,94
19,46
28,60
Korea
8,59
21,19
28,27
United Arab
Emir.
2,63
9,22
18,68
Singapore
11,43
12,95
18,44
Canada
5,03
8,05
15,10
Others
106,69
124,55
200,07
1.098,10
1.076,77
1.574,01
TOTAL
Source: MOIT, 2011
MOTORCYCLES:
Especially the small displacement motorcycles in the 125cc category are essential in the
life of Viet Namese, but also Asians in general. Market grow in Latin America and Asia
and remain more stagnant with only small growth rates in the US and Europe. In Europe,
due to the inclusion of 125cc categories in the car drivers´ licences, small 2-wheelers,
specifically scooters become increasingly interesting for young people.
The market is dominated by five international FDI brands, which are assembled in Viet
Nam. The following international brands are present in Viet Nam (according to size):
21
Market leader: Honda; 2.Yamaha; 3. SYM (Taiwanese); 4.Piaggio; 5.Yamaha.
For the sector’s planning and monitoring requirements, information is not available at
official sources, such as market forecasts, information to market shares, sales and trend
information, etc. The 5 players exchange basic market information. Each of the
companies decides on their specific market approach. Piaggio successfully entered the
market in an upper price market segment (target price approx. US$ 3.500, compared to
the more basic mass marketed 2-wheeler at around US$ 2.000). New trends, such as
scooter designs, etc. open new profitable market segments. The total market size in 2010
was around 3.5 million 2-wheelers. In 2010 about 30.5 motorbikes were registered and
running in Viet Nam.
The positive expectation to future growth of the sector is confirmed by HONDA´s
investment plans with the doubling of production capacity in the next few years.
The Viet Namese market of 2-wheelers is about 200% of the size of he EU motorbike
market, even though both markets cannot be compared due to eminent different price
levels and models sold.
Viet Nam is worldwide number four in annual registration of motorbikes:
Country
China
India
Indonesia
Viet Nam
New Motorbikes /
Year
70 million
10 million
10 million
3.5 million
Source: Piaggio
To sum up, especially the local car sector faces great future challenges. At current stage,
the sector can be described as low technology, low production volume with
corresponding high production costs. Viet Namese automotive car sector faces potential
pressure from many competitive producer countries in the neighborhood17.
The policy environment is rather protective with high tariffs. It has been excluded from
ASEAN and ASEANplus FTAs up to-date. The government made commitments to
abolish product exceptions until 2018. This will increase competitive pressure from Asian
car producing countries further and there will be either adaptation to minimum
competitiveness through larger scale production, partnerships, etc. or a rather likely
further reduction of the sector.
Manufacturing hub Viet Nam for motorcycles:
The motorcycle sector is competitive and has export potential. Due to the lower
technology requirements and lower unit costs, local tier can develop and strengthen the
local value and supply chain. As tariff was increasingly abolished or reduced in various
trade agreements in the ASEAN region, large Japanese motorbike OEM do not consider
it economically viable to install production sites in each potential market. Due to more
equality of tariff, other factors are more in the focus for location of their industry.
Duplication of production units is seen more critical and is not always economically
viable. Exceptions are OEM brands with high country volumes or the requirements of
adapting to specific technical country standards.
17
EU report, project No 2007/146105 `Economic Integration and Viet Nam`s Development`
22
In general terms, attractiveness of a Viet Namese hub increased, also under the ASEAN
free trade area after 2018 perspective. However, there are still a number of serious
obstacles that prevent stronger consideration of the Viet Namese hub, such as business
environment, high transaction costs, customs delays and high cost of transport.
Current and continuing conflicts and disadvantages in other countries do not favor
investment (India-high costs, China-strongly regulated, Indonesia-general safety,
Thailand-political unrest).
IV.2.2. Supply chain and analysis of the Viet Namese automotive sector
General remarks:
Labor force: According to “impact assessment of free trade agreements on Vietnam’s
economy”, employment of unskilled labor did not notably increase in the automotive
sector. However low labor cost has counter effect of low payment for white collar
technical and managerial positions. This does not endorse successful employment of
higher skilled labor for administrative, marketing and production management positions.
Economy of scale effects: the cost structure in automotive manufacturing is much
impacted by missing positive economy of scale effects. Generalizing, VAMA comments
on high fix cost due to low production output as being one main competitive
disadvantage compared to other ASEAN states and China. Cost benchmarking is difficult
due to the complexity of comparing between similar industries. Increasing requirements
on product differentiation will have negative effect on economy of scale expectation.
Niche specialization to smaller market segments can be helpful to counteract negative
economy of scale effects. It is unlikely that Viet Namese manufacturers will be
competitive at large mainstream output level and corresponding positive economy of
scale effects. Large producers are more reluctant to enter small size low cost markets.
The production quantity per production line should be at least 50.000 units in order to
attain some economy of scale benefit.
Supply chain integration and added value: There are no national Tier 1 or Tier 2
suppliers in the country who can supply systems or subsystems to foreign OEM car
manufacturing companies who run assembly lines in the car sector in Viet Nam.
The German system supplier and tire producer Continental (Schaeffler Group), who is
one of the largest high technology system and component suppliers to the automotive
industry in the EU, is currently executing feasibility studies on possible investment in
Viet Nam, likely to aim for Tier 1 or Tier 2 supplier positions.
Japanese car manufacturers, such as Toyota, support their main preferred suppliers to
invest in countries, such as Viet Nam, where they are already involved in car assembly.
Such common procedure does not help to create added value to local/regional/national
manufacturers of automotive parts in the country. Local supplier´s integration is crucial
for future development.
Currently, the main value is in the production of spare parts for the aftermarket, with
special focus to motorbikes.
The localization ratio for some of the local motorcycle brands is higher. Some of the
motorbike producers use up to 80% local content and up to 60% for engine parts.
23
Sector association: VAMA represents seven international car manufacturers that are
presently operating in Viet Nam and ten Viet Namese car manufacturers (Attachment
03:VAMA association information).
Ideally, the sector association would remain independent, in order to maintain a high
degree of neutral and objective views on sector development. Currently, the association
and some of the executives are linked with Toyota. This is not an ideal precondition for
independent and strong representation of the whole sector.
24
Mapping of automotive sector value chain:
Motorcycles
Local aftermarket
OEM supply
> 500 Village and household
workshops  Spare Parts for
local market motorcycles
Approx. 400 small SME / micro
village workshops of all tier for
OEM part, component and
system supply
Unknown number
of local companies
producing
unbranded
motorcycles
5 Joint Venture or
100% FDI enterprises
TIER 3
Parts,
material,
accessories
TIER 2
TIER 1
(Sub)Components
(Sub)Systems
OEM
Assembly
vehicles
17 Joint Stock
FDI companies
250 local producers
for aftermarket
(spares, services)
Local aftermarket
50 foreign SME –
preferred FDI
suppliers from
Japan, Korea,
Taiwan
+ backward linkage
sub suppliers
(number of comp.
unknown)
2 Local
companies
NO local suppliers
in Tier 1 and Tier 2
position.
German company
Continental
researching
opportunities
Potential
OEM supply
Constraint
Cars
25
Comments to automotive supply chain mapping:
 The automotive supply chain is not locally integrated. More than 90% of raw
material and pre-products imported from Asian countries.
 A typical small motorcycle consists of about 500 individual parts, which are to
great extend imported from different international suppliers.
 Profound information on profit margin and value adding by VC operators is not
available. Profit margins at Tier 1, OEMs and motorbike dealers are highest in the
VC. Profit margins are supposingly in the region of 5-10% on tier level. Tier 1
preferred supplier realizes better margins. Tier 3 margins are less depending on
OEM and Tier 1 operational profits. Tier 3 suppliers have the potential to earn
well. They can deal with a variety of products that enables them to sell to several
tier 1 or 2 and to several OEM. They may operate in local after sales market as
well as international markets. Their benefit may be either advantages in exchange
rates in international business, or a high degree of business flexibility with only
loose connection to one brand OEM. Tier 2 suppliers are under increased pressure
due to pressures from both sides, forward and backward linkages.
 In terms of external trade, the Viet Namese strength seems to be more in the
motorcycle than in the motorcar subsector (middle range technology, potential
higher degree of local content. Focus to spare part, after sales service and
maintenance business. Strong market growth and increased product segmentation
(fashion trends in motorbikes, such as high end scooter, etc.) and the growing
market size for re-purchase of motorcycles , spare parts and maintenance.
 Weakest point in the supply chain is the total absence of local Tier 1 and Tier 2
suppliers for automotive/cars, whereby higher local content is reached in the local
production of motorbikes.
SWOT analysis:
Internal
Strengths
 Motorcycle production and
functioning local tier 1 and tier 2
producers
 Low labor costs
 Technology minded workers






Weaknesses
No local tier 1 and tier 2 companies in
the car manufacturing subsector
Supply chain (infrastructure, raw
material, technology)
Availability of support technology
(all production machinery and
equipment imported)
Human resources in middle
Management (technicians, manager,
marketing)
Not able to take advantage of scale
effects due to low output
Low engineering and technical
capabilities required to perform to
good standards of QCD (quality, cost,
delivery)
External
Opportunities
 FTA ASEAN with potential of
regional hub

Threats
New presumptive VN legislation
about compulsory recruitment of Viet
26
 Political and social stability
 FDI business environment
 2-wheel market the 4th biggest in the
world and positive potential
 Improvement of supply chain (FDI,
1st tier)
 Market well suited for 2-wheelers


Namese personnel
Customs delays
Government imposed policy,
restricting free importing of goods all
ports or airport
Important Success Factors for trade with the EU, stronger local supply chains,
higher local added value:
The Sector and Industry
Competitive Position of Sector and Strategy
- By specializing to certain systems and
components, focus should be toward
tier 1 and tier 2 position. This might
well take a few years, but the trend has
to be put in motion. If not done so
already, it might be interesting to set
up regular supply chain sector
coordination meetings to find out
about minimum requirements and to
try to increasingly match minimum
technical standards
- The main challenge will be the ASEAN
2018 market opening, and time is of
essence. It might be strategically worth of
considering to concentrate on the existing
strenghts and fortify the competitive
position on specific motorcar segments,
such as 9-seaters, 10-seaters and trucks and
the extension of production of motorcycles
Environmental Factors and Business
Environment
Standards and Certification
- Improve attractiveness for FDI by
promoting positive effects of future
Viet Namese hub to EU system and
component suppliers
- Counteract concerns over corruption
- Improve the national standards
certification service industry
- Regardless the current gap of compliance
toward EU and other international
technical/environmental sector standards,
the sector will not be able to avoid
compliance. The alternative would be the
cut off from the global supply linkage
Conclusions related to FTA dealings:
 Impact of FTA to FDI: It is expected that the FTA will have limited impact to
increased FDI inflow from the EU. European OEM´s do not consider Viet Nam at
current conditions being a high potential and competitive focal point for investment.
Investment decisions also depend on competitive comparison with other neighboring
countries. Exceptions may be foreign investments for tier 1 and tier 2 positions (cars).
Low labor costs and low tariff alone are not the only major driving forces to create
interest of investors, even though reduction of currently 35.3% WTO/MFN 2014 tariff
will increase Vietnam´s competitiveness of the sector in the ASEAN region.
Most important for positive investment decisions are supportive business and transport
infrastructure, suitable systems and process management, availability of skilled labor,
higher degree of supply chain integration and more OEM licensed sub-contractors.
Focus from EU FDI is more toward system and component suppliers than to OEM
27
assembly. FDI promotion from Viet Nam should aim to improving tier 1 to 3
producers in the country, thus building stronger supply base.
 Import and Export under the FTA: In terms of imports, Viet Nam considers
´automotive´ as sensitive and highly sensitive (e.g. import from China / 50% tariff).
Even though, advantages of export to the EU exist due to the GSP benefits (3,5%),
exports in automotive are low (see III.1./1.a.). The FTA with the EU has potential to
improve tariff compared to other countries, if tariff is reduced to 0% for import to the
EU. 18. Until 2008 Viet Nam has realized export to the EU in very small quantities of
after-market products, such as wipers and filters. With FTA in place, import of luxury
cars to Viet Nam is likely to increase, depending on the buying power of well earning
consumers. More imported cars will create further employment in sales and aftersales
service and car maintenance. The representative of VAMA (also Vice president of
Toyota operations in Viet Nam) was not in favour to further opening of the market for
import of European cars. The FTA with the EU with a potential reduction of tariff to
0% for exported cars from Viet Nam, would result in comparative tariff advantage
between 6,5 – 10% for Viet Namese cars compared to other ASEAN states and India.
The low tariff will likely not improve Vietnam´s potential to sell cars to the EU
market, because low cost but high standard cars are already successfully introduced
from Romania, India, China and even from EU manufacturers, thus not providing
much room for Viet Namese low technology units.
 Export of motorcycles: to the EU is not a serious potential (small and very fragmented
market, low potential for small motorcycles, no market growth in the segment, high
packaging and transport costs). Some potential may be the export of spare parts to the
EU. Currently, main exporter of spares to the EU is China.
IV.3. IT and electronics sector
IV.3.1. Sector background in Viet Nam
General sector information:
The electronic industry is one of Viet Nam’s key focus sectors.
The current 10 year master plan calls for national investments of about US$ 8.5 billion.
(Attachment 04 : sector master plan from May, 2007)
Since 2003, the Viet Namese government has put special attention to the sector. In the
scope of the ASEAN Free Trade Area (AFTA), Viet Nam reduced import and export tax
of 755 products imported from other ASEAN countries, including many electronic
products. Export taxes were reduced from 50% to 20%. As it stands, export turnover is
mainly obtained by FDI companies, mostly from Japan and Korea. The share of local
Viet Namese exports in this sector is negligible.19
The turning point for the sector was the AFTA implementation and WTO adherence.
According to AFTA/1st June 2006, Viet Nam cut import tax rates on ASEAN electronics
complete sets to 0-5%. The competitiveness of the local electronic industries for local
market supply was under pressure.
18
19
Regional integration and opportunities/challenges for Viet Namese businesses, Claudio Dorti
VNEX, Viet Nam Export Portal
28
Up to date, little investments have been made by EU FDI companies, except for Siemens,
Schneider and Phillips. EU companies in Viet Nam see the trans-ASEAN trade
perspective. Electrolux set a positive example by integrating local producers step-by-step
into their production process of household appliances.
According to Viet Nam Economic Times/11.2011, investments of mainly Japanese
electronics companies in Viet Nam are booming. In 2011, Panasonic Viet Nam
announced his long-term commitment to Viet Nam. It is building a new component plant
and extents its assembly line for white goods and plans to open a home appliance R&D
Center. Panasonic´s total investment is about US$ 224 million. Nokia plans to extend its
mobile phone assembly with an investment of US$ 280 million. Samsung Electronic Viet
Nam plans to invest US$1,5billion until 2020 in a high-techn complex. Sony lately
invested 5 Mio US$ and Canon 3 Mio US$. Main reasons given are: Production costs are
still lower than in neighboring countries, young urbanising labor force with 60% under
the age of 30. Labor costs are 35-45% cheaper than in larger Chinese cities and up to
35% cheaper than in Thailand. Construction costs seem to be up th 40% cheaper than in
Beijing or Shanghai. One main reason for investments is the political and social stability
in the country.
Intel´s investment of US$ 1,0 billion was the lead for following strong FDI inflow since.
These investments are visible indicator that profits are made in Viet Nam, even though
mainly by large foreign companies with little supply backbone in the country.
Government now decided to update the current master plan. Based on current
development indications, the fulfillment of the running master plan seems questionable. It
is criticized amongst the industry that the current master plan does not contain practical
implementation rules, nor does it have much impact on the widening technology gap.
According to VEIA, practical implementation of the master plan does not indicate
whether investments will be made in technology gathering and upgrading, improvement
of SME infrastructure, in supply chain development, skills development, clustering, in
closing the gap of standards, compliance and marketing development. All these and
more support areas would be of importance to increase sector competitiveness for higher
local content in the supply chain. In the same way it would endorse competitiveness
against FDI companies of Japanese and Korean origin and elevate products by local
companies for the local market.
According to information from `The Nation`20, the sector´s goals until 2015 are:
 Ranking list of the International Telecommunication Union = 70
 ICT industry contribution to the country`s GDP = 17-20%
 Coverage of broad band services to communes and wards nationwide, incl. TV
 broadcast technology = 70%
 Nationwide telephone coverage = 100%
Situation of national SME:
There are around 400 SME companies nationwide, many with limited technology base.
Smaller companies invest no more than 0.5% in F&E compared to up to 10% in larger
Asian multinationals, such as the Japanese and Korean FDI companies in Viet Nam. The
FDI multinationals from Japan and Korea determine the market. The local supply chain
integration is low and backward linkages between local SME and FDI companies are
20
Mutrap Report FTA-9 EU
29
little developed. The market share of multinational FDI companies on the local electronic
and domestic electrical applications is increasing and currently at about 60 to 70%.
Samsung´s mobile phone factory has exported for more than US$ 1.0 billion, now being
one of the most successful Samsung mobile phone plants in the world. Samsung invested
US$ 670 million in the plant, which was opened in April 2010. The mobile phones are
exported to 52 countries. This success story indicates the availability of well suited labor
for assembly of electronic technology. Again, local content is minimal and local value
added is negligible.
Technology transfer from Japanese and Korean companies to the small local SME`s does
not happen at large scale. According to Viet Nam Business News21 and according to
VEIA (Viet Nam Electronic Industries Association), the situation of the local SME ICT
sector is looking bleak and companies are disappearing or stagnating. Local enterprises
with production of consumer electrical products, health care products, power
transmission systems, industrial electronics, communication and energy saving products,
such as Viettronics Dong Da, Tan Binh, Thu Duc and Bien Hoa, originally well
introduced brands, have reduced their operations or slowly disappeared from the market..
Sector association:
Representation of the manufacturing sector companies is weak. Amongst the 150
members of the association are five associate members (FDI companies, mainly of
Japanese and Korean origin). Only about 20-30 members are SME production
companies. More than 100 members are trading companies only.
IV.3.2. Supply chain and analysis of the ICT sector
General remarks:
Value added:
Added value remains low for local ICT SME. FDI companies do not open for more
sourcing from local sources. They import most parts and accessories to assemble.
They mainly use cheap labor and cheaply leased land. In 2010, Viet Nam exported about
3.4 billion US$ ICT goods, with only estimated 5-10% locally added value.
Viet Namese companies do not possess skills and technology to produce high level
technology products.
The sector has potential to develop software on small scale under license (e.g. embedded
software) and to produce product casings, cables and connectors and other low tech
components for white goods.
Local and foreign markets:
The export turnover in 2010 amounted to US$ 3.6 billion with almost 98% of the export
turnover coming from foreign-owned companies in the country with low return rate to
local industries.
Domination of FDI from Japan and Korea on the local market is extremely high. Close to
100% of the product groups 1-3 (see mapping) are sold by large brand producers with
added value no more than 10-15% (housings, cables, etc.).
21
Viet Nam Business News from 25th November 2011
30
Software development, including embedded software for automation systems, home
security and smart devices could be a potential of increased input by local software
programmers.
Mapping of IT and electronics sector value chain:
Provision
of inputs
Production
of ICT products
Sales and
Marketing
4 product groups:
Product group 1:
White goods
(household appl., etc.)
FDI
90-95% of
export output
and 60% of
local market is
dominated by
FDI
Product group 2:
Video/Audio/Visual
(TV, Radio, etc.)
Product group 3:
Professional electronic
products
(automation and media
applications, housing
security, building mgt
systems, incl. embedded
software and smart devices
Product group 4:
Software
development,
including
embedded
software under
license
15 big players besides smaller FDI. Biggest are: Cannon, Fujitsu, Panasonic,
Sony, Samsung, Intel
400 SME, mainly in product groups 1 - 3
Local SME
Export
Local Market
98%
100 %
Product group 3
Product goup 1
Product group 2
% unknown
Product group 4
Added
Value in
the VC
Import rate
(%)
Product groups 1-3:
5-10%
Product group 4:
20% licence software
locally produced
Potential!
Along the product groups at least 80%
31
SWOT analysis:
Internal
Strengths
 Young and skilled labor
 Favorable FDI investment legislation
 High potential at local market with
growth rate
 Stable political and social conditions
 Production costs in VN are lower than
in neighboring countries
Weaknesses
 Locally available technologies lagging
about 10-15 years behind
 Low impact of association to the
industry and no access to FDI
companies
 Small scale local production
 Lack of locally produced products
 few branding efforts only for new
products
External
Opportunities
Threats
 Chances exist in engineering
 FDI companies do not see VN as
applications with more value added
technology base but as cheap and skilled
labor assembling pool
 Young people with great eagerness to
succeed
 SME has limited access to finance
 Supply chain opportunities tackled and
 cheaper imports than own production
developed and better communication
with FDI companies
 FDI from China
 FTA with the EU for import of `green
production standards`
SWOT Analysis Summary
Strength:
 In comparison, the labor force is better set than in China.
 The question remains open about what counts more for evaluation of sector success:
total output, production and sales numbers, number of employees (local industry and
FDI), or whether the main viewpoint is related to the future development of the local
SME and its competitiveness
 100 million consumers, 50% young population with increasing buying power and
spending habits
Weakness:
 Technology gap is likely to widen due to fast development of technologies, low
spending on F&E of smaller local companies
Consultants comments:
 In the view of sector economical development strategies, favorable conditions for
FDI are contradicting the practice of FDI´s non-consideration of local resources.
 Specialization to market niches might be useful to cushion the competitive pressure
from FDIs at local market
 Without the technology base and easy access to finance by local SME, free
competition on local and export markets will force out local producers, at least on
high tech production.
32
 The need to strengthen associations and business service providers is eminent.
Important success factors for trade with the EU, stronger local supply chains,
higher local added value:
The Sector and Industry
- Setup cluster for improved cooperation
between local industries with stronger
internal supply network
- Companies to concentrate to their
strongholds and product know-how
instead of continuing to manufacture
wide range of products that are not any
more economically viable
- Strengthen the service sector in
telecommunication, as part of “higher
local content” initiative. Realize that
value creation is not just manufacturing,
but also service provision
Environmental Factors and Business
Environment
NA
Competitive Position of Sector and Strategy
- Strengthening of associations
- Setting up of public/private dialogue
platform, together with FDI with the
objective of improving intra sectoral
communication and to increase readiness
of FDI to intensify cooperation with local
supply chain and to share technology
- Install a national technology research and
transfer entity
- Need for more investment in R&D (0,5%
is not sufficient in a fast moving
technology environment)
Standards and Certification
- Improve the national standards
certification service industry
Conclusions related to FTA dealings:
The sector association and a large local player appraise the FTA with the EU as “not
useful” and even threatening to local producers.
 FDI and trade:
o Representatives of the association make the largely uncontrolled FDI inflow partly
responsible for the decline of local companies. Viet Nam lacks technical skills, puts
low local investment in technology development and is not able to close the fast
opening technology gap. This situation calls for a realistic and alternative sector
strategy.
o The FTA with the EU will likely not attract much FDI in this sector. Some potential
may be in specialist products, licensed software development and medical
applications, which are not yet strongly covered by the consumer product minded
Japanese and Korean companies. The most successful years for FDI in consumer
electronics and white goods have been a few years ago. The low technology base is
not much attracting foreign investors and other ASEAN countries with at least
similar or better tariff conditions and favorable business environment offer
advantages beyond cheap labor.
o Export of Viet Namese electronic products to the EU cannot be expected, and even
less in future with the widening technology gap. Other reasons given are high nontariff barriers, environmental and CSR requirements.
 General issues: members of the association see potential conflicts between EU
companies and Viet Namese SME, mainly in terms of administrational procedures,
process management, strict approach to standards and difference in business behavior.
33
Japanese companies seem to manage the production scene better due to similar culture
and long presence in the country than it is expected with newly involved EU
companies. They also believe that local market saturation does not allow for more
competition, at least in the consumer electronics market segment.
 Technology Transfer and “Green” Production: the sector would like to take advantage
of the ´green´ technology transfer from the EU in order to become more competitive.
Technology transfer from EU companies will not take place without the advantage of
investment in the sector in Viet Nam.
VI.4. Footwear sector
VI.4.1. Sector background in Viet Nam
Sector overview22:
The leather and footwear sector in Viet Nam provides about 670.000 direct employments
and further 500.000 jobs in support industries along the supply chain.
According to a 2008 review by LEFACO, the sector comprises of 825 SME and further
estimated 1.000 small ´garage-producers`.
SME in the footwear sector, according to size:
SME classification
Number of
Companies
Large size, 10.000 to 80.000 operators
20-30
Medium size, 500 to 5.000 operators
200-300
Small size, below 500 operators
Up to 500
The production capacity of about 1600 complete production lines has potential for an
annual output of 800 million pairs of footwear, 120 million handbags, 270 million square
foot of finished leather and 1400 square foot of PVC and PU.
Domestic consumption was only 9% of total national production in 2010, which confirms
that the shoe sector is one of the important export sectors in the country. Most Viet
Namese companies operate on subcontracting and processing contracts, leaving it to
international FDI companies to provide raw material and accessories. About 80% of all
material is imported. Taiwanese and Korean FDI account for more than half of the total
export turnover.
International and national competitiveness of the local footwear production:
 Considering the strong position in EU, US and Japanese markets, the sector is
competitive, although based on cheap labour and basic skills in the shoe production
and not based on availability of raw material, design and own branding
 The subcontracting business model is strongly connected to renown shoe brand
manufacturers (such as Adidas, Nike and Reebok and many others firms from the
22
EU Report on Viet Nam, 2011; LEFASO; Viet Namica
34
US, Asia and the EU) as well as large European and US retail chains with own
private brands. Nike represents about 25-30% of the foreign investment. According to
the source, value added in Viet Nam is about 30% for ladies shoes and 60% for sports
shoes. Leather import tariff is not a factor (approx. 5%) and is avoided through duty
drawback23
 The local Viet Namese footwear industry cannot compete with Chinese shoe
production in the low price sector by reason of high raw material purchase costs,
limited design capabilities and lower overall productivity. Viet Namese footwear
quality is at large better than Chinese shoe quality
 Local producers do not plan ahead for more than one season. EU companies´
planning horizon is at least 2 years ahead in terms of fashion trend and market
intelligence
 Viet Nam`s shoe sector almost fully depends on CMT and local market segments,
which aren`t dominated by Chinese products
Main Export markets of Viet Namese footwear (Million USD):
Market
EU
2007
Value
%
2008
Value
%
2009
Value
%
2010
Value
%
2.176,83
54,50
2.484,72
52,32
2.007,27
49,35
2.403,75
46,93
USA
885,12
22,20
1.075,13
22,55
1.038,82
25,54
1.407,31
27,47
Japan
114,75
2,90
137,58
2,89
122,47
3,01
171,96
3,40
Others
817,54
20,43
1.060,35
22,24
1.060,35
22,10
1.138,62
22,23
Total
3.994.24
100,00
4.767,22
100%
4.066,76
100%
5.122,25
100%
Source: LEFASO
Export of Viet Namese footwear to the EU:
6,000
5,000
4,000
3,000
2,000
1,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: EU Report on Viet Nam, 2011
Export turnover in the last 10 years was steadily increasing. The total share of footwear
export to the EU has declined over the last 10 years from about 75% to about 45%. The
USA accounts for about 27% of the total exports.
23
Mutrap/ Impact assessment of FTAs on Viet Nam´s economy, 2010
35
According to LEFASO, future growth and other fluctuations can be easily balanced by
local production capacities.
According to ”Vietnamica and Lefaso”, footwear exports grew 20% from January to
August 2011 with export revenue of US$ 4.2 billion.
The export to the EU has reached a record high of US$ 1.9 billion, followed by the US
with about US$1.2 billion. Export to the EU accounts for about 45%, followed by the US
(29.3%) and Japan (4.1%).
In 2010, the total EU import of footwear was € 13.5 billion (approx. US$18 billion at
current exchange rate), resulting in considerable 10% EU import share by Viet Nam.
Currently, 16.5% tariff EU import tariff is added to the dockside price of Viet Namese
footwear, leaving good leeway for more trade with potential FTA tariff benefits.
EU antidumping measures:
The EU imposed antidumping duties in 2006, ending on 31st March 2011, but still under
observation. Since April 2011, export to the EU has increased considerably. According to
“Viet Namica” some of the FOB prices have decreased, providing potential evidence to
“continuation or repetition of dumping” with a possible consequence of 10% antidumping tariff.
These measures affected about 20% of the footwear exports to the EU. Since 1st January
2009, footwear exports to the EU have lost beneficial tariff of preferential treatment and
the GSP advantage owing to reduced dependence of exports to the EU on one single item
and Vietnam´s success of export diversification.
Interestingly, the European Footwear Association of Importers and Retailchains (FAIR)
consider the EU commission´s anti-dumping investigation against Viet Namese footwear
as “being faulty and biased”24. The association claims that large difference between an
average import price of € 9 and the average sales price of € 30, practically exclusively
contain labor costs and material. The more than 300% mark up compensates for FOB to
CIF cost differences, distribution, brand marketing costs, design work, technology
development, quality control and marketing activities to the points of sale and profit as
well as margins of importers and retailers.
FAIR represents more than 100 footwear importers and large retailers in France, USA,
UK, German, Austria, Netherlands and France with a total of about 90.000 employees.
Social and environmental compliance:
(refer to 3.a. sector information Textile sector)
VI.4.2. Supply chain and analysis of the footwear sector
General remarks:
The footwear supply chain is very fragmented. Raw material and accessory supply is
confusing. Average men or women shoes require about 50 different accessories and parts
in addition to fitting material, which is imported or supplied from numerous sources.
Exact information about sourcing reality can only be obtained from the companies
directly.
24
PR Newswire Europe Ltd
36
The 300 FDI companies (of which 200 companies are producing footwear, including
companies involved in raw material supply, tannery and footwear production) account for
about 65% Export of leather products (footwear, hand bags, accessories).
About 80% of accessories and raw materials and leather are imported.
(Attachment 05: Master plan Footwear)
37
Mapping of footwear sector value chain 25:
Raw leather
Equipment
Technology
Techniques
NATIONAL ADDED VALUE
Tannery 20%
Design input
Material
Processing
Cutting
Assembling
upper
component
Sole
processing
Sole
polishing
Accessories 20%
Material supply,
incl. tanned leather
Accessories for
footwear
Consumers
Internet
Distribution by
brand distributors
Retail store chain
networks
International
Quality
Certification
Wholesale
Retailers and
supermarkets
25
International
Social and
Environmental
Standards, CSR
International
Transport
Agents
Input from LEFASO,01.06.2009
38
Logistics, Sales
Production
Production
for local
market
30%
Subcontracting
for export
70%
Nbr. of
companies
/units
Total: 825 SME
FDI / low
local
content
300 FDI (200
shoes)
(survey 2008)
Import rate,
raw
material,
access.,
(%)
Added
Value in
the VC
Number of
sector
employees
+
Marketing,
Services
Local
Market
Approx. 1000 small
`garage factories`
Contribute
to 65%
export
80%
No exact figures available
650.000
direct
employeess
available
+
500.000 support
and service
emplyees
available
SWOT analysis:26
Internal
Strengths
 Labour force available, good for
basic processing
 Labor costs are low compared
to other countries in the region
 Top 5 footwear producer and
exporter in the world
 Favorable geographical
conditions, with the shoe centers in
26
Weaknesses
 Labour shortage on medium and high
technical, marketing and managerial level
 Mainly subcontracted processing
( low profit, low added value
based on cheap unskilled workers)
 Low range products are not competitive
against Chinese offer in the Viet Namese
market
Input from LEFASO/Mrs. Nguyen Thi Tong; Viet Namica, September 2011
39
Binh Duong and Hai Phong
 High range quality products are not much
provinces, near major ports
produced in VN
 Competitive in medium range
 Lack of capacity to design and supply raw
products (in terms of quality, price)
materials, testing, marketing, distribution and
 Sector has good preconditions to
logistics
provide required volume and quality,  Lack of qualified high skilled
machines, output)
workers and senior management
 Low degree of down- and upstream linkages
in the industry
 No international brand footwear (except Bitis
to China)
External
Opportunities
Threats
 Viet Nam as a alternative
 Competitiveness scrutinized by increasing
outsourcing country after China
labor and material costs
 Market integration opens
 Increasing market requirement on design,
opportunities for Viet Namese
product safety, quality
companies to cooperate with
 Global financial crisis \
European companies to fill in niches  Facing multiple antidumping cases in EU,
(technology transfer, design,
US and Brazil
marketing)
 Technical
 Access to Japan, Oceania, South
barriers, environmental requirements,
Africa, the Middle East thanks to
labeling, CSR
FTAs and WTO
 EU GSP no longer given to Viet Namese
 Growing demand for product with
since 2009
short design life cycle
 The social problems arising
 Opportunity to upscale market
from the industrial concentration of unskilled
segment, provided that design
workers
capacity is available
 Brand distributors, such as Adidas, Puma,
 Political and social stability
and others will not accept any scrutinizing of
 More focused export and trade fair
own brand and be rather hesitant to cooperate
promotion of the sector in EU
subcontracting with companies who sell
markets
forged products on the local market.
 Increase of production costs because of
inflationary pressure and dependence on
imported materials
Important Success Factors for trade with the EU, stronger local supply chains,
higher local added value):
The Sector and Industry
- To secure steady and continuous leather
import
- To initiate upgrading program with own
design efforts, private brands for buyers
- To step up with own initiative marketing
efforts in international markets
Competitive Position of Sector and
Strategy
- To be able to take advantage of the
preferential access through FTAs in the
ASEAN region and the EU
- To become more competitive in the low
price shoe sector against China
- To safeguard the local market
40
- Establish strategic supply chain platform
with association, companies, government
and FDI for expressing concerns on supply
chain issues and for step-by-step
approximation to more partnership within
the supply chain
- Motivate government and trade
promotion office to increase
international state-of-the art export
promotion activities for the sector
Business Environment
Standards and Certification
- To be able to increase well trained labor
force, counteracting increasing labor
shortages
- Establish stringent control of cross
border trade with China in order to stop
cheap import of footwear to local market,
which also endangers benefits of the FTA
- Increase incentive to FDI to cooperate
with local production industry in capacity
building of middle salary technical and
marketing/management personnel
- Initiate waste and water treatment
systems in tanneries
- Improve the national standards
certification service industry
- Make determined efforts to fulfill
international social standards
- The government to implement stricter
controls of environmental and social
breaches of law more strictly penalize
- Re-introduce the Environmental
Impact Assessment (EIA) as to be a
serious tool for industrial
environmental protection
Conclusions related to FTA dealings:
 Antidumping: Considering that antidumping observation will not impose 10%
additional tariff, the reduction of currently 16.5% EU tariff will most likely lead to an
increase of market share to the EU. FTA negotiations between the EU and Viet Nam
could have the positive side-effect of Vietnam´s market economy status, with less
probability of anti-dumping imposition.
 Post-FTA scenarios:27 According to analyzed possible scenarios, the reduction of tariff
results in potential increase of export of footwear to the EU from 11,9% to 13.3%. It
reduces the risk of further deterioration of export to the EU. Other scenarios
demonstrate risks involved in antidumping duties. General expectation and outlook to
FTA is positive and negotiations should be sped up. Counterbalancing of lost market
share with the EU can be problem.
 FDI: Set out a marketing strategy for tackling EU buyers, brand producers of sport
shoes and large retailers. Take advantage of the tariff reduction and start offering
product private brands to retailers, produce design series and model ranges.
 Social and environmental standards: This is a critical requirement for many Viet
Namese footwear companies, notably on sub-supplier level.
27
MUTRAPIII, report on quantitative and qualitative impact assessment/FTA-9 EU, 2011
41
VI.5. Textile and Clothing sector
VI.5.1. Sector background in Viet Nam
Sector overview:
Viet Nam is the fifth largest producer of textiles and garments in the world. Annual
export turnover of the sector is expected to reach about US$ 11 billion in 2011 with
steady growth in the last 10 years. Most of the turnover is originating from CMT with
estunated 4-10% margin (trend toward lower margins). Additionally about US$ 4.2
billion was sold in the local market, assuming higher value added due to local production
of yarns and fabrics. Exact information is not available.
There are about 3.000 textile and garment companies in the country, inlcuding 2.000
large companies. About 75% of the companies are privately owned or shareholder
companies, 24.5% are FDI based companies and 0.05% represent state owned companies.
Most of the traditional GoE now have either private or shareholder ownership. Around 80
ringspinning plants comprising 4 million spindles mills mainly produce medium count
cotton yarns and cotton-polyester blends with an annual yarn export value of US$ 1
billion. 30% of the spinning production goes into fabrics and garments for the local
market.
In 2010, the industry produced in the various value chain stages: Synthetic fibre (180.000
tons), spun yarn (480.000 tons), woven fabric (1 million sqm), knitted fabric (200.000
tons), garments (2.4 billion product items)28
About 200 mainly outdated weaving mills produce mostly for the local market.
Very little of the local spinning and weaving output is suitable for CMT production.
Therefore 90% of the required fabric in CMT clothing production is imported.
Circular knitting plants are by large small scattered “garage sized” SME, except those
integrated in vertical companies. Exact numbers on knitting production are not available.
.
The increasing number of annual fashion cycles in the EU with changing design and
manufacturing requirements and strict in-time delivery and short lead times put pressure
on administrational, production, organizational and transport performance of Viet
Namese firms.
Both, the textile and garment sector, even though part of the textile value chain, have
different development goals and are also characterized by totally different sets of
problems and opportunities. The successful garment sector is highly labor intensive. The
textile subsectors ideally represent a highly capital intensive technology environment.
The local content is low (max.10% in CMT). Raw material, such as cotton and manmade
fibers are imported, even though a modern FDI financed PE endless fiber plant is being
installed in the South of the country. About 90% of intermediate products and
accessories, yarns, woven or knitted fabrics are imported (exempted from duty) for CMT
production and export
28
MUTRAP report on Impact Assessment of Free Trade Agreements on Viet Nam´s economy, 2010
42
The total import of cotton, manmade fibers, yarns and fabric and accessories accounted
for US$ 8.9 billion in 2010 (including cotton import for local market products), leaving a
calculated balance of US$ 3.3 billion, which represents low margin of operations.
The margin, when put in relation to the large input factor of up to 3 million workers and
around 3.000 textile and garment manufacturing companies in the country does not allow
for large investments in vertical operations, such as spinning, weaving and finishing.
Investments into the textile industry is more likely by new FDI plants. Investment in old,
existing factories with given layout and production technology, lacking environmental
systems and infrastructural limites is often complicated and less viable. Some of the big
local players may be successful to renew their integrated operations.
The investment cycle in the textile industry for a new vertical integrated company is at
least 3 to 5 years from first market and investment analysis to full operations.
Custer development with textile industrial cluster in the proximity of large garment plants
and potential supply chain integration would decrease costs and improve the margins
throughout the textile value chain.
The garment industry output has a comparatively positive image on quality, compared
with other CMT countries. Main export items are T-shirts, polo shirts, shirts, trousers and
women´s wear in the low to medium segments.
Trade with the EU:
46% of the world trade on textile and garments products have been imported by the EU in
2008. Viet Nam expects to export garments in the value of about US$ 2 billion to the EU
in 2011, which is about 18% of the export sales.
Observers confirm the trend of inflowing orders to Viet Nam and other Asian countries
from Eastern European countries, such as Romania or Hungary. Considering the example
of Eastern Europe for mainstream CMT production. Labor cost advantages eroded over
the last view years and did not anymore secure the sector`s output. Some of the Eastern
European countries are increasing their efforts into upgrading of own products, to create
design and promote own products to selected EU and other markets while reducing
dependency on CMT and subcontracting. Although Eastern European countries decided
on motivated development plans of the garment and textile sector, some were not fast
enough in implementing parallel development strategies, which resulted substantial losses
and the closing down of non-competitive clothing manufacturing companies.
Vietnam´s textile and clothing sector may seriously consider to initiate the upgrading
processes, just in time when the sector has apparent success and positive growth in
garment CMT manufacturing. Time is of essence when dealing with complicated and
capital intensive restructuring and realignment of the textile and clothing sector.
Experience proofes that once closed down, textile or clothing companies will unlikely
re-open and will not be able to catch up to already overdue investments in such low
margin environment.
Labor costs in garment and footwear manufacturing:
According to “Emerging Textiles”29, in 2008 seven Asian countries are offering lower
labor costs in the RMG sector than China. According to the source, Bangladesh was still
the cheapest CMT country, ranging at US$ 0,22 at 2008 exchange rates.
29
EmergingTextiles.com/Textile and Clothing Trade information, 2008
43
Besides Bangladesh, Cambodia and Pakistan and Viet Nam were other low cost apparel
exporters with labor costs per hour at 33 cents, 37 cents and 38 cents correspondingly.
According to Decree 70/2011/ND-CP on regional minimum salaries for all sectors, which
is applicable as from October 1st, 2011, the minimum salaries ranges in regions 2-4 from
US$ 70 – 89 and in zone 1 (e.g. Hanoi and HCMC) at least US$100. According to the
Viet Nam Investment Review from November 28th, 2011, the Viet Nam General
Confederation of Labour (VGCL) opts for adjustments to the minimum salary regime. It
should ideally be changed to a flexible system based on current inflation rate and workers
skills.
In contrary to this, Korean representatives of a large Viet Nam based clothing
manufacturing company believe that government should assure stable consumer prices in
order to keep the minimum salary at lowest possible level.
According to government, low minimum salary regimes provide better chances to get
foreign investment. However, concerns are rising whether the argument of continuous
cheap labor for luring investments would trigger social unrest30.
Furthermore, the consumer price index rose by 12.24% in Februar 2011 31 and the Viet
Namese Dong also underwent devaluation, which in return putting additional pressure on
import prices.
According to information revealed by Business-in-Asia, Viet Nam leads the minimum
wage increase at a current rise of 11.5%. In comparison, Indonesia, Phillipines and
Thailand raised minimum salaries by 7% in the same time frame.
According to the Viet Nam Labour Law, Par.8 Wages and Benefit, legislation clearly
regulates the standards (Attachment 06: Summary of Viet Namese Labour Law).
Social and environmental compliance (information applies to all sectors, with special
focus to the labor intensive garment and footwear sectors):
Social and environmental compliance of manufacturing SME and some FDI companies is
not up to exceptable standards yet. Only 51 SME (large to medium size) in the country
are certified according to SA 8000 US standard. According to information from the
UNIDO CSR project office, only around 20 garment companies are amongst the certified
SME.
It can be assumed that some companies are satisfactorily compliant to specific buyer and
EU retailer CSR requirements. Otherwise export would not be as successful as it
currently is. The general situation in a majority of sub-suppliers and less controlled
garment manufacturers seems to be largely unsatisfactory and requires upgrading. Future
successful growing trade with the EU calls for increased focus to CSR issues.
The pressure in the EU on buyers and their connected international supply linkages to
improve on CSR compliance will increase.
A possible way of developing better compliance could be a 4-level approach, which is
also valid for the footwear sector:
30
31
Insight-Viet Nam Investment Report / 28th November 2011
Business-in-Asia.com
44
 Level 1: Cooperate with larger buyers to fulfil their CSR requirements (SA8000 – US
standard; BSCI – European standard integrating ILO standards and local labor law;
particular CoC of large EU retailers, compliance with ISO 26.000 and ability to
qualify for re-certifications).
 Level 2: Becoming compliant to basic principles, including: transparency (companies
are required to map and lay out their processes), legal compliance, ethical behavior,
respect to human rights, respect to international laws and regulations. Issues to be
tackled are the fact that legal compliance is not a strong culture yet; to tighten law
enforcement in the industry and increase fines, otherwise entrepreneurs are not
motivated to change. It was also reported that incidents increased for payment of
danegeld to security companies, or migrant workers were put under pressure to make
payments.
 Level 3: investment in environmental protection measures (soil, air, water recycling
and treatment, efficient use of energy in textile dyeing and finishing mills and
improvement in air filtering at spinning and weaving mills).
 Level 4: improvement of core subjects related to governance, human right according
to ILO conventions, labor (social dialogue, free establishment of labor associations,
health and safety at workplace, etc.). Enforcement of Viet Namese labor and
environmental law.
In future, CSR compliance is not any more a deliberate or soft factor. It will be important
contractual content in procurement contracts and also may be part of a FTA with the EU.
Critisism to the EU, expressed by companies and associations for using the argument of
compliance to impement protective measures lacks realism.
All EU companies operate under environmental and social legislations that are binding
legal basis of business. Already 15 years ago the Swiss textile dyeing and finishing
industry had to comply with environmental requirements, which at that time
corresponded to costs of at least 15% of the production costs.
Non-tariff standards:
The sooner the local textile, garment and footwear sector implements and harmonizes
sector specific EU standards the better. Compliance to technical and environmental safety
standards is mandadory regulation, equally required for all exporters to the European
Union.
IV.5.2. Supply chain and analysis of the textile and clothing sector
Most of the large buyers currently source within the economy and standard clothing
segment. That`s where price is the strongest determination factor. The resulting income
does not leave much room for higher investment in training, better payment for key
personnel in marketing, production and compliance departments.
Textile industry investments:
Stand-alone finishing and dyeing plants do not much benefit from higher profit due to
their role as sub-contractors in the textile value chain and their almost exclusive
production for lower priced local market.
Composite plants can shift added profits internally and invest in environmentally friendly
production in their finishing departments.
45
Dyeing and finishing seems to be the weakest part in the current local textile production
chain, correlating to technology problems, limited experience of technical operators, little
flexibility in economically viable manufacturing of small and specialized lots and high
costs and insufficient quality standard.
Some few vertical integrated companies are state-of-the-art. Information on current
technological, economical and export readiness benchmarks and standards were not
available to the consultant.
It is likely that reduced import taxes on raw material for local production would enable
local textile industries to put more investment in technology and production upgrading, in
particular in the weaving and dyeing sub sector. Lower costs of importing raw material
and accessories improves potential to invest, if not just considered as additional profit
margin by many industrialists.
The 5-year Masterplan for the Textile Industry foresees by 2015 the production of one
billion m2 fabric, presuming considerable investment in ginning, spinning, weaving and
finishing/dyeing.
A thorough textile investment study, initiated by MOIT or one the attached institutes,
such as CERM, would establish objective investment decision data which are based on
current input costs, RoI of spinning, weaving/knitting and finishing. It also analyses
potential value added and cost structures along the supply chain. Based on such studies,
investment scenarios will offer objective information resource for any local or FDI
investment decisions.
The study also needs to contain a sound market analysis amongst the main international
buyers and retail chains in the EU and USA in order to establish a probability range of
technological requirements and fabric and raw material specifications, which are required
by CMT companies in order to cover a large part of mainstream products. As a result,
import of raw material and pre-products can slowly be replaced by local production.
Precise costs information on raw material, pre-products and local textile and garment
production costs is not available. As a result, cost per meter or kg of fabric of different
specifications cannot be determined. Thus it is difficult to evaluate the break even and
more viable alternative of either tariff-reduced import of cotton lint, yarn, fabric, etc, or
the investment in local cotton growing or vertical textile production.
An example of the a value chain mapping indicating the costs of the Zambian cotton
sector shows typical portions of costs along the textile production value chain. Such data
should be made available from the Viet Namese textile and garment industry.
(Attachment 07 : cost structure of cotton textile sector in Zambia, 2007)
Added value and profit margin:
According to industrialists, typical profit margins originating from CMT, ranges
somewhere between 4-10%, even though the lower range appears to be more realistic.
The low margins amongst the sector are not suitable for long term growth and realization
of investments within the current macro economic framework.
Net profits seem to slowly erode in many companies. Due to missing effectiveness in
company management, many CMT manufacturers do not have a clear idea about their
46
current cost structure. Efficient operations require sound knowledge of own position as to
business ratios and benchmarks.
The Textile and Garment association (VITAS) might get involved in step-by-step
analysis of benchmarks in order to improve the self-evaluation of textile and garment
companies. The same applies to the other sector associations in footwear, automotive and
electronics.
47
Mapping of the current situation of textile/clothing value chain:
Provision
of inputs
Trade and
export, local
market
Clothing
production
Textile
production
5 – PES fiber production
6 - Spinning
7 - Weaving
8 - Knitting
9 - dyeing & printing
10 – finishing
1 Import of
11 Spinning and
Cotton fiber
weaving for local
market
12 - Knitted garments
- Woven garments
- Washing
Local market
clothing
production
2 Import of
fabric for CMT
by intern.buyers
International
brand producer /
CMT buyers
13 CMT for Export
EU
consumer
3 Import of
accessories
4 Import of
100% for local
market
garments
Import rate
(%)
Nbr. of
companies
/units
1 = 100%
2 = 90%
3 = 90-100%
4 = unknown (70%
of all consumer
goods imported
from China)
Local VN
consumer
5 = 4-5 factories
6 = 80 old plants
7 = 200 old plant
8= numerous small
factories, 15-20 large
vertical companies
9/10= Unknown
12= 2000 large companies:
1.5 million workers;
1000 small companies:
1,0 million workers
No of
employees
13= about 1.300 foreign
FDI companies in garment
CMT production  >95%
international sourcing
FDI / low
local
content
Added Value in
the VC
(assumption).
No figures
available
12 = 90% (value) into
CMT.
12= 3000 companies
(incl. Textile), of which
are 2000 large size
VERY LOW
<3%
More if imported by local
company on own FOB
basis
LOW
5-10%
Considering low priced
local market and high
capital investment and
cost structure and high
operating costs
MEDIUM
5-10%
for low capital investment and low
operating costs
48
SWOT analysis:
Internal
Strengths
Availability of skilled workers
 Current low labor costs
 Low costs to set up garment CMT
production
 Good CMT manufacturing quality
 Flexible production output

Opportunities
Political and economical stability
 Not much social unrest (yet)
 Tariff reduction through FTA

Weaknesses
of cotton fibers imported, 80% of
fabrics imported for CMT
 White collar personnel not well enough
trained
 Low value added in CMT without much
technology transfer and low margins
 No own brands for international markets
 Low productivity
 Low degree of supply chain integration
External
Threats
 endangered competitiveness due to nonLLDC classification (no preferences)
 unsolved treat on RoO with the EU
 high opportunity costs of the sector
 High competitive pressures from other
ASEAN countries
 Lowest possible level of supply chain
integration for export products
 After initial phase, failure to proceed along
the roadmap and companies are unable to
improve
 cheap import of clothing products from China
 100%
SWOT Analysis Summary and Comments
Strengths:
 Most blue collar employees possess secondary education
 Comparable good CMT quality standard is proven by presence of high fashion EU
manufacturers, such as Marks & Spencer, BOSS and others
 FDI companies invest in Viet Nam`s interior and pay 60% lower salaries as
compared to industrial centers, such as HCMC (US$ 100-150 versus US$ 50 -60). It
can be assumed that social standards in the interior are more neglected.
 RMG sector is flexible enough to adjust to variations in demand. Fast investment
cycles and production adjustments bolster increase of CMT resulting from an FTA
with Europe and from numerous other ongoing worldwide trade arrangements
Weaknesses:
 90% of the fabric is imported directly by international CMT buyers and companies,
only 10% based on FOB by manufacturing companies, providing some margin.
 Training for white collar staff should focus to: Management, language training,
technical and technological skills, marketing knowledge.
 Viet Namese branding for EU markets is expensive (design and product
development, brand marketing) and cannot be implemented without a more
integrated supply chain.
 Productivity in the garment sector is 20-30% below Chinese productivity.
 The low integration of the textile value chain is also reflected by the separation of
export industry from production for the local market. About 70% of all consumer
49
goods are supposedly imported from China. The question remains, how much of the
local textile production is supplied by local suppliers and where the break even
ranges for lower costs of local products in order to increase the rate of import
substitution.
Opportunities:
 Stringent Rules of Origin also force the countries textile sector to invest and initiate
change, equivalent to long term value adding and value chain integration. This
assumption is not unambiguous as such long term effects require high capital input,
stronger technology base, improved white collar labor and more integration in
international marketing and production cycle.
Threats:
 Transport via Hong Kong and Singapore is costly and prolongs lead-times
 CMT becomes more vulnerable due to increasing labor costs.
 Cheap import of lower grade clothing products from China put additional pressure
on competitiveness of local textile and clothing industry, also calling for product and
design upgrading with higher perceived value by final consumers. Textile products
from China are currently imported at large extend through unofficial and informal
border gate business. By doing so, additional and unnecessary competitive pressure
due to lower prices and evading of taxes is put to national production.
Important Success Factors for increased trade with the EU, stronger local supply
chains and higher local added value:
The Sector and Industry
Competitive Position and Sector Strategy
- Concentrate on improvement of
effectiveness of operations (better
control and transparency in terms of
costing, processes, quality
management, etc.)
- The garment industry to aim for added
value through efforts to create own
exportable private brands (to be
proposed to buyers and retailers) and
aim for upgrading of products to
better paid segments (Attachment 08:
product upgrading segment)
- Intensify efforts to become brand
license producer
- Aim for speedy beginning of FTA
proceedings with the EU
- Keep the sector textile sector masterplan
realistic
- Initiate coordinated sector baseline studies
to enable investments in textile sector that
are based on sound numbers and equations
- Increase efforts to improving association´s
representation and improve business
service development for exporters (more
export promotion in EU countries)
Business Environment
Standards and Certification
- Improve attractiveness for FDI
- Counteract concerns over corruption
and danegeld, also related to customs
- Improve the national standards certification
service industry
- Government agencies and ministries to step
up legal enforcement of social and
environmental standards
- Improve or initate national quality initiative
50
Conclusions related to FTA dealings:
 Trade potential of CMT into the EU: Currently, Viet Nam exports garments to the US
(55%), EU (18%), Japan (11%), Japan (11%), South Korea (3%) and other ASEAN
countries (2%). The EU market is the largest market for ready-made garments in the
world with 500 million consumers with promising potential for more export of CMT
into the EU after the signing of an FTA. Without the signing of a FTA, the likelyhood
exists of loosing EU related market share to other competing CMT countries in the
ASEAN region.The benefit of the EU-Viet Namese FTA for increasing CMT export to
the EU can be considerable. Taking the example of tax reduction by the FTA between
the Republic of Korea and ASEAN. As a result, Viet Nam was able to increase its
export revenue to the RoK by 240% within one year32. Under the assumption that the
FTA reduces the EU tariff for garments to 0%, resulting tariff advantage could be in
the range of up to 12%.
 Rules of Origin: The main concern of the Viet Namese Textile sector is EU`s strict
interpretation of the Rules of Origin.
 Social and environmental standards: This is a critical requirement for many Viet
Namese textile, clothing and footwear companies, notably on sub-supplier level.
 Favourable FDI legislation: The Textile sector master plan assumes that FDI will
improve investments in textile production. The textile industry are capital intensive.
The investment per worker in an average spinning mill can range from 0.5 to 1.5
million US$. Two years after the signing of the Japan-Viet Nam FTA, no direct
Japanese investment has been realized in the country. Similarly, EU companies will
most likely be resistant to largely invest in textile production. Reasons are: lack of
easy access to raw material, not enough skilled white collar labour, scope of choice to
invest in emerging economies with better industrial, environmental and service
infrastructure.
 FTA facilitating better profit margins and calling for parallel measures and strategies:
On the long term, favorable export of RMG to the EU can have positive impact to
medium to long term upgrading of products and supply chain integration. This has to
go along with developing own brands and designs that can be brought to the EU
markets. Adding value in the textile value chain is only achievable through investment
in the textile production (spinning to finishing) and through investments in upgrading
product development (e.g. technical textiles, medical applications, fashion products,
etc.) or entering into brand licensing with long term partnership agreements.
V. SECTOR AND SUPPLY CHAIN TRENDS IN THE EU
V.1. General trends with adapted view to cooperation EU-Viet Nam
V.1.1. Considerations of FDI companies ideally match Viet Namese industrial
partners for best concerted output:
Investment decisions of EU companies, seeking cooperation with Viet Namese
companies are always linked to two considerations, the Economic Value Added (EVA)
and Strategic Value Added (SVA). This applies to all, FDI, outsourcing, global supply
32
Viet Nam Logistic News, 2011
51
chain decisions by OEM. According to the business partners depending on potential
sectors, the weighting and priorities of EVA and SVA may be varied.
Strategic decision making of EU investors - according to value-adding aspects
Considerations based on:
- local and ASEAN market
attractiveness
- client matching
- Technology matching
- Competitive position
- Supplier capabilities and
supply chain considerations
- Strategic business model
Qualitative
(Strategic
Considerations)
=
Strategic Value
Added (SVA)
Synthesis and
combination of
factors
Considerations based on:
- Overall cost structure
- Required assets
- FDI legislation
- expected revenues and
value added
- positive benchmarking of
economic factors, including
labor in comparison to
competing countries (e.g.
other ASEAN countries)
Decision making
criteria and potential
facilitation by FTA:
- sourcing decisions
- RoO
- FDI facilitation
- tariff facilitation
- etc.
Quantitative
(Economic
Considerations)
=
Economic
Value Added
(EVA)
Source: adjusted from Sloan Management Review/Charles H.Fine
Companies measure their EVA as follows: Net sales ./.operating expenses = operating
profit after tax ./. capital charges (invested capital x costs of capital). The generally used
argument of cheap labor advantage must be supplemented by statements about high
opportunity costs.
Source: adjusted and supplemented from Sloan Management Review, 2001
52
According to the above matrix, any supply and value chain management decision are
always result of synthesizing strategic and economic considerations of the EU company
considering placement in Viet Nam. Other bilateral FTA arrangements, such as those in
the ASEAN arena may contribute to the SVA consideration of the EU investor. The
textile and footwear sectors do not create as much interest on strategic level and have
their focus to short and medium term economic advantages (extended workbench),
implying less investment and a lower degree of long term commitment.
In the view of these decision criterions, The FTA will contribute to increased
attractiveness to foreign investors and industrial cooperation partners. Additional
promotional and strategic measures by Viet Namese government can be useful (proactive
international FDI marketing, step-by-step implementation of useful sector information
(supply chain characteristics, cost structures, up-to-date statistics that are available from
one source only, definition of a non-bribery environment, realistic programs for
strengthening the export oriented local SME.
EU investors should be approached with a `one-stop-shop concept` instead of currently
facing numerous government and institutional bodies which sometimes aren`t even
integrating their information, methodology and opinions.
V.1.2. Purchasing trends with embedded consequences for Viet Nam as supplier
country:
According to the “Sourcing Monitor”33, four main trends can be seen in the EU
purchasing departments (not sector specific):
 Savings: still being top priority, purchasing directors take a medium term view,
such as managing supplier risks more systematically
 Achilles` heel: better knowledge of the supplier markets, which was often
overlooked and more in-depth understanding of supplier markets with stronger
view to allocating purchasing resources and securing skilled labor
 Internal skills management was a major challenge. Purchasing issues are
becoming increasingly complex, requiring high level of skills in the European
purchasing departments to counteract growing complexity of global sourcing
 Trend in purchasing gradually moving from the status of ´cost killer´ to an
´operational and strategic player´
The FTA provides potential for positive economic contribution to EU purchasing
departments and supply chain decision makers
V.1.3. Access to EU markets:
Legal and non-legal market access requirements for products exported to the EU are
amended by specific required or recommended technological, quality, global supply
chain and administrative requirements. Some of these buyer specific standards form
increasingly integral part of purchasing and cooperation contracts.
Compulsory legal market access requirements:
33
Sourcing Monitor/BearingPoint-Microsoft-ESSEC-Novamétrie/France - 2010
53
Each Viet Namese company seeking to export or cooperate with EU partners will have to
comply to EU legislation and non-legislation standards. A simple decision tree helps to
understand the requirements. Depending on the UE country, additional legislation might
have to be taken into consideration. Information can be found on specific country`s
importer information web sites.
(Attachment 09: standard selection decision tree)
All operators of the supply chain in a sector have to comply with the correspondent
directives. The EU buyer/ OEM usually inform their sub-suppliers or partners about
required standards to be adhered to. However it will be advantageous to Viet Namese
suppliers to be well aware of the requirements before they enter negotiations with EU
partners.
Harmonization and standards related to the ´New Regulation`, which are defined in
Council Resolution of May 1998 / 31985Y0604(01)34 are based on the following
principles. These standardize and simplify the approach to technical standards for
exporters.
Quote: ec.europa.eu/enterprise
 there is a clear separation between the European Economic Community (EEC)
legislation and European standardization;
 EEC legislative harmonization (e.g. EEC Directives) is limited to the essential
requirements (safety requirements of general interest) needed to ensure the free
movement of products throughout the Community;
 the task of drawing up the corresponding technical specifications is entrusted to
the standardisation bodies;
 products manufactured in conformity with harmonized standards are presumed to
be conformant to the essential requirements;
 standards are not mandatory, they remain voluntary Alternate paths are possible
but the producer has an obligation to prove his products are conformant to the
essential requirements;
 standards must offer a guarantee of quality with regard to the essential
requirements of the directives;
 public authorities are still responsible for the protection requirements on their
territory (e.g. market surveillance);
 safety clauses require the Member States to take all appropriate measures to
withdraw unsafe products from the market. /unquote
Further harmonized standards and directives, not providing for CE marking, but
important to Viet Namese exports to the EU:
 Packaging and packaging waste – 94/62/EC and 2005/20/EC
 General product safety – 2001/95/EC
 Restrictions on marketing and use of certain dangerous substances and
preparations – 76/769/EEC
 Energy labeling of household appliances – 92/75/EC
Non-legislative requirements and recommendations for exporters of manufactured
products to the EU:
Environment, health and safety and social issues include adherence to:
 Local Viet Namese social and workers legislation and environmental law
34
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31985Y0604(01):en:NOT
54


International labor standards and codes (see
Company specific CSR policies
Other non-legislative recommended compliance grants preferred market access and
provides additional competitive advantage, also in regard to other ASEAN subcontracting
competitors. Compliance improves transparency, enables traceability of products and
tackles quality systems:
 Adopting quality management system ISO 9001
 Banning corruption in international supply chains
 Implementing sustainable development in international supply chains
 Respecting intellectual property rights
 Adhering to manufacturers quality management requirements (process, quality of
manufactured parts and of assembly) - ISO/TS 16949 Standard (e.g. automotive)
Codes of Conduct in the sectors:
Besides fulfillment of particular Codes of Conduct implement by OEM and buyers, other
international CoC are:
 UN Global compact initiative
 Basic standards of ILO conventions
 ISO 25.000
 BSCI (textile and shoe industry)
 SA8000
The European Rapid Alert System (RAPEX):
Familiarity to the issues on non-compliance with safety legislation when exporting nonfood consumer goods into the EU (European Rapid Alert System (RAPEX) is
recommendable. More information on RAPEX is available at
http://ec.europa.eu/consumers/safety/rapex/index_en.htm
New rules to integration of CSR in EU companies` operations: according to the currently
discussed new principles on CSR, promotion of social and environmental responsibility
will be promoted throughout the international supply chain. For most EU companies,
many of such standards are already covered by their integrated compliance architecture
toward suppliers and established CSR policies. These standards may be differently
handled in the EU countries, but are imposed by EU rules. The EU document (title:
communication from the commission to the European Parliament, the council, the
European economic and social committee and the committee of the regions / a renewed
EU strategy 2011 – 24 for Corporate Social Responsibility) displays a multidimensional
perception of CSR requirements: human rights, labor and employment practices,
environmental issues, combating bribery and corruption. The promotion of social and
environmental responsibility through the supply-chain is considered to be an important
cross-cutting issue35.
V.2. Automotive sector
V.2.1. Supply chain and trends in the EU
35
EU document COM(2011) 681 final
55
The EU automotive market is one of the most dynamic and innovative sectors in the EU.
Global supply chain development is increasingly important for the sector.
In 2009, the EU accounted for 25,5% of the worldwide production of motor vehicles. The
global growth of car production in 2010 was about 20%. The production share of Asian
countries besides China, South-Korea and Japan was about 3,6%.
World wide production of vehicles 2009
(%)
NAFTA
15%
China
23%
Japan
13%
Mercosur
6%
India
4%
EU27
25%
S-Korea
6%
Asiaothers
4%
Europe-others
2%
Russia
1%
Australia
0.4% S-Africa
1%
V.2.2. OEM supply chain structure and trade channels for automotive parts and
components:
The access to the aftermarket for spare parts is by large easier than entering the OEM
market with strong standards, high own financial resources for organizing intermediate
storage, just in time pressures, risk of product reject, increasing ownership in research
and development (R&D), contribution to new designs of systems and components
(mainly for global players). It is unlikely for the Viet Namese automotive sector to
become preferred supplier at Tier 1 or Tier 2, without cooperation of international
systems producers with investment in Viet Nam.
All producers and tier sub-suppliers have to be approved by the corresponding OEM. The
tier 1 suppliers usually select tier 2-3 suppliers. All suppliers have to be approved by the
OEM.
TIER-3
TIER-2
TIER-1
Parts, material,
accessories
Subcomponent,
components
Subsystems ,
systems
OEM
Vehicle assembly
According to element 4.6.2.1 of QS-9000, the supplier shall perform subcontractor
quality system development based on requirements of ISO 9001. Objective is to achieve a
56
zero defect level, strict on-time-delivery and adopt OEM led continuous improvement
programs. Basic compliance is usually based on certification to ISO 9001 (for process
orientation) and ISO 16.000 (for environmental issues – if applicable) standards and
adherence to ILO and local social compliance worker legislation.
Supplier certification is usually achieved by second or third party assessment and on-site
audit by approved auditing firms.
OEM and supply chain functions:
The after-market may be the most intermediate approach for Viet Namese producers. In
parallel some of the best local producers may look into the systems and subsystems
market opportunities.
Systems and Subsystems
Products and Markets
- Injection system
-break system
-power train
- pedal system
-cable tree
-audio & multimedia
- etc.
- car series
- specific model
- model range
- ASEAN cross
trade
OEM and
supply chain
functions
After-Market
- Engineering
- Design
- Selected final
assembly
- Testing
- etc.
- parts (non-critical specs)
- licensed by OEM
- etc.
Processes
Focus of EU / Viet
Namese cooperation
V.2.3. EU spare part market opportunities:
The FTA can provide easier access to EU markets and enable Viet Namese producers of
spare parts and accessories to gain market share.
The main product groups in the aftermarket business are gaskets, shock absorbers,
wipers, air filters, exhaust systems, oil filters, v-belts, batteries and spark plugs. These
57
product groups are increasingly imported from developing countries. The top five
exporting countries for these products rapidly increased their market share from 2003 (at
66% ) to 2008 (70%). The `big 5` in 2008 were: China (26%), Turkey (23%), Brazil
(8%), India (7%), South Africa (6%).36 Developing countries are increasing their share
rapidly.
In 2009, Viet Nam exported fractional 0.1% of total value gaskets and 0.3 % of total
value wipers to the EU.
The following table reflects on import of parts into the EU from different regions. It gives
an indication on the potential of the EU aftermarket.
Leading supplier countries for aftermarket products in the automotive sector (2008):
Product /
Value (Euros)
GASKETS
2.7 billion
SHOCK
ABSORBER
1.7 billion
WIPERS
384 million
AIR FILTERS
1.0 billion
EXHAUSTS
2.2 billion
OIL FILTERS
36
Market share
Supplying countries
Intra-EU = 81%
Germany, Italy, France, Poland, UK
Extra-EU /non Asian DC = 14.%
USA, Japan, Switzerland, Turkey, Costa Rica,
Brazil, Mexico, Serbia
Import Asian countries = 4,9%
China (2.3%), Taiwan (1.1%), S-Korea
(0.5%),India (0.4%), Sri Lanka (0.4%), Thailand
(0.1%), Viet Nam (0.1%)
Intra-EU = 64%
Italy, Germany, Sweden, Austria, UK
Extra-EU /non Asian DC = 13.6%
Norway, Switzerland, USA, Japan, Canada, Brazil,
Turkey, Serbia
Import Asian countries = 22.4%
China (22%), Cambodia (0.3%)
Intra-EU = 82%
France, Germany, Poland, Spain, Italy
Extra-EU /non Asian DC = 4%
USA, Turkey, Mexico, Brazil, South Africa
Import Asian countries = 14%
China (8.7%), S-Korea (2.4%), Japan (2.1%),
Taiwan (0.4%),Viet Nam (0.3%),Hong Kong
(0.1%)
Intra-EU = 70%
Germany, UK, France, Italy, Belgium
Extra-EU /non Asian DC = 9%
USA, Israel, South Africa, Turkey, Mexico,
Tunisia, Bosnia, Brazil
Import Asian countries = 25.7%
S-Korea (1.4%), China (1.1%), Japan (0.9%),
Taiwan (0.3%), Indonesia (0.3%), Thailand
(0.2%), India (0.1%),
Intra-EU = 95%
Germany, France, Czech Republic, Spain, Austria
Extra-EU /non Asian DC = 3%
USA, Canada, Switzerland
Import Asian countries = 2%
Japan (1%), S-Korea (0.4%), China (0.4%), India
(0.2%)
Intra-EU = 77%
Germany, France, Austria, Belgium, Italy
Extra-EU /non Asian DC = 15.9%
USA, Israel, Switzerland
Eurostat Combined Nomenclature, 2009; CBI
58
1.5 billion
Import Asian countries = 7.1%
China (5%), S-Korea (1.3%), Indonesia (0.3%),
Thailand (0.3%), India (0.2%)
Intra-EU = 85%
Germany, Belgium, France, UK, Italy
V-BELTS
1.6 billion
Extra-EU /non Asian DC = 6.3%
USA, Switzerland, Norway
Import Asian countries = 8.7 %
Japan (3.4%), China (2.8%), India (1.2%), SKorea (0.7%), Indonesia (0.4%), Thailand (0.2%)
BATTERIES
2.7 billion
Intra-EU = 77%
Germany, Spain, Italy, France, Czech Republik
Extra-EU /non Asian DC = 6.0%
USA, Turkey, Oman, Brazil, South Africa,Ukraine
Import Asian countries = 16.1 %
China (6.3%), South Korea (3.8%), Indonesia
(2.4%), Japan (1.5%), Taiwan (1.0%), Hong Kong
(0.3%), Malaysia (0.3%), India (0.3%), Thailand
(0.2%)
Intra-EU = 64%
Germany, France, Belgium, Netherlands, Italy
Extra-EU /non Asian DC = 7.9 %
USA, Russia, Switzerland, Mexico, Brazil, Turkey
Import Asian countries = 28.1%
Japan (27%), China (0.5%), India (0.3%), S-Korea
(0.3%)
SPARK
PLUGS
554 million
Source: own table based on Eurostat and CBI
V.2.4. Facts and trends in the automotive supply chain in the EU:







37
Difference between “after-market” and “OEM market” standards.
World-wide car production and supply networks, forcing companies to operate
globally, specifically with suppliers from low cost countries
Drastically reducing number of suppliers, therefore tier 2-3 suppliers are selected
by direct tier 1 suppliers. All suppliers need approval from the OEM. The
approval process for application of supplier status can be applied for online (e.g.
VW: http://www.vwgroupsupply.com)
Specifically tier 1 producers are under intense pressure to reduce their overall
costs. This is mainly related to the demand of the OEM for price cuts as part of
the OEM`s increasing price pressures on the consumer markets in the EU, raising
raw material costs and increased price pressures from OEM car producers in lowcost countries, such as Korea (e.g. Hyundai/KIA group, now becoming the sixth
largest producer worldwide). Suppliers (tier 1 – 3) more and more admit to
productivity improvement models and quality standards, such as Six Sigma, TS
16949 (similar to ISO 9000 in the past)37
More focus towards systems and module suppliers
Complex and difficult relationship between global automotive demand and supply
Clear trend toward process orientation. This includes optimization of information
and material flow, improvement of just-in-time and suppliers reliability,
reduction of own manufacturing inventory as well as reduction of CO2 emission
due to fine tuned product transport. This way, Knorr-breaking systems (one of
Germany`s most renowed producer of breaking systems) received the Logistic
Award 2011 by VDA (German Automotive Association). In 2011 the company
Asia-Pacific Research and Training Network on Trade,Working Paper Series, No. 37, July 2007
59







was able to reduce stock by 25%, improve just-in-time by 20% and reduce CO2
emission by 16%. This example demonstrates how leading EU manufacturers aim
for optimization of international and national supply systems
High demand on implementation and R&D for new technologies, also initiated by
Tier 1 suppliers
Introduction of diversification and acquisition strategies based on market and
competitive analysis
Trend to `green` production and products
Worldwide supply chain integrity and risk management, social and environmental
compliance performance, country of origin issues, customs audits
Cash-to-cash cycle improvement: EU manufacturers cut the cycle between 2004
to 2010 by 1/3 to ½, meaning, that critical time of payment to suppliers until
payment by final consumer was cut by half. This indicates that payment
conditions to suppliers are under pressure, shorter lead-times are introduced and
part of the responsibility of intermediate stock, etc. rests with the suppliers
The automotive assembly plant siting model means that the installation of an
assembly plant can result in additional job creation through secondary sub-tier
supply and production facilities
Access to higher educated and better paid white collar personnel becomes more
important demand to local suppliers
V.2.5. Importance of the sector in the EU
According to published EU information on Enterprise and Industry, the EU is world`s
largest producer of motor vehicles. The industry is central to Europe`s prosperity and is
key for knowledge development and leading in the technical/technological innovation
process. The sector is EU`s largest investor in R & D measures.
A few facts describing the automotive sector in the EU:
 Direct employment in the EU in 2007 with more than 2,3 million people,
providing more than 12 million jobs including back and forward supply chain. In
2007 this was equivalent to about 6% of the manufacturing employment in the
EU-27. About 60-70% of the jobs are linked to skilled and semi-skilled operators
at factory level, whereby about 30-40% are trained in different academic levels
(engineers, technicians, sales specialists, IT, quality management, design,
business management, etc.)
Country
Germany
Sweden
France,
Belgium,
Czech Rep.
Spain

Share of labor in
manufacturing
sectors
Share of labor force in automotive sector in
EU countries.
(source: EU document SEC(2009)1111)
13%
9%
each
8%
It is estimated that car manufacturers in Germany, France and Italy import about
40% (based on total value) components and systems, whereby the smaller
60






producers import around 25%. Trade figures and production figures therefore
have to be objectified and cannot strictly be seen as value produced in the
corresponding country. According to CLEPA (European Association of
Automotive Suppliers), about 3000 companies in the EU are operating as direct
suppliers to the manufacturing OEMs, most of them Small and Medium industries
with about 3 million people involved. According to EU sources it is estimated that
for each Euro of value addition in the automotive industry itself, about Euro 2.7
added value is added by the support and supply industries.
In 2007, the sector produced about 19.7 million vehicles (cars, trucks, buses),
reflecting about 27% worldwide market share. It contributes to 3% to EU´s GDP
(2008). The sector exports more than it imports.
Exports amounted to about Euro 126 billion, and imports to about Euro 65 billion.
The EU industry is world leader in premium vehicles.
The automotive sector invests about Euro 24 billion p.a. in R&D, representing
about 30% of total industrial investment to R&D in the EU.
European car makers are leaders in alternative drive unit developments,
alternative fuel and environmentally friendly technologies (CO2 emissions, fuel
efficiency, battery powered hybrid, electrical, Diesel technology, Hydrogen). The
industry works on complex technological solutions in order to maintain its global
leadership in the sector. This requires increasingly higher skilled workforce. This
is also reflected into subcontracting international supply chains, including Viet
Nam. These trends put additional pressures on OEM suppliers
Ongoing and future discussions on company`s carbon footprints will demand
some collaboration in the upstream supply chain. According to McKinsey
analysis, 40-60% of the footprint is linked with the supply chain in machine
manufacturing and automotive sectors (source: McKinsey Quartely).
According to EU information, strategic guidelines for the automotive sector are:



38
To strengthen the competitiveness of the automotive industry.
The aim is to identify and assess policy issues of significant importance to the
competitiveness of the EU automotive industry and to suggest solutions that take
into consideration economic, social and environmental objectives.
To complete, adapt and simplify the internal market regulatory framework.
The work on improving the Internal Market is built upon the introduction of the
EC Whole Vehicle Type-Approval System which allows manufacturers to have a
vehicle "type" approved in one Member State and then be able to market the
vehicle in all other Member States without further tests.
To promote globalization of the technical regulatory framework through UNECE:
Global technical harmonization is a key factor in strengthening the
competitiveness of the European automotive industry world-wide. The EU is a
Contracting Party to two agreements of the United Nations Economic
Commission for Europe (UNECE): the 1958 Agreement on Uniform Technical
Prescriptions for Vehicles, and the Global Agreement of 199838
EC website – enterprise and industry
61
V.2.6. EU legislation and directives for import of automotive products into the EU:
Relevant legislation on CE-marking to machinery are directives 2006/42/EC, 98/37/EC.
Further important specific directives are:
 Product liability – 85/374/EC
 Chemicals REACH – 1907/2006/EC
 Type approval for parts and components – 2007/46/EC
 PentaBDE/octaBDE in flame retardants – 1907/2006
 PAH in car tyres – 1907/2006/EC
 Heavy metals in components and other materials and end-of-life vehicles (ELV),
batteries – 2000/53/EC, 2006/66/EC
V.3. Textile and Clothing sector
V.3.1. Supply chain trends in the EU
EU buyers demand analysis:
A demand analysis, which was carried out in 2008 resulted in the following priorities of
large textile buyers and retailers in reference to sourcing decisions39. The result of these
research indicates the priorities of major buyers. There might be light changes in
priorities in the last four years, but the main criterion is likely to be the same as in 2008:
Main sourcing criteria are:
a) Service problems (95% of all indications)
b) Not exceptable lead-times and compromised deadlines (81% of all indications)
c) Quality problems and inconsistency (77% of all indications)
d) Missing social standards or non-adherence to existing standards (77% of all
indications).
(Attachment 10 : EU buyer purchasing selection criteria)
Social and environmental compliance:
Minimum compliance standards are in most cases covered by the individual companies`
standards. Depending on the EU buyer, additional certification may be required if the
company specific CoC does not cover the minimum specifications of either BSCI
(covering large spectrum of European requirements), ETI base code and JO-IN (covering
British requirements) and SA8000 (covering most parts of the US requirements).
CoC compliance would enable smaller and medium sized garment and textile companies
to later upgrade on their compliance level, including more complex and investment
sensitive environmental standards in composite mills. Environmental standard
compliance is increasingly required by European large buyers, also sub-suppliers that are
contracted by direct subcontractors. The minimum social standard is reflected by ILO
minimum labour standards in combination with the current Viet Namese labor and
environmental laws.
According to the Textile buyers´ research40, the majority of large EU retailers (61%) are
willing to pay a slightly higher price to verifiably compliant companies. 79% of the
39
40
Study by W.Wiegel for RMG sector /Bangladesh, 2008
EU textile buyers research/W.Wiegel,2008
62
interviewed buyers believe that they have higher costs when implementing compliance
systems with CMT producers.
Exceptions are retailers in the basic price segment (e.g. over the counter business with
low margin, such as TCHIBO) and most of the importers that are not retailers. Their
customers are mainly smaller retailers, who do generally not pay more for compliancy.
100% of the interviewed buyers prefer to work with compliant companies, if they would
have the choice.
V.3.2. Interpretation of results “sourcing barriers”
The responses are divided into 4 ratings of importance related to sourcing barriers. All
indications are in % of all retailers/importers responses.
Rating (1) means “very important”, (5) means ”not much important at all”,
total rating 1–5.
Very strong focus: > 75% of all responses (1) and (2)
SOURCING BARRIERS
1
2
Service problems
39
56
Too long delivery time, compromised deadlines
54
27
Quality problems
68
Missing social standards
50
3
4
5
Comment
5
0
95% (1+2)
14
5
0
81% (1+2)
9
14
5
0
77% (1+2)
27
14
9
0
77% (1+2)
Strong focus: > 40% - 49% of all responses (1) and less than 75% (1) and (2)
SOURCING BARRIERS
1
2
3
4
5
Comment
Labour problems, skills not available
47
24
24
5
0
47% (1); 71% (1+2)
Price problems
43
24
24
9
0
43% (1); 67% (1+2)
Little supplier transparency
41
23
27
9
0
41% (1); 74% (1+2)
Medium focus: < 40% (< 40% of all responses (1) and less than 75% (1) and (2)
SOURCING BARRIERS
1
2
3
4
5
Comment
Very expensive transport and complicated
38
28
19
10
5
38% (1); 66% (1+2)
Missing environmental standards
36
27
32
5
Discrepancies to country / EU standards
31
31
48
Raw material limitations (fabric and fiber)
32
26
11
36% (1); 63% (1+2)
31% (1); 62% (1+2)
10
21
32% (1); 58% (1+2)
63
Legal uncertainty
30
35
25
10
30% (1); 65% (1+2)
Border formalities, bureaucracy, customs
27
18
41
14
27% (1); 45% (1+2)
Source: W.Wiegel for GIZ Bangladesh
Conclusions: almost 40% of the buyers would not pay higher prices for compliant
products, but 100% want to purchase from compliant companies. As a result, it is the
responsibility of the Viet Namese CMT company to aim for compliancy in their
companies. Compliancy will be a critical competitive advantage in the future.
According to the 2008 EU buyer study,
 Prime problems are related to service, delivery time and quality
 Social compliance ranges in position 4
 Environmental standards were not of major concern for European buyers in 2008,
hence the situation has changed with much stronger focus to environment
 Price is not the prime argument for buyers
Worldwide textile and garment supply chain:
In the EU, products from foreign manufacturers are imported by wholesalers or retailers.
EU manufacturers or brand producers and by agents. All of the importers sell the goods
to non-importing retailers or also to importing retailers.
Wholesalers, agents and importing manufacturers do not have direct links to the retail
sales outlets (department stores, sports retailers, super/hypermarkets, e-commerce, etc.).
CMT manufacturers have no links to the final consumer markets, which hampers the
transfer of market, fashion and price information.
Whenever a Viet Namese CMT producer decides to approach the final retail market in
the EU with own designs and brands, direct connection to the market reality is
unavoidable. It is highly recommendable for larger producers and technology leaders in
the country to start visiting international textile and garment trade fairs in France, Italy
and Germany in order to become aware of the trends, requirements and potentials of the
worldwide largest garment and textile market.
Margins for knitted and woven garments from FOB to over the counter:
Depending on the trade channels (e.g. trough agents or wholesalers, via large retail chains
or brand retailers, etc.), margins between CIF and at point-of-sales will range
approximately between 200 to 300%. This includes the corresponding VAT in the
countries of destination, considers 0% tariff and duty. For the backward projection to ex
factory cost, additional costs for ex factory  FOB and FOB  CIF have to be added.
Brand producer`s margins are even higher and can range up to 500%. Margins include
wholesalers markup (between 15-40%), retailers margins (between 40-100%), VAT, all
costs of distribution and risk of left overs to be sold with losses, design and fashion input,
packaging and placement in retail shops, costs of interacting with worldwide CMT
manufacturers and related expenses and input toward compliance and standards.
Similar structures, but different margins, exist in the footwear sector.
V.3.3. EU legislation and directives for the garment sector:
The most important directives for the sector are:
 Chemicals REACH
 Flame retardants in garments – 67/548/EC
64


Labeling requirements for garments and textiles – 2008/121/EC
AZO dyes, Nickel and Cadmium,Perfluorooctane sulfonates (PFOS), Penta and
OctaBDE in textile and leather products – 1907/2006/EC
V.3.4. Sector and manufacturer specific requirements for international partnerships
along the supply chain:
The below mentioned labels and product/production standards promote increased
competiveness in export markets and promote more successful dealings with EU buyers,
including mark-ups:
 Compliance with eco labels and sustainability initiatives, such as Oeko-Tex, etc.
(refererence: www.oeko-tex.com)
 Organic cotton labels. The word “organic” is defined by law. Such labels can only
printed when using 100% recognized organic cotton fibers (mainly from India and
African countries)
 Fare-Trade labels (reference: http://193.194.138.42/en/Sustainability-ClaimsPortal/Discussion-Forum/Fair-Trade/Web-links/(UNCTAD Sustainability Claims)
V.4. Footwear sector
V.4.1 Supply chain trends in the EU
The EU footwear sector is the strongest worldwide. Germany, France, UK, Italy and
Spain dominate the EU market with a market share of more than 70% of the EU market
potential. Footwear sales largely depend on current consumer sentiment as it is not a
required item to be replaced regularly. Similar to Viet Namese footwear product group
standardization, in the EU products are grouped as casual footwear, sports footwear and
evening footwear. The different EU countries focus either more or less on the different
product groups. It might be of interest to look into such consumer behavior when
contacting EU shoe importers in the EU countries (depending on weather, income ranges,
cultural implications, etc.). Further segmentation is according to user (man, woman,
children) and to material usage (leather, textile, rubber).
An interesting and informative market study on EU footwear is available to footwear
producers at cbi.eu (Document: The Footwear Market in the EU, 2010
The EU shoe sizing system is rather complicated. The shoe size is the length of foot plus
two centimeters – expressed in “Paris Points”. The Paris Point is the length equaling 2/3
of a centimeter (0.2625 inches). Size is not adjusted for gender.
Even though attempted by the ISO organization, shoe sizing up to-date is still not unified
yet. In the EU are still two sizing systems in place, the UK system and the Continental
European system. Proper shoe sizing by manufacturers is of utmost importance for the
specific EU markets, where physiology of consumers largely varies (from tall Northern
Europeans to in tendency smaller Southern Europeans)41.
Country
41
Shoe sizes
International Shoe Sizes/www.internationalshoesizes.com
65
EU
35
35,5
36
36,5
37
UK
2,5 3
3,5 4
4,5
Source: internationalshoesizes.com
38
38,5
39
40
40,5
41
42
42,5
43
44
5
5,5
6
7,6
7
7,5
8
8,5
9
9,5
etc.
V.4.2. EU legislation and directives for the footwear sector:
The most important directives for the sectors are:
 Chemicals REACH  AZO dyes, Nickel and Cadmium,Perfluorooctane sulfonates (PFOS), Penta and
Octa BDE in textile and leather products – 1907/2006/EC
 Endangered species (CITES) – 338/97/EC
 Flame retardants – 67/548/EC
 Footware labeling – 94/11/EC
V.4.3.
Sector and manufacturer specific requirements for international
partnerships along the supply chain:



Fare-Trade labels (reference: http://193.194.138.42/en/Sustainability-ClaimsPortal/Discussion-Forum/Fair-Trade/Web-links/
(UNCTAD Sustainability
Claims)
Specific shoe industry labels, which are created by countries and manufacturers
(e.g. India, sustainable soleRebels footwear in Ethiopia, etc.)
Commission Decision on “establishing the ecological criteria for the award of the
Community eco-label for footwear” (EuroLex L 196/27), www.eco-label.com
V.5. IT and Electronics sector
V.5.1. Electronic sector in the EU
Electronic industrial profile in Europe:
The EU Electrical Engineering industry (EEI) is one of the biggest sectors in the EU with
a wide range of product lines from consumer products to power stations and grids,
industrial applications, automation, IT technology, software development, electrical
engineering industry. In 2008 with forecasting until 2012, the electronic consumer mass
market represents approx. 50% of the total worldwide electronic industry (in value
terms). EEI comprises of about 200.000 SME. The overall production was about Euro
411billion in 2008.
The EU market share on world production in 2008 was about 21% (USA/20%,
Japan/13%, China/27%, Other Asia Pacific/15% and Rest of the World /4%).
The EC Directorate-General for Enterprise and Industry is also active in the following
areas of electrical engineering:42
- Trans-Atlantic Economic Council (TEC), EU/USA Transatlantic Econ. Council
- Information Technology Agreement (ITA), www.wto.org
- NAMA, www.wto.org
- Regulatory and Industrial and Enterprise Policy Dialogues (where also China is
involved in one of the working groups)
42
EC website ec.europa.eu/enterprise/sectors/electrical/international/index_en.htm
66
Europe’s strategic leadership and future drivers are the following electro/electronic
domains (2008):43
Automotive
Telecommunication
Industrial
Aerospace,
Defense
Medical
Total World
(EURO)
100 billion
303 billion
156 billion
79 billion
29 billion
EU share
33%
22%
39%
33%
26%
Leadership
OEMs,
integrators,
components
Mobiles,
infrastructure
Automation,
Power transmission
Civil aerospace
Medical
imagery
Even though EU shares may have changed by 2011, the indicated domains remain to be
the strategic backbone of the EU electronic industries.
The mega trends in the sector are focusing to re-engineering and refocusing according to
changed market and electronic system development conditions:
 From Boxes to System solution (focus on system integration and services; new
priorities, such as energy efficience; follow OEM realignment; more product
design in electronic development; change in distribution systems)
 From integrated models to innovation ecosystems (Partnerships, new business
relationships, new approach to eco design)
 From size to market leadership (divesture from non-core business and refocus to
key strengths)
The market for embedded software systems (ES) is enormous and can provide potential
for local Viet Namese producers. Nowadays, in almost all industrial products with
electrical or electronic components with control and visualization mechanisms, embedded
systems are required. The market potential is either in the open market or the OEM
market. Open market can be supplied by third-party manufacturers who operate
according to functional or contract specifications. The open market accounts for about
25% of the total market. The remaining 75% of embedded systems are in-house
developments of OEM manufacturers, using own resources. Approximations of global
market size was about Euro 125billion in 2010 with about Euro 19billion only in the
German market. Microsoft assumes the EU potential to be up to Euro 70billion.
V.5.2. Sector related EU legislation and directives:
Directives for providing CE-mark on electro/electronic products and other technical
standards are related to44:
 Low Voltage – 2006/95/EC
 Electromagnetic compatibility (EMC) – 2004/108/EC
 Measuring instruments – 2004/22/EC
 Liability for defective products – 85/374/EC
 Heavy metals in batteries – 2006/66/EC
43
Decision/Etudes Conseil,2008
http://ec.europa.eu/enterprise/policies/european-standards/documents/harmonised-standardslegislation/list-references/
44
67

Eco-design and energy efficiency – 2005/32/EC
V.5.3. Non-legislative requirements for export to the EU:


International Code of Conduct for Electronic Industry, called Electronic Industry
Code of Conduct (EICC)
Occupational health and safety (OHS) conform to WHO
RECOMMENDATIONS







The Government to implement efficient public/private sector development
platforms with focus to trade and competitiveness, which enforces the current
forum, such as initiated by the chamber of commerce or other neutral and target
oriented entities of Viet Nam. Such platforms consist of policy makers
representing the public sector and decision makers of major private sector
companies (representing the sectors) and from sector associations as well as trade
support organizations. One objective is to better respond to diverging interest, to
agree to priority areas and to implement changes in cooperation with the
corresponding public or private sector entities.
The Government and associations to carry out detailed sector value chain analysis
with corresponding tangible and intangible upgrading. The analysis results may
be integral objective part of future Master plans. Value chain upgrading will also
integral part of supply chain integration
(Attachment 11: Value Chain analysis methodology)
Part of value chain upgrading strategies is to implement sector strategies by
government. Strategies should be based on study results and intensive exchange
of ideas and facts with the private sector. Each sector should formulate specific
advantages that could be turned into profitable products and services or initiate
further integration of supply chains. Such strength should lead into “ typical, or
unique products of Viet Nam”, mainly in consumer goods industry, such as
garments, footwear or handicraft. Unique selling points (USP) with niche
products will ease the competitive pressure relating to other ASEAN.
Private and non-government actors should get more involved (e.g. through
private/public sector development platforms, strengthening of associations,
proactive involvement in private sector development affairs and sector
development). Sector development and SME competitiveness campaigns should
not be left to government only, but be supported by strong private sector
initiatives for combined efforts of both entities.
Strengthening of the local automotive sector with focus to upgrading of Tier
production and export promotion of spare parts and accessories to EU aftermarkets. This will prepare the sector better than application of protective
measures with no or little motivation for improvements. Focused upgrading helps
the sectors to compete against increasing competitive pressure from FDI´s
The Government to set up a mixed task force between private and public sector on
supply chain and value chain development for x-raying critical sectors such as
ICT and automotive, with special view to making the sectors more aware and
competitive for higher supply chain integration with FDI companies
To complement FTA dealings with parallel realistic sector policy development
strategies measures in order to upgrade some of the analyzed short comings. In
68







this context, Government should agree with associations and main sector
representatives on a realistic implementation plan with stringent monitoring and
evaluation of results achieved. Sector policies should be regularly adapted to
changes in macro and micro business environment and demand structure from the
EU or other client countries. It is equally important to maintain a high level of
compliancy to agreed development goals
The Government to establish a fine tuned approach between urgently needed
import substitution and export growth across the sectors. Trade balance also
includes a view to internal revenues achieved through determined import
substitution programs. The FTA supports the reducing of costs of import
CIEM (Central Institute of Economic Management) to execute overall and
detailed base line studies in selected offensive and defensive key sectors. The
analysis should cover the micro, meso and macro level implications and should be
followed by an advanced value chain and supply chain analysis of the sectors.
Objectives and expected benefits are to describe and encompass value adding
functions, bottlenecks and economic as well as organizational potentials in the
sector. Identification of weak value chain operators, contribution to industrial
Master plans and sector development strategies, provision of supply chain
information to potential investors, etc.
Without possessing objective data, no strategies or Master plans can be seriously
implemented
Concerted realization of FDI promotion amongst industrial associations in the EU
countries, initiated by economic councilors in the Viet Namese embassies
Improve local governance and rule of law for more receptive business
environment for foreign FDI companies
Analysis and determination of ´Critical Success Factors for the sectors´ with
special focus to different industrial development areas, to potential trade
improvement, on how to tackle FDI in conjunction with higher local content and
medium to long term integration of supply chains. The study would fit into the
framework of the CIEM study on competitiveness of Viet Namese manufacturing
and service sectors
Sector associations should be strengthened and better integrated as representative
body and service provider to Viet Nam`s meso landscape. This may require better
funding and legislative input. Strengthened associations should be instructed to
carry out regular benchmarking of their sector industries across defined common
success factors. Sector associations should be strictly autonomous and objective
and not unnecessarily linked with companies (e.g. Toyota)
It is recommended to increase and focus the national export and trade fair
promotion for the various sectors in EU markets. Trade fairs should be regularly
attended. Currently only US$ 4.0 million are invested into trade and export
promotional activities, worldwide. A research among 3.300 companies by the
Viet Nam Chamber of Commerce revealed the strong demand for better market
information. It is recommended to make efforts for additional marketing of the
European Trade Information Center in HCMC (cooperation with Eurocham and
Mutrap) and its very informative trade facilitation website. Further information
facillities may need to be launched in Hanoi and Central Viet Nam. The Chamber
of Commerce the corresponding Export Promotion Agencies and Sector
Associations, possibly in cooperation with Eurocham and/or other entities, should
introduce sector specific information networks about EU market access
information and buyer/seller matchmaking
69



Organize visits in the EU market places. The largest and best textile and footwear
companies in Viet Nam should become aware of the great potentials, but also the
hindrances and needed investments for starting their own business development,
cutting out CMT and subcontracting
It is recommended to conduct profound sector investment analysis, which is based
on value chain analysis. Such investment analysis should propose investment
scenarios in the sectors and provide valuable services to potential FDI projects
Government to implement a “one-stop-shop” concept for EU investors and
business partners, which reduces the time consuming and ineffective gathering of
scattered information and ads to a professional approach to potential trade and
investment partners
ATTACHMENTS:
Attachment 01
Visiting schedule
Attachment 02
References and resources
Attachment 03
VAMA information
Attachment 04
Master plan ITC
Attachment 05
Master plan Footwear
Attachment 06
Viet Namese Labor Law
Attachment 07
Cotton textile costs in Zambia
Attachment 08
Product upgrading segments
Attachment 09
Standards selection tree
Attachment 10
EU buyer purchasing preferences
Attachment 11
Value chain methodology
Attachment 12
References and sources
Attachment 13
Visiting schedule
Attachment 01: Visiting schedule
Day
Organization/Company
14.11.2011 Toyota / VAMA (Viet Nam
Person/Name
Mr. Pham Anh Tuan
Responsibility
Deputy General Manager
70
Automobile Manufacturers`
Association
Toyota Viet Nam &
representative of VAMA
16.11.2011 UNIDO / United Nation
Industrial Development
Organization
Mr. Francesco Russo
Chief Technical Advisor on
SME cluster development
17.11.2011 VITAS / Viet Nam Textile
and Apparel Association
Mr. Le Van Dao
Vice Chairman
18.11.2011 Ministry of Industry and
Trade / light industry depart.
Mr. Nguyen Thi Hoang
Thuy
Deputy Director General
18.11.2011 Eurocham / European
Chamber of Commerce in
Viet Nam
Dr. Matthias Duehn
Executive Director
18.11.2011 UNIDO / United Nation
Industrial Development
Organization
Mr. Florian Beranek
Chief Technical Advisor on
Corporate Social Responsibility
21.11.2011 VEIA / Viet Nam Electronic
Industries Association
Mrs. Do Thi Thuy
Hong
Dir. of Viet Nam Electronics
and Informatics Joint Stock
Corp.
Mr. Tran Quang Hung
Mr. Nguyen Nhu
Thang
Mr. Phuong
retired Secretary General of
VEIA
Deputy General Secretary of
VEIA;
MOIT
28.11.2011 EU Delegation
Mr. Jean-Jacques
Bouflet
Head of Trade and Economic
Affairs
Mr. Bryan Fornari
.
Deputy Head of Cooperation
and Development
Mrs. Vu Thi Tuan Anh
Programme Officer
29.11.2011 Institute for Industry Policy
and Strategy (IPSI)
Dr. Truong Chi, Binh
Director
29.11.2011 Viet Nam Leather and
Footwear Association
(Lefaso)
Mrs. Nguyen Thi Tong
Vice Chairwoman, Vice
Secretary
01.12.2011 PIAGGIO Viet Nam Co.Ltd
Mr. Massimiliano
Guelfo
Vice President
01.12.2011 French Embassy
Mr. Christian Levon
Economic Councilor
01.12.2011 Ministry of Industry / heavy
industry department
Mr. Tru
Deputy Director
02.12.2011 Central Institute for
Dr. Nguyen Thi Tue
Director, department of
71
Economic Management
(CIEM)
Anh
business environment and
competitiveness
Attachment 02: References and Sources
References and Sources
15 LEFASO/Directory 2011
2 Frank E. Armstrong / Qualitydigest
3 EC document: communication from the commission to the European Parliament, the
council, the European economic and social committee and the committee of the
regions / a renewed EU strategy 2011 – 24 for Corporate Social Responsibility
4 MUTRAP study: `Impact Assessment of Free Trade Agreements on Viet Nam`s
Economy` - Activity Code: FTA-HOR
5 Website information of European Commission ` Enterprise and Industry`
http://ec.europa.eu/enterprise/sectors/automotive/index_en.htm
6 Commission staff working document-European industry in a changing world /
updated sectoral overview 2009
7 Charles H.Fine, 2001, Strategic Sourcing Lessons from Value Chain Redesign in the
Automotive Industry
8 UNIDO working paper/Value Chain Diagnostics for Industrial Value Chains, 2009
9 European Union Economic and Commercial Counselors, Report on Viet Nam, 2011
10 Eurocham/trade, investment issues & recommendations/2011 - white book
11 Viet Nam Export Portal
12 EU publication `Economic Integration and Viet Nam`s development` / Project
2007/146105, 2009
13 EU harmonized standards and CE: http://ec.europa.eu/enterprise/policies/europeanstandards/documents/harmonised-standards-legislation/list-references/
14 EU website information ´Enterprise and Trade´
15 CBI Sektorinformation
16 Congressional Research Service / Europe´s Preferential Trade Agreements, 2011
17 VEIA, Sector information
Additionally: footnotes and references indicated in the report
Attachment 03:VAMA association information
72
Attachment 04 : Master Plan for the ICT industry
THE PRIME MINISTER OF
GOVERNMENT
----------
SOCIALIST REPUBLIC OF VIET NAM
Independence - Freedom - Happiness
----------
No: 75/2007/QD-TTg
Hanoi , May 28, 2007
DECISION
APPROVING THE MASTER PLAN ON DEVELOPMENT OF VIET NAM'S ELECTRONICS
INDUSTRY UP TO 2010, WITH A VISION TOWARD 2020
THE PRIME MINISTER
Pursuant to the December 25, 2001 Law on Organization of the Government;
Pursuant to the June 29, 2006 Law on Information Technology;
At the proposal of the Minister of Post and Telematics,
DECIDES:
73
Article 1.- To approve the master plan on development of Viet Nam's electronics industry up to
2010, with a vision toward 2020, with the following principal contents:
I. DEVELOPMENT VIEWPOINTS AND OBJECTIVES
A. VIEWPOINTS
1. To develop the electronics industry into an important industry of the economy in the direction of
satisfying export and domestic consumption demands and contributing to accelerating the
process of national industrialization and modernization.
2. To encourage various economic sectors to invest in electronics industry in different scopes and
forms, from assembly of finished products to manufacture of accessories, spare parts and
subsidiary products, attaching special importance to attracting foreign investment from
transnational conglomerates.
3. In the coming time, domestic enterprises will develop through restructuring their production
towards development of specialized electronics, including the manufacture of products,
accessories, spare parts and subsidiary products for informatics, telecommunications, medical
electronics, industrial electronics, mechanical electronics, measurement and automation.
4. Development of human resources to meet qualitative and quantitative requirements constitutes
an important factor in the development of electronics industry in Viet Nam.
B. DEVELOPMENT OBJECTIVES
1. General objectives
To develop Viet Nam's electronics industry in service of national industrialization and
modernization as well as defense and security tasks, and to become competitive in the regional
and world markets.
2. Objective by 2010
The industry will achieve a production turnover of USD 4-6 billion and an export turnover of USD
3-5 billion, create 300,000 jobs, and grow at an annual rate of between 20% and 30%.
3. Vision toward 2020
a/ Electronics industry will become a motive force for development, making great contributions to
export.
b/ To create 500,000 jobs and build a contingent of engineers and technicians with international
qualifications.
c/ Domestic manufacture will be capable of satisfying most of the market demand and not depend
on imported products.
d/ Subsidiary industries will be developed to meet domestic manufacture and export demands.
e/ Manufacturing establishments will be located rationally according to regional development
orientations.
II. DEVELOPMENT ORIENTATIONS
1. Orientations on products and product structure
74
a/ The group of products to be developed includes: computers and peripheral devices;
information-telecommunications products; products of medical electronics, industrial electronics,
measurement and automation; accessories, spare parts and subsidiary products.
b/ To raise the proportion of special-use electronic products, spare parts and accessories by
promoting the manufacture and assembly of special-use electronic products and hi-tech products
in order to improve enterprises' technology capacity.
c/ To develop the production of electronic materials, a domain in which Viet Nam has many
advantages in terms of resources. To prioritize the development of some subsidiary industries
such as template treatment, casting, plastic pressing, metal piercing, and surface treatment
(painting, plating, etc.) in service of the manufacture of spare parts and accessories for the
electronics industry.
2. Orientations on market
To diversify and raise the competitiveness of, products in order to satisfy the domestic market
and approach to the regional and world markets. To concentrate efforts on studying and
developing products of high added value and competitiveness in the region and world.
3. Orientation on human resources
The State encourages all economic sectors in society to participate in the development of human
resources to meet development requirements of electronics industry. To develop human
resources through training:
a/ Experts in designing, researching and developing new products of high added value and
competitiveness so as to meet the demands of the regional and world markets;
b/ Qualified technological engineers who are capable of receiving and effectively applying
advanced technologies in Viet Nam, and creating new technologies;
c/ A contingent of skilled workers who are directly engaged in production activities and ensure
product quality;
d/ Good middle-ranking managers who are capable of effectively managing production
processes.
4. Orientations on research, designing and development of products and technologies
To research and design civil and special-use electronic products, spare parts and accessories of
moderate complexity and diversified designs, so as to meet the market demand and raise product
competitiveness.
To continue building and training a contingent of experts in researching, designing and
developing hi-tech products of high intellectual content, making the full use of advantages in
design, system integration and programming capacity to turn out products of higher added value.
To ensure close coordination among universities, research institutes and enterprises in order to
make the full use of research capacity, equipment and results. To encourage the application of
research results to production and business activities and support the development of new
products.
To apply advanced technologies and receive technologies directly from foreign companies which
have created source technologies without going through an intermediary, regarding economic
benefits as the primary criterion.
5. Orientations on region-based development of electronics industry
75
To concentrate investment in the development of electronics industry in industrial parks and
export-processing zones in key economic regions according to the Government's orientations on
socio-economic development of these regions up to 2010, with a vision towards 2020.
III. IMPLEMENTATION SOLUTIONS
1. Solutions related to mechanisms and policies
a/ To perfect the legal environment in order to improve the investment environment and protect
industrial property rights in electronics industry.
b/ To perfect tax policies along the line of creating conditions for, and taking into account the
benefits of, both assembly enterprises and manufacturing ones, creating a fair and equal
environment for production and business.
c/ To comply with commitments in international agreements (AFTA/CEPT, WTO, etc.).
d/ To accelerate reform of administrative procedures; to raise the state management capacity in
electronics industry; to publicize mechanisms and policies; and to continue perfecting legal
foundations aiming at improving the investment environment.
e/ To invest in the construction of infrastructure: To ensure stable power supply and convenient
information and traffic networks; to build IT parks.
2. Solutions related to investment capital
a/ To encourage all economic sectors to invest in electronics industry, paying special attention to
the attraction of foreign investment capital from giant and transnational conglomerates and
foreign-invested enterprises currently operating in Viet Nam.
b/ To mobilize to the utmost all domestic capital sources for investment in the electronics industry.
c/ To prioritize investment capital from the state budget for infrastructure construction, human
resource training, research-development (R-D) activities and trade promotion in electronics
industry. To prioritize the use of ODA capital borrowed from the Government for electronics
industry development projects.
3. Solutions related to key products
In each period, the Prime Minister shall approve a program on development of key products and,
along with incentive mechanisms for the application of research results to production and
business activities, provide for the minimum proportion of R-D expenditures for the development
of new products in enterprises. Enterprises eligible for participating in developing key products
are entitled to investment incentives from the state budget for R-D activities, pilot production,
trade promotion programs, and supports for production and investment in IT parks. Financial
supports for the development of key products are allocated from the state budget for the program
on development of key information technology products approved by the Prime Minister.
4. Market solutions
a/ The domestic market:
- For special-use electronic products, spare parts and accessories: Enterprises should apply
measures to raise the quality and utility of products, thereby increasing their added value.
- For civil electronic appliances: To apply measures in order to improve product quality, reduce
costs and improve designs in order to increase their domestic market shares.
76
b/ Export markets: To create high-quality electronic products with competitive prices to meet the
market demand. To enhance international cooperation, trade promotion and marketing activities
carried out independently or within the framework of national trade promotion programs, and the
participation in overseas fairs and exhibitions in order to get information on foreign markets and
partners. The State encourages and creates conditions for enterprises to set up their branches or
representative offices or trade centers in foreign countries to conduct market surveys, product
and brand promotion, signing contracts and organize product outlets.
5. Technology solutions
a/ To attract foreign investors to invest and transfer technology in the domain of manufacturing hitech products of high intellectual content.
b/ To make investment in strategic technologies and key products on the basis of increasing
budget allocations for scientific and technological research, providing credit and credit guarantee
for the application of new technologies.
c/ To adopt proper mechanisms in order to commercialize scientific research results. To build a
system of electronic product-testing laboratories up to international standards. To provide
consultancy, guidance and support for enterprises participating in the program on building quality
management systems. To guide industrial property and trademark registration.
6. Solutions related to human resources
a/ To strongly renovate training methods and teaching programs used in electronicstelecommunications and information technology departments of technical universities and
colleges. To boost the training of managers, technicians and skilled workers. To selectively apply
foreign programs and experiences on training human resources for electronics industry,
coordinate closely with prestigious training organizations and establishments in the world and the
region in order to train human resources of high quality.
b/ To encourage the application of a training model with the participation of three parties
(enterprises - institutes and schools - state management agencies) to train high-quality human
resources to meet the requirements of enterprises, in which training establishments will be placed
under the management of enterprises, industrial parks, export-processing zones or IT parks.
c/ To properly address the relations between training, employment and treatment and between
training and retraining. To adopt policies to support electronics enterprises to organize the
training of human resources.
7. Solutions related to subsidiary industries
a/ To improve the capacity of essential processing industries such as piercing metal details,
casting, plating and template manufacture under the framework of the national program on
development of subsidiary industries.
b/ To accelerate the reform of state enterprises engaged in mechanical engineering, plastics and
casting to become enterprises specialized in manufacturing products for subsidiary industries.
IV. Key projects
1. The project on building an information technology-telecommunications industry complex,
carried out by the Ministry of Post and Telematics in association with electronics groups and
enterprises.
2. The project on restructuring electronic products, carried out by the Viet Nam's Association of
Electronics Enterprises.
77
3. The project on building an electronics industry information center, carried out by the Ministry of
Post and Telematics.
4. The project on training human resources for electronics industry, carried out by the Ministry of
Education and Training in coordination with the Ministry of Labor, War Invalids and Social Affairs.
Article 2.- Responsibilities of ministries, branches and localities
1. The Ministry of Post and Telematics shall:
a/ Publicize, and organize the implementation of, the plan on development of the electronics
industry; elaborate and promulgate a list of key information technology products; effectively
manage state budget capital invested in projects on development of key products;
b/ Coordinate with ministries and branches in elaborating policies to facilitate the attraction of
investment in the development of electronics industry; elaborate and promulgate quality
standards and technical regulations applicable to electronic products; coordinate with localities,
especially economic regions, in adopting mechanisms and policies to set orientations for
investors to develop production in accordance with the development orientations set forth in the
master plan;
c/ Act as a market link for domestic enterprises, providing information on technological trends and
product designs, analyzing, forecasting and publicizing statistical data synthesized on a national,
regional or sectoral basis in order to help enterprises take the initiative in producing products
based on market demand and in technological research and development.
2. The Ministry of Industry shall assume the prime responsibility for, and coordinate with
concerned ministries and branches in, formulating programs and policies on development of
subsidiary industries commensurate with the development of electronics industry.
3. The Ministry of Planning and Investment shall assume the prime responsibility for, and
coordinate with the Ministry of Finance and the Ministry of Post and Telematics in, elaborating
investment promotion policies so as to improve the capacity of attracting investment in the
development of the electronics industry; allocate the State's development investment capital for
programs on development of electronics industry in each period.
4. The Ministry of Finance shall assume the prime responsibility for, and coordinate with
concerned ministries and branches in, studying, proposing, amending, or promulgating new
policies on tax and capital sources in order to facilitate enterprises' investment and production
activities; study and promulgate incentive policies to encourage the development of electronics
industry to meet the requirements of international economic cooperation.
5. The Ministry of Trade shall assume the prime responsibility for, and coordinate with the
Ministry of Post and Telematics and concerned ministries and branches in, organizing the
implementation of solutions, programs and projects in order to boost trade promotion, develop
market and build brands for electronics industry. To prioritize electronics industry in the national
trade promotion program.
6. The Ministry of Science and Technology shall elaborate and promulgate policies to promote RD activities, technology import and commercialization of scientific and technological results and
encourage enterprises to develop and renew technologies; and coordinate with the Ministry of
Post and Telematics in promulgating technical regulations, quality standards and regulations on
transfer of special technologies in electronics industry.
7. The Ministry of Education and Training shall formulate training policies and programs;
coordinate with the Ministry of Post and Telematics in formulating policies on training human
resources, including specialists, engineers and skilled workers, for realizing the plan on
development of electronics industry.
78
8. The Ministry of Labor, War Invalids and Social Affairs shall elaborate policies on labor training,
labor, wage, social insurance, health insurance and labor safety for laborers, and on relations
between laborers and labor users in electronics industry.
9. Provincial/municipal People's Committees shall organize investment promotion activities,
invest their resources in the construction and renovation of infrastructure, reform administrative
procedures, associate with other regions and promote their geographical, economic and human
resource advantages to attract foreign investment in industrial parks, export-processing zones, hitech parks and IT parks in their localities.
10. Trade associations and enterprises
Associations shall act as a link between enterprises and state management agencies. Trade
associations, on the one hand, should quickly reflect enterprises' opinions and problems in
administrative procedures to state management agencies, request these agencies to actively help
enterprises solve these problems, and on the other hand, assist enterprises in accessing
statistical indicators and information on the market and products from state management
agencies.
Enterprises shall actively participate in the program on restructuring enterprises and renovate
their working styles so as to match the professionalism of international economic conglomerates
and multi-national companies. To attach importance to re-investment in technological R-D and
the development of new products and key industrial products. Enterprises that participate in these
programs are entitled to incentives prescribed by law.
Article 3.- This Decision takes effect 15 days after its publication in "CONG BAO."
Article 4.- Ministers, heads of ministerial-level agencies and government-attached agencies and
presidents of provincial/municipal People's Committees shall implement this Decision.
PRIME MINISTER, Nguyen Tan Dung
Attachment 05 : Masterplan Footwear
BỘ CÔNG THƯƠNG
--------------------
CỘNG HÒA XÃ HỘI CHỦ NGHĨA VIỆT NAM
Độc lập - Tự do - Hạnh phúc
-----------------------
Số: 6209/QĐ-BCT
Hà Nội, ngày 25 tháng 11 năm 2010
QUYẾT ĐỊNH
PHÊ DUYỆT QUY HOẠCH TỔNG THỂ PHÁT TRIỂN NGÀNH DA – GIẦY VIỆT NAM ĐẾN NĂM
by 2020,
With the view to 2025
--------------------------BỘ TRƯỞNG BỘ CÔNG THƯƠNG
Căn cứ Nghị định số 189/2007/NĐ-CP ngày 27 tháng 12 năm 2007 của Chính phủ quy
định chức năng, nhiệm vụ, quyền hạn và cơ cấu tổ chức của Bộ Công thương;
79
Căn cứ Nghị định số 92/2006/NĐ-CP ngày 07 tháng 9 năm 2006 của Chính phủ về lập,
phê duyệt và quản lý qui hoạch tổng thể phát triển kinh tế - xã hội và Nghị định số 04/2008/NĐCP ngày 11 tháng 01 năm 2008 của Chính phủ sửa đổi bổ sung một số điều của Nghị định số
92/2006/NĐ-CP;
Theo đề nghị của Vụ trưởng Vụ Công nghiệp nhẹ,
QUYẾT ĐỊNH
Điều 1. Phê duyệt Quy hoạch tổng thể phát triển ngành Da – Giầy Việt Nam đến năm
2020, tầm nhìn đến năm 2025 với những nội dung cơ bản như sau:
1. Quan điểm và Định hướng phát triển
a) Phát triển ngành Da – Giầy Việt Nam phù hợp với quy hoạch tổng thể phát triển kinh
tế - xã hội và quy hoạch phát triển công nghiệp cả nước, quy hoạch phát triển kinh tế - xã hội các
địa phương và lộ trình hội nhập quốc tế của Việt Nam;
b) Huy động các thành phần kinh tế, các nguồn lực trong nước và thu hút đầu tư nước
ngoài để xây dựng và phát triển ngành Da – Giầy Việt Nam theo hướng chủ động phục vụ xuất
khẩu và tiêu dùng nội địa, tăng thu ngoại tệ cho đất nước, tăng việc làm, tăng thu nhập đi đôi với
cải thiện đời sống người lao động;
c) Phát triển mạnh sản xuất nguyên phụ liệu và công nghiệp hỗ trợ ngành Da – Giầy
nhằm giảm nhập siêu, nâng cao giá trị gia tăng, tham gia sâu vào chuỗi giá trị gia tăng của thị
trường sản phẩm Da – Giầy thế giới;
d) Phát triển ngành Da – Giầy Việt Nam nhanh, ổn định và bền vững theo hướng chuyên
môn hóa, hiện đại hóa, ứng dụng công nghệ mới hiện đại với thiết bị tiên tiến, thân thiện với môi
trường nhằm tạo ra năng suất lao động và hiệu quả kinh tế cao, chủ động hội nhập kinh tế với
khu vực và thế giới, từng bước chuyển đổi phương thức sản xuất từ gia công sang tự sản xuất,
kinh doanh;
e) Gắn việc phát triển nhanh qui mô sản xuất với việc tập trung mở rộng thị trường xuất
khẩu và thị trường nội địa, nghiên cứu ứng dụng khoa học công nghệ và phát triển nguồn nhân
lực được đào tạo trong đó quan tâm đặc biệt đối với lao động nghèo, lao động nông nghiệp đang
thực hiện chuyển dịch cơ cấu kinh tế từ nông nghiệp sang công nghiệp. Gắn việc phát triển sản
xuất trên cơ sở thực hiện tốt trách nhiệm xã hội, thân thiện và bảo vệ môi trường. Chuyển dịch
các cơ sở gia công mũ giầy về các vùng nông thôn, vùng có nhiều lao động;
g) Nâng cao năng lực tự thiết kế mẫu mã và phát triển sản phẩm mới, ưu tiên ứng dụng
công nghệ tự động hóa trong thực hiện công nghệ và tổ chức quản lý sản xuất;
2. Mục tiêu phát triển
a) Mục tiêu tổng quát
Xây dựng ngành Da – Giầy Việt Nam đến năm 2020 thành một ngành công nghiệp xuất
khẩu mũi nhọn quan trọng của nền kinh tế quốc dân. Tiếp tục giữ vị trí trong nhóm các nước sản
xuất và xuất khẩu các sản phẩm Da – Giầy hàng đầu thế giới. Tạo thêm nhiều việc làm cho xã
hội trên cơ sở thu nhập của người lao động ngày càng được nâng cao, thực hiện trách nhiệm xã
hội ngày càng tốt, số lượng lao động được qua đào tạo ngày càng tăng.
b) Mục tiêu cụ thể
- Tốc độ tăng trưởng giá trị sản xuất công nghiệp ngành Da – Giầy giai đoạn 2011 –
2015 đạt 9,4%/năm; giai đoạn 2016 – 2020 đạt 8,8%/năm; giai đoạn 2020 – 2025 đạt 8,2%/năm;
- Phấn đấu đạt kim ngạch xuất khẩu năm 2015 là 9,1 tỷ USD; năm 2020 là 14,5 tỷ USD
và năm 2025 đạt 21 tỷ USD. Tốc độ tăng trưởng kim ngạch xuất khẩu bình quân trong giai đoạn
2011 – 2015 là 10,9%/năm; giai đoạn 2016 – 2020 là 9,7%/năm và giai đoạn 2021 – 2025 là
7,6%/năm;
- Nâng dần tỷ lệ nội địa hóa các loại sản phẩm. Phấn đấu năm 2015 tỷ lệ nội địa hóa đạt
60-65%, năm 2020 đạt 75-80% và năm 2025 đạt 80-85%;
- Cùng với ngành Dệt May và một số ngành liên quan làm trụ cột phát triển công nghiệp
Thời trang Việt Nam tại một số đô thị, thành phố lớn;
- Xây dựng một số khu – cụm công nghiệp sản xuất Da – Giầy, sản xuất nguyên phụ liệu
và xử lý môi trường tập trung trên cơ sở lợi thế về hạ tầng và lao động để chủ động cung cấp
nguyên phụ liệu, nâng cao năng lực cạnh tranh cho ngành;
- Xây dựng mới và phát triển các cơ sở đào tạo, các cơ sở nghiên cứu khoa học công
nghệ, các trung tâm kiểm định, dịch vụ ngành và các trung tâm Xúc tiến thương mại, trung tâm
Thời trang ở trong nước và nước ngoài.
3. Định hướng Quy hoạch phát triển
80
a) Quy hoạch sản phẩm chiến lược
- Giầy dép là sản phẩm chủ lực của ngành trong đó giầy thể thao và giầy vải được ưu
tiên hàng đầu trong sản xuất và xuất khẩu;
- Sản xuất giầy dép da thời trang và cặp túi ví chất lượng cao phục vụ thị trường mới, thị
trường cao cấp và thị trường nội địa.
- Tập trung sản xuất da thuộc với công nghệ tiên tiến, thân thiện với môi trường phục vụ
chiến lược sản xuất giầy dép da thời trang, cặp túi ví có chất lượng cao để phục vụ xuất khẩu và
thị trường nội địa. Đầu tư sản xuất da thuộc được gắn liền với việc phát triển đàn gia súc góp
phần giảm nhập siêu và chủ động trong sản xuất.
- Sản lượng sản phẩm và tốc độ tăng trưởng sản phẩm bình quân đến năm 2020 như
sau:
TT
1
2
3
1
2
3
Chỉ tiêu
Tổng giầy dép các loại Total
assorted footwear
Cặp – túi – ví các loại bags,
cases, purses
Da thuộc leather
- Da thuộc cứng
- Da thuộc mềm (bia 30x30)
Đơn vị tính Unit
Triệu đôi million
pairs
Triệu cái million
items
1,000 tấn tones
Triệu bia million
sheets 30 x 30
cm
Tăng trưởng bình quân Average growth
Tổng giày dép các loại
%/năm %/year
Cặp – túi – ví các loại
%/năm
Da thuộc
- Da thuộc cứng
%/năm
- Da thuộc mềm
%/năm
2015
1.172
2020
1.698
170
285
39
197
63
277
2011 - 2015
9,0
13,0
2016 – 2020
7,7
12,0
15,0
10,0
10,0
7,0
b) Quy hoạch theo vùng lãnh thổ
Quy hoạch các trung tâm phát triển và bố trí năng lực sản xuất theo vùng lãnh thổ được
dựa trên lợi thế về nhân lực, về nguồn cung cấp nguyên phụ liệu, giao thông, cảng biển theo
hướng: duy trì và phát triển các trung tâm Da – Giầy hiện có tại các đô thị và thành phố lớn thành
các trung tâm thương mại, thiết kế mẫu mốt, dịch vụ công nghệ có giá trị gia tăng cao; di dời các
các cơ sở sản xuất đặc biệt là các cơ sở may gia công mũ giầy về các vùng lân cận, các vùng
nông thôn có nhiều lao động.
Bố trí sản xuất và đầu tư của ngành Da – Giầy trên toàn quốc được xác định thành 4
vùng chủ yếu như sau:
Vùng 1: Vùng đồng bằng sông Hồng
Qui hoạch theo định hướng lấy thành phố Hà Nội làm trung tâm dịch vụ, cung cấp
nguyên phụ liệu, công nghệ, mẫu mốt, các cơ sở sản xuất các sản phẩm giầy dép, cặp túi ví có
giá trị cao, qui mô hợp lý và các trung tâm xúc tiến thương mại chuyên ngành.
Các doanh nghiệp sản xuất gia công sẽ được phát triển hoặc di dời về các tỉnh như: Hải
Dương, Bắc Ninh, các khu vực lân cận thành phố Hải Phòng, Phố Nối (Hưng Yên), Đồng Văn
(Hà Nam), Nam Định, Hà Nội mở rộng, Phú Thọ và Vĩnh Phú. Tại khu vực này sẽ hình thành khu
– cụm sản xuất và kinh doanh mua bán nguyên phụ liệu và công nghiệp phụ trợ, cụm công
nghiệp nhỏ và làng nghề truyền thống. Phát triển trung tâm đào tạo và trung tâm nghiên cứu
khoa học và ứng dụng, chuyển giao công nghệ.
Vùng 2: Vùng Đông Nam Bộ
Qui hoạch theo định hướng lấy thành phố Hồ Chí Minh làm trung tâm dịch vụ, cung cấp
nguyên phụ liệu, công nghệ, mẫu mốt, các cơ sở sản xuất các sản phẩm có giá trị cao, qui mô
hợp lý và các trung tâm xúc tiến thương mại chuyên ngành, xây dựng các cụm công nghiệp nhỏ
và làng nghề truyền thống tại các quận ven thành phố. Di dời các cơ sở thuộc da tại trung tâm và
lân cận thành phố đến các khu thuộc da tập trung cách xa thành phố và khu vực đông dân cư.
Các cơ sở sản xuất giầy dép và cặp túi ví sẽ được phát triển hoặc di dời về các tỉnh như:
Bình Dương, Đồng Nai, Tây Ninh. Tại khu vực này sẽ hình thành khu – cụm sản xuất và kinh
81
doanh mua bán nguyên phụ liệu và công nghiệp phụ trợ. Phát triển trung tâm đào tạo và trung
tâm nghiên cứu khoa học và ứng dụng, chuyển giao công nghệ.
Vùng 3: Vùng Bắc Trung Bộ và Duyên hải miền Trung
Qui hoạch theo định hướng lấy thành phố Đà Nẵng làm trung tâm để hình thành cụm
công nghiệp gia công và sản xuất giầy dép, cặp túi ví lớn của ngành Da – Giầy.
Các cơ sở may mũ giầy, sản xuất giầy dép, cặp túi ví và sản phẩm Da – Giầy được chế
biến từ da cá sấu và da đà điểu sẽ được phát triển tại các tỉnh như: Bình Định, Đà Nẵng, Quảng
Nam, Khánh Hòa.
Vùng 4: Vùng đồng bằng sông Cửu Long
Qui hoạch lấy thành phố Cần Thơ làm trung tâm. Khuyến khích các doanh nghiệp phát
triển mở rộng gia công sản xuất giầy dép và thiết lập với các doanh nghiệp Da – Giầy trong khu
vực do có lợi thế về nguồn lao động và các hỗ trợ ưu đãi dành cho khu vực tiếp nhận chuyển
dịch cơ cấu kinh tế.
Chú trọng phát triển sản phẩm da thuộc, giầy dép, cặp túi ví được chế biến từ da cá sấu
và da trăn. Đây là thế mạnh của vùng trong những năm gần đây do phát triển được vùng chăn
nuôi động vật có da nốt sần lớn nhất tại Việt Nam.
(Chi tiết xem Phụ lục số 1 kèm theo Quyết định này).
4. Nhu cầu vốn đầu tư phát triển ngành Da – Giầy
- Tổng nhu cầu vốn đầu tư toàn ngành giai đoạn 2011-2015 là 28.340 tỷ đồng. Trong đó:
+ Huy động trong nước : 12.340 tỉ đồng, chiếm 44%;
+ Kêu gọi đầu tư nước ngoài: 835 triệu USD, chiếm 56%.
- Tổng nhu cầu vốn đầu tư toàn ngành giai đoạn 2016-2020 là 31.230 tỷ đồng. Trong đó:
+ Huy động trong nước: 13.124 tỷ đồng, chiếm 42% tổng vốn đầu tư;
+ Kêu gọi vốn đầu tư nước ngoài: 944 triệu USD, chiếm 58% tổng vốn đầu tư.
- Tổng nhu cầu vốn đầu tư toàn ngành giai đoạn 2011-2020 là 59.570 tỷ đồng. Trong đó:
+ Huy động trong nước: 43%
+ Kêu gọi đầu tư nước ngoài: 57%.
(Chi tiết xem Phụ lục số 2 kèm theo Quyết định này).
5. Hệ thống các giải pháp thực hiện quy hoạch
a) Giải pháp đầu tư
Tiếp tục tranh thủ xu hướng chuyển dịch đầu tư của ngành Da – Giầy thế giới từ các
nước phát triển, gắn liền đầu tư với hội nhập, tham gia phân công lao động quốc tế để tạo cơ hội
phát triển, mở rộng sản xuất.
Huy động mọi nguồn vốn từ tất cả các thành phần kinh tế, thuộc các hình thức sở hữu
khác nhau trong và ngoài nước để xây dựng, phát triển thêm các cơ sở sản xuất kinh doanh.
Khuyến khích phát triển các doanh nghiệp nhỏ và vừa, các làng nghề truyền thống. Đặc
biệt khuyến khích khởi sự các doanh nghiệp Da – Giầy tạo được nhiều việc làm cho xã hội và sử
dụng lao động tại chỗ ở các vùng nông thôn.
Quá trình đầu tư đảm bảo vừa tăng nhanh qui mô, mở rộng năng lực sản xuất, vừa bảo
đảm từng bước tái cấu trúc ngành theo hướng phát triển bền vững và hiệu quả ngày càng cao.
Một số dự án đầu tư chính như sau:
- Đầu tư mở rộng thêm trên 3 nghìn dây chuyền sản xuất May mũ giầy và các dự án sản
xuất cặp túi ví. Các dự án đầu tư này được thực hiện tại các vùng nông thôn, có khả năng cung
cấp nhiều lao động.
- Đầu tư mới và mở rộng trên 400 dây chuyền gò ráp và hoàn chỉnh giầy dép. Các dự án
đầu tư này được thực hiện tại các tỉnh có ưu thế về cảng biển, nguyên phụ liệu;
- Đầu tư mới và phát triển các trung tâm nghiên cứu thời trang tại các thành phố lớn; các
trung tâm phân tích đánh giá chất lượng nguyên phụ liệu, sản phẩm, các dự án đầu tư khu xử lý
chất thải và bảo vệ môi trường;
Các dự án sản xuất nguyên phụ liệu Da - Giầy, dự án đầu tư khu – cụm công nghiệp
nguyên phụ liệu Da - Giầy được hưởng được mọi ưu đãi như công nghiệp hỗ trợ và được hưởng
các ưu đãi về tín dụng đầu tư và tín dụng xuất khẩu của Nhà nước;
Nhà nước ưu tiên xem xét, dành đủ quĩ đất để phát triển các khu-cụm công nghiệp thuộc
da, sản xuất nguyên phụ liệu, xây dựng các trung tâm nguyên phụ liệu ngành Da - Giầy; các
trung tâm đào tạo, nghiên cứu khoa học và nghiên cứu ứng dụng chuyển giao công nghệ, thiết
kế mẫu mốt; các trung tâm kiểm định và các khu xử lý môi trường tập trung của ngành.
b) Giải pháp phát triển sản xuất nguyên phụ liệu và công nghiệp hỗ trợ.
Khuyến khích tập trung các nguồn lực để ngành Da - Giầy chủ động hướng ra xuất khẩu
và gia tăng chuỗi giá trị tương lai sản phẩm Da - Giầy. Trong đó, ưu tiên mở rộng thêm ở ba lĩnh
vực: thiết kế phát triển sản phẩm, sản xuất nguyên phụ liệu và kiểm định chứng nhận sản phẩm.
Việc tập trung đầu tư vào ba lĩnh vực trên để gia tăng giá trị và năng lực cạnh tranh của sản
phẩm giầy dép, cặp túi ví và da thuộc Việt Nam, chủ động cân đối nguyên phụ liệu trong sản
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xuất, tiết kiệm chi phí và chủ động về xuất xứ sản phẩm thông qua việc nội địa hóa sản phẩm ở
mức độ cao. Một số dự án chủ yếu:
- Xây dựng 02 (hai) trung tâm (01 ở phía nam, 01 ở phía Bắc) sản xuất nguyên phụ liệu
và dịch vụ, cung ứng nguyên phụ liệu và công nghiệp hỗ trợ nhằm tạo ra bước đột phá đối với
công nghiệp hỗ trợ ngành Da - Giầy.
- Xúc tiến xây dựng 02 (hai) khu – cụm công nghiệp thuộc da tập trung (01 ở phía nam,
01 ở phía Bắc) có hệ thống xử lý chất thải để đáp ứng nhu cầu về da thuộc trong nước và xuất
khẩu, giảm nhập khẩu, tăng tỷ lệ nội địa hóa.
- Xúc tiến thực hiện dự án xây dựng các trung tâm nghiên cứu thiết kế thời trang và phát
triển sản phẩm Da - Giầy tại thành phố Hà Nội và thành phố Hồ Chí Minh;
- Khuyến khích các doanh nghiệp nghiên cứu sản xuất máy móc thiết bị trong nước để
phục vụ phát triển ngành, giảm nhập siêu.
c) Giải pháp thị trường
Để tiếp tục giữ vững và mở rộng thị phần xuất khẩu, từng bước chiếm lĩnh lại thị trường
trong nước, ngành Da - Giầy cần phát triển dựa trên nền tảng năng lực sản xuất mạnh và chủ
động, với đội ngũ doanh nhân đủ năng lực kinh doanh sản phẩm thời trang quốc tế. Cụ thể:
- Giữ vững sản phẩm chủ lực (giầy thể thao và giầy vải) và thị trường truyền thống (Hoa
Kỳ, EU, Nhật Bản) đi đôi với chủ động và linh hoạt trong việc đổi mới cơ cấu sản phẩm xuất khẩu
nhằm đáp ứng nhu cầu ngày càng đa dạng và cao của thị trường, đặc biệt là thị trường xuất
khẩu;
- Nghiên cứu để có cảnh báo sớm về việc khả năng bị áp đặt các biện pháp trừng phạt
chống trợ cấp và chống bán phá giá nhằm tránh các vụ kiện khi tham gia thị trường thế giới.
Đồng thời tiếp cận với việc áp dụng các biện pháp phòng vệ thương mại về bán phá giá, về sở
hữu trí tuệ để bảo vệ sản xuất và người tiêu dùng trong nước;
- Tăng cường công tác xúc tiến thương mại thông qua Chương trình xúc tiến thương mại
quốc gia để giữ vững thị trường xuất khẩu truyền thống (Hoa Kỳ, EU, Nhật) và phát triển thị
trường mới (Trung Đông, Châu Phi, SNG, Châu Á). Thường xuyên tổ chức hội chợ, triển lãm
trong và ngoài nước để các doanh nghiệp có cơ hội quảng bá, giới thiệu sản phẩm đến người
tiêu dùng trong cả nước và nhà đầu tư nước ngoài đang tìm kiếm cơ hội sản xuất – kinh doanh
sản phẩm Da - Giầy tại Việt Nam;
- Sản xuất các sản phẩm Da - Giầy với mẫu mã, chất lượng, giá cả phù hợp với thị hiếu,
thói quen tiêu dùng của người Việt Nam. Phát triển, mở rộng hệ thống phân phối sản phẩm của
doanh nghiệp trong nước về các vùng nông thôn, miền núi. Hưởng ứng và tham gia tích cực
cuộc vận động “Người Việt Nam ưu tiên dùng hàng Việt Nam”;
- Phối hợp với ngành Dệt May xây dựng một số trung tâm thời trang và kinh doanh
chuyên ngành tại các đô thị, trung tâm kinh tế lớn;
- Chủ động tiếp cận với các kỹ năng kinh doanh hiện đại trong đó chú trọng ưu tiên xây
dựng thương hiệu doanh nghiệp, xây dựng thương hiệu và nhãn hiệu sản phẩm, xây dựng
thương hiệu nhóm hàng, thương hiệu ngành hàng nhằm tạo hình ảnh cho sản phẩm Da - Giầy
Việt Nam trên thị trường quốc tế và trong nước.
d) Giải pháp đào tạo phát triển nguồn nhân lực
Từ nay đến năm 2020, ưu tiên đào tạo phát triển nguồn nhân lực nhằm tạo nguồn lực
chuyển đổi phương thức sản xuất, nâng cao chất lượng nguồn nhân lực có khả năng tham gia
hội nhập sản xuất - kinh doanh quốc tế trên cơ sở khơi dậy tiềm năng xã hội, tạo động lực phát
triển ngành và thực hiện cơ chế xã hội hóa một cách sâu rộng. Cụ thể:
- Phối hợp với các trường của Bộ Công Thương và các cơ sở đào tạo khác xây dựng
một số trung tâm đào tạo chuyên ngành Da - Giầy đạt chuẩn quốc gia và quốc tế theo phương
thức xã hội hóa về giáo dục và đào tạo;
- Xây dựng hệ thống đào tạo trên cơ sở phối hợp chặt chẽ các trụ cột chính là nhà nước
– nhà trường – doanh nghiệp;
- Xây dựng hoàn chỉnh bộ module nghề theo các phân khúc của chuỗi giá trị gia tăng
ngành Da - Giầy (thiết kế - sản xuất – bán hàng) nhằm tạo nền tảng dữ liệu đào tạo cho các cơ
sở đào tạo, cho các doanh nghiệp dựa vào đó đào tạo nguồn nhân lực sát thực tế công việc tại
doanh nghiệp, rút ngắn khoảng cách giữa lý thuyết và thực hành, tạo điều kiện để doanh nghiệp
dễ dàng tái đào tạo, đào tạo nâng cao tay nghề cho người lao động;
- Đẩy mạnh và mở rộng hợp tác quốc tế trong lĩnh vực đào tạo để xây dựng và nâng tầm
nguồn nhân lực có trình độ cao ngang với các nước tiên tiến có thể xâm nhập sâu vào thị trường
quốc tế.
- Khuyến khích mọi thành phần kinh tế, mọi hình thức doanh nghiệp trong nước và ngoài
nước góp vốn tham gia đầu tư vào đào tạo lĩnh vực Da - Giầy.
- Nhà nước hỗ trợ một phần kinh phí từ ngân sách và các dự án hỗ trợ phát triển kinh tế
khác của cộng đồng trong và ngoài nước cho hoạt động nghiên cứu, đào tạo và đầu tư cơ sở vật
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chất kỹ thuật nhằm nâng cao năng lực cho các Viện nghiên cứu, các cơ sở đào tạo cho ngành
Da - Giầy;
- Hiệp hội Da - Giầy Việt Nam và Viện nghiên cứu Da - Giầy là đầu mối phối hợp liên kết
với các trường đào tạo chuyên nghiệp thông qua hình thức mở lớp đào tạo cán bộ quản lý, cán
bộ thiết kế, kỹ thuật, cán bộ kinh doanh, kế hoạch; Kết hợp đào tạo dài hạn và ngắn hạn; Kết hợp
giữa đào tạo chính quy và đào tạo tại chỗ, đào tạo trong nước và cử cán bộ ra nước ngoài đào
tạo;
e) Giải pháp phát triển khoa học công nghệ và bảo vệ môi trường
- Mở rộng và nâng cao năng lực cơ sở nghiên cứu khoa học ngành Da - Giầy theo
hướng tự chủ, tự chịu trách nhiệm để trở thành các đơn vị nòng cốt trong việc nghiên cứu ứng
dụng công nghệ mới, vật liệu mới, đào tạo nguồn nhân lực và tham gia tư vấn, đề xuất chiến
lược phát triển chung của ngành Da - Giầy;
- Nhà nước khuyến khích các doanh nghiệp đầu tư nghiên cứu khoa học và ứng dụng
triển khai công nghệ tiên tiến, hiện đại vào sản xuất thông qua các hình thức mua bán, chuyển
giao công nghệ từ các nước có nền công nghiệp Da - Giầy phát triển;
- Nghiên cứu xây dựng các modul quy trình công nghệ xử lý chất thải dạng rắn, lỏng, khí
trong thuộc da, sản xuất giầy dép và chế biến đồ da theo công nghệ tiên tiến, thân thiện và bảo
vệ môi trường;
- Xây dựng cơ sở dữ liệu cỡ số phom giầy Quốc tế và Việt Nam, xây dựng cơ sở dữ liệu
ngành Da - Giầy và hệ thống các modul thiết kế mỹ thuật và thiết kế kỹ thuật sản phẩm giầy dép;
- Xây dựng 02 (hai) Trung tâm phân tích đánh giá nguyên phụ liệu, sản phẩm và môi
trường ngành Da - Giầy tại Hà Nội và thành phố Hồ Chí Minh;
- Đẩy mạnh hợp tác quốc tế và khuyến khích phát huy sức sáng tạo từ nội lực quốc gia
trong nghiên cứu khoa học, công nghệ nhằm tạo ra công nghệ tiên tiến cho ngành trên cơ sở
thúc đẩy xây dựng và triển khai một số đề án khoa học công nghệ cụ thể phù hợp với từng giai
đoạn phát triển của ngành.
f) Giải pháp quản lý ngành
- Nhà nước tiếp tục thực hiện cải cách hành chính trong đó tập trung hoàn thiện, đơn
giản hóa thủ tục hành chính trong công tác đầu tư, xuất nhập khẩu, hải quan, hoàn thuế để thu
hút đầu tư và giảm chi phí cho doanh nghiệp;
- Nâng cao vai trò và hiệu quả hoạt động của Hiệp hội Da - Giầy Việt Nam trên cơ sở làm
tốt nhiệm vụ cầu nối giữa các doanh nghiệp Da - Giầy trong ngành, giữa cộng đồng doanh
nghiệp Da - Giầy với Chính phủ (trực tiếp là Bộ Công Thương). Hiệp hội tạo tiếng nói chung của
các doanh nghiệp, giải quyết các vấn đề chung của ngành, tập hợp ý kiến và đề xuất của các
doanh nghiệp Da - Giầy đối với Chính phủ và Bộ Công Thương trong việc chỉ đạo và xây dựng
hành lang pháp lý để cộng đồng các doanh nghiệp hoạt động và phát triển bền vững, có hiệu quả
trong khuôn khổ pháp luật của Việt Nam và Quốc tế;
- Xây dựng quy chuẩn kỹ thuật và bộ tiêu chuẩn Việt Nam (TCVN) trong lĩnh vực Da Giầy đáp ứng yêu cầu hội nhập kinh tế quốc tế và pháp luật của Việt Nam;
- Tăng cường công tác kiểm tra, giám sát thực hiện Luật Sở hữu trí tuệ, Luật Thương
mại và sử dụng các biện pháp phòng vệ thương mại hợp pháp để đảm bảo quyền lợi người tiêu
dùng và doanh nghiệp.
Điều 2. Tổ chức thực hiện
1. Bộ Công thương chủ trì, phối hợp với các Bộ, ngành liên quan và Ủy ban nhân dân
các tỉnh, thành phố trực thuộc Trung ương chỉ đạo phát triển ngành theo Quy hoạch này và chịu
trách nhiệm công bố công khai Quy hoạch;
2. Các Bộ: Kế hoạch và Đầu tư; Tài chính; Nông nghiệp và Phát triển nông thôn; Khoa
học và Công nghệ; Tài nguyên và Môi trường; Giáo dục và Đào tạo; Ngân hàng Nhà nước Việt
Nam; Ngân hàng Phát triển Việt Nam theo chức năng của mình phối hợp với Bộ Công Thương
để hỗ trợ các doanh nghiệp, các địa phương trong việc triển khai thực hiện Quy hoạch và các đề
án đã được phê duyệt.
3. Ủy ban nhân dân tỉnh, thành phố trực thuộc Trung ương cụ thể hóa Quy hoạch tổng
thể phát triển ngành Da - Giầy trên địa bàn tỉnh, thành phố; tham gia với các Bộ, ngành kiểm tra,
giám sát việc triển khai thực hiện Quy hoạch để đảm bảo tính đồng bộ, thống nhất với Quy hoạch
tổng thể phát triển kinh tế - xã hội của địa phương.
4. Hiệp hội Da - Giầy Việt Nam phối hợp với Bộ Công thương tuyên truyền, phổ biến Quy
hoạch tổng thể phát triển ngành Da - Giầy cho cộng đồng các doanh nghiệp ngành Da - Giầy cả
nước để có định hướng và kế hoạch phát triển sản xuất kinh doanh phù hợp với Quy hoạch.
Tổng hợp ý kiến và kiến nghị của các doanh nghiệp với cơ quan có thẩm quyền để điều chỉnh
quy hoạch cho phù hợp với tình hình thực tế.
Điều 3. Quyết định này có hiệu lực kể từ ngày ký.
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Điều 4. Các Bộ trưởng, Thủ trưởng cơ quan ngang Bộ, Thủ trưởng cơ quan thuộc Chính
phủ, Chủ tịch Ủy ban nhân dân tỉnh, thành phố trực thuộc Trung ương và các cơ quan có liên
quan chịu trách nhiệm thi hành Quyết định này./.
BỘ TRƯỞNG
Vũ Huy Hoàng
Attachment 06 : summary Viet Namese Labour law
Source: VDClaywer.com / Viet Nam
Summary Viet Namese Labour law
1. No prison or forced labor
According to the Viet Nam Labor Law, paragraph 2, Article 5 that maltreatment of workers and the use if
forced labor in any form shall be prohibited
According to the Viet Nam Labor Law, Article 9, the employment relationship between workers and
employers shall be established and developed through negotiations and agreement on the principles of
voluntary, equality, co-operation, respect of each other’s lawful rights and interests, and full observance of
commitments.
2. No Child Labor
Minimum Age
In accordance with Viet Nam Labor Law, Article 6, the minimum age for workers is 15 for all industries.
Record Keeping
According to the Viet Nam Labor Law, Article 119 at places where young workers (under 18 years old) are
employed, separate records shall be kept mentioning in full the name, date of birth, work assigned and
results of periodic health checks.
3. Working Hours
According to the Viet Nam Labor Law, Article 122 the hours of work for young workers shall not exceed 7
hours per day or 42 hours per week.
According to the Viet Nam Labor Law, Article 119 states that young workers are workers under 18 years of
age.
4. Harassment/discipline
According to the Viet Nam Labor Law, Article 5, maltreatment of workers is prohibited.
According to the Viet Nam Labor Law, Article 8, Section 3, employers have the obligation to respect the
workers’ honor and dignity, and to treat workers correctly.
According to the Viet Nam Labor Law, Article 111, Section 1, all acts by employer to offend female
workers’ dignity and honor are strictly prohibited.
5. Nondiscrimination
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In accordance the Viet Nam Labor Law, with Article 5, Section 1, every person shall have the right to
work, to chose freely the type of work or trade and to improve professional skills without any
discrimination in respect of sex, race, social belonging, creed, or religion.
According to the Viet Nam Labor Law, Article 9 indicates that the labor relationship between workers and
employers shall be established and developed through negotiations and agreement on the principles of
voluntariness, equality, co-operation, respect for each other's lawful rights and interests, and full
observance of commitment.
Accoding to the Viet Nam Labor Law, Article 111, Section 1, the employer must implement the principle
of equality between men and women in respect of recruitment, employment, advancement in wage grades,
and remuneration.
6. Freedom of association
According to the Viet Nam Labor Law, Article 153, in order to represent and defend the rights and interests
of workers and their labor collectives, the Federation of Labor at the provincial level shall set up trade
union organizations in every enterprise, not later than six months from the date of commencement of
operations in the case of newly established enterprises.
Collective bargaining
According to Point 1 of Article 44 of the Viet Nam Labor Code, a collective labor agreement is a written
agreement completed between the workers’ collective and the employer concerning conditions of work and
employment, and the rights and interests of each party to the labor relationship. A collective agreement
shall be negotiated and concluded by the representative of the labor collective (employees) and the
employer in accordance with the principles of voluntariness, equality and openness to the public.
7. Health and Safety
According to the Viet Nam Labor Law, Article 95 the employer shall be responsible for providing adequate
means of protection to the employees, ensuring occupational safety and health, and improving the working
conditions of the employees.
H&S regulation Posting
According to Article 3 point 1, Government Decrees No. 06/ND-CP dated on January 20, 1995 (Amended
December 27, 2002) regarding Occupational safety and hygiene requirements; Occupational safety and
hygiene criteria and procedures are mandatory. On the basis of occupational safety and hygiene criteria and
procedures promulgated by the State or a branch concerned, an employer must prepare occupational safety
and hygiene rules for each particular machinery, equipment, and material item, and internal rules on
occupational safety and hygiene for the work place.
Personal Protective Equipment
According to the Viet Nam Labor Law, Article 101, workers engaged in dangerous and harmful work (i.e.
toxic work) must be provided with protective clothing, PPE, allowances in kind and other preferential
treatment as regards to hours of work and rest.
According to Section 1, Article 95 of Viet Nam Labor Law, the employer shall be responsible for providing
adequate means of protection to the workers, ensuring occupational safety and health, and improving the
working conditions of the workers.
According the part 7, Section III, Circular 10/1998/BLDTBXH of Ministry of Labor dated on May 28,
1998 regarding personal protective requirement. Workers are required to use personal protective equipment
provided while working.
Protective Machine Guards
According to the Viet Nam Labor Law, Article 98 regarding mechanical safety, the employer must ensure
that machinery, equipment, workshop and storehouses are checked and repaired periodically in accordance
with occupational safety and health standard.
Dangerous Chemicals
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According to the Viet Nam Labor Law, Article 97, the employer shall ensure that the workplace meets the
prescribed standards on space, ventilation, light, and the health standards permitted in respect of dust,
emanation, toxic gas, radioactivity, electromagnetic field, heat, humidity, noise, vibration, and other
harmful elements. Such elements must be periodically checked and measured. At workplaces holding
dangerous and harmful elements likely to cause occupational accidents, the employer must provide
appropriate technical and medical facilities, and personal protective equipment (“PPE”) to ensure prompt
rescue in case of emergencies or accidents.
Chemical
According to the Viet Nam Labor Law, Article 96, section 2 the production, utilization, maintenance and
transportation of machines, equipment, materials, energy, electricity, chemicals, fertilizers, herbicides,
raticides, the change of technologies and importation of new technologies must be done in conformity with
the norms of labour safety and labour sanitation. The production or importation of machines, equipment,
materials and substances requiring a high level of labour safety and sanitation must be declared and
registered and have the licenses of the State inspection offices on labour safety or labour sanitation.
Fire Fighting
According to the Government Decision 35/2003/ND-CP dated on April 4, 2003 providing guidance on the
Viet Nam Law of Fire Fighting and Prevention, Article 9, Point 1, regarding Conditions on fire safety for
enterprises;
An enterprise is located on a specific location, which has people working in, shall be ensured the following
conditions are included;
- Enterprise must set up; fire safety regulation, restriction signs, notify signs, evacuation plans applicable
with the size and enterprise’s operational condition;
- Set up a policy and assigned personnel responsible for fire fighting and prevention in the enterprise;
- Set up a fire fighting plan and fire escape plan which have certified by the authority agency.
- Ensure electricity wiring, machineries using electricity, equipments against thunderbolt are incompliance
with the fire safety standards.
- Establish fire safety procedures applicable with specific working condition of individual enterprise;
- Establish the fire fighting team with well trained, which is always available at enterprise for any case of
fire;
- Install fire alarm, fire fighting equipments, fire prevention equipments, and other applicable fire fighting
equipments meet the requirement;
- Maintain onsite all documentations regarding fire fighting and prevention in accordance with the
requirement;
Fire inspection
According to the Government Decision 35/2003/ND-CP dated on April 4, 2003 providing guidance on the
Viet Nam Law of Fire Fighting and Prevention, Article 19, Point 2 regarding fire fighting plans,
equipments and fire prevention inspection; All fire fighting plans, equipments and fire prevention must be
checked frequently, on timely basic and unscheduled inspection.
Fire drill training
According to the Government Decision 35/2003/ND-CP dated on April 4, 2003 providing guidance on the
Viet Nam Law of Fire Fighting and Prevention, Article 22, Point 5a, The person who set up and responsible
for fire fighting plans shall conduct the fire drill training at least one a year and on unscheduled training
upon requested
First Aid
According to the Viet Nam Labor Law, Article 103, the business has the responsibility to organize
healthcare for the laborers and must give first aid and emergency aid to the laborers when necessary.
According to Circular 09/2000/BYT of the Ministry of Health dated on April 28, 2000, provides guidance
on health care for workers in medium and small enterprises, Section III, Point 3 as follow; the employer
87
shall be responsible for (well organized on) first aid activities in the enterprise. The person in charge for
first aid must be trained and obtain qualified certificate from the Provincial Centre for Medical Prevention,
or District Center for Medical. Each work floor shall be provide with first aid kits with content and side as
follow (ANNEX 2); One first aid kit is provided to every 25 workers and the items in the first aid kit shall
be including; 2 adhesive roll bandages, 2 grid rolls -5 x 200cm, 2 average bandage roll -10 x 200cm, 1
larger bandage roll -15 x 200cm, 5 cotton balls (packet), 3 triangular bandages (units), 1 scissors, 2 disposal
gloves or latex (pair), 1 anti-toxic appropriate facemask, 1 hydrogen peroxide, 1 antiseptic cleansing
agents, and 1 first aid procedures (CFR Procedure).
Health examinations
According to the Viet Nam Labor Law, Article 102, in recruiting and arranging labor the labor user shall
based himself on the health criteria for each type of work. He must organize training, guidance, and inform
the laborer of the regulations and measures of safety and sanitation and the possibilities of accident to be
prevented in the work of each laborer. The laborer must be given a health check during the recruitment and
periodical health checks according to the prescribed regime. The cost of health checks for the laborer is
borne by the labor user.
According to Circular 13/BYT-TT of the Ministry of Health dated on October 24, 1996 regarding medical
check up for workers. Point 3.2.2, every year, the employer must organize a medical check up for all
workers including training and probation workers. For those who work in hard & harmful conditions must
have one medical check up for every 6 months. The employer must establish the health monitoring books
for all workers. All medical check up expenses will be paid by employer.
Hard& Harmful jobs in Apparel
According to Decision No. 1629/LDTBXH-QD dated December 26, 1996 and Decision No. 1152/2003/
QÐ-BLÐTBXH dated September 18, 2003 by Ministry of Labor-War Invalids-Social Affairs regarding to
the temporary list of hard, harmful, dangerous works, and special hard, harmful, dangerous works, hand
knitting work, sewing and button sewing, cutting works in the garment industry are classified as hard and
harmful work.
Hard & Harmful jobs in Footwear
According to Decision 190/1999/QD-BLDTBXH dated on March 3, 1999 of the Ministry of Labor
regarding list of jobs in footwear industry that classified as dangerous, hard and harmful work including;
vacuum drier, leather polisher, shoe former machine operator, paint on leather, chemical mixer, glue
sticker, and industrial machines maintenance.
Health room
According to the Circular 14/1998/TTLT of Ministry of Labor, Ministry of Health and Viet Nam Labor
Federation, Section 3, point 3.1(a and b), all enterprises must establish a department or person in charge of
health care of the enterprise, and be attended on all worked hours in the enterprise. The number of staff or
their occupation up to the enterprise dimension;
b. Point b: The enterprises have less harmful elements are applied as follow.
- The enterprises which have lesser than 300 employees, shall be attended at least a nurse looking after
employee’s health care.
- The enterprises, which have from 300 to 500 employees, shall be attended at least one physian and one
nurse.
- The enterprises which have from 501 to 1,000 employees shall be attended at least a Doctor and a nurse.
- The enterprises which have over 1,000 employees shall be established a clinic with Doctors and nurses in
the enterprise.
Canteen/food license
According to The State Law article 28, point 2 of Food Hygienic and Safety No.12/2003Pl-UBTVQH11
dated on July 26, 2003. Enterprise or Private own who dealing with the high risk of food safety have to be
authorized and certified by the Local Authority Agency.
88
According to Decision No.163/2004/ND-CP, Article 15, Point 1, dated September 7, 2004 by the Viet
Namese Government to guide the implementation of some articles regarding the State law of food hygiene
and safety. Organizations, family, and private business that trade in high risk food poisoning have to submit
relevant document to the authorized government agencies for obtaining qualified certificate about trading in
high risk food poisoning.
According to Decision No.163/2004/ND-CP, Article 34, dated September 7, 2004 by the Viet Namese
Government to guide the implementation of some articles regarding the State law of food hygiene and
safety. Organizations, family, and private business which trade in food service have the responsibility to
implement guidance, requirements about food hygiene and safety, and to keep food sample in 24 hours for
inspection purpose.
According to Decision 4128/ 2001/ QD-BYT, dated November 03, 2001 by the Viet Namese Ministry of
Health, and also according to Point A and F of Article 1 of Regulations on hygiene, safety and maintenance
of foods provided by companies’ canteen and kitchen, or ready – made foods supplying businesses dated
November 03, 2001, the position of the kitchen, or canteen must have good safe & hygienic environments,
and must be separated from other sources of contamination or pollution; and the sewage system at the
cooking area or at the kitchen must be clean and drained, and food staff must be trained on food safety and
hygiene.
Also according to Point 8 of the Guidance 037 of HCMC Center for Medical Reserve, dated January 23,
2002, regarding temporary guidance on keeping food samples at businesses, food samples must be kept for
at least 24 hours.
Food Hygienic
According to Decree No. 4128/2001/QD-BYT, dated October 3, 2001of the Ministry of Health providing
the guidances of standards of food safety and hygiene at collective kitchens, canteens and businesses
trading in ready-made food in General Provision Section II, Point 4, as follow;
a. Collective kitchens, canteens and businesses have to submit water sample for testing to Medical
Prevention Center at least once a quarter (3 months).
b. Using food additives, food color out of the approved list of food additives of the Ministry of Health is
prohibited.
c. Using rotten, broken, spoiled food materials for preparing food is prohibited.
d. Well-done food must be covered to prevent from houseflies, dust, and other kinds of insect.
Hygienic Training
According to Decree No. 4128/2001/QD-BYT dated October 3, 2001of the Ministry of Health providing
the guidance of standards of food safety and hygiene at collective kitchens, canteens and businesses trading
in ready-made food in General Provision Section II, Point 2, as follow;
a. The cooks and food staff serving food have to attend a training course on food safety and hygiene and
have responsibilities of their works.
b. The cooks and food staff must be received medical check-ups prior to hiring, and medical check-ups are
provided for the cooks and food staff at least once a year after hiring.
c. Canteen staff's clothing and personal things are not allowed to place in the food processing area.
d. Every food staffs have to keep personal hygiene, cut nail, and wash hands before preparing food,
serving, and selling well-done food.
e. Food staffs have to use tools to divide food when delivering. Using bared hands to divide food is
prohibited.
f. Food processing staffs are not allowed to eat and drink, chew chewing gum, smoke cigarette in the
kitchen.
8. Wages and benefits
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According to the Viet Nam Labor Law, Article 55, the wage of a worker is agreed upon between the parties
to the labor contract and paid according to the productivity, quality and efficiency of the work performed.
The wage of a worker must not be lower than the minimum wage rates regulated by the State.
Minimum wage – Local investment
According to Government Decree 167/2007/ND-CP regarding minimum wage in local investment
enterprises effected from January 1, 2008 are as follow:
1. Level 626,000VND/month for enterprieses located in urban districts of Ho Chi Minh and Ha Noi
2. Level 580,000VND/month for enterprieses located in suburban districts of Ho Chi Minh and Hanoi,; Ha
Long City (Quang Ninh); Bien Hoa City (Dong Nai); Long Khanh Town; Nhon Trach, Long Thanh, Vinh
Cuu and Trang Bom of Dong Nai Province; Thu Dau Mot town, Thuan An, Di An, Ben Cat, and Tan Uyen
Districts of Binh Duong Province; Vung tau City of Ba Ria – Vung Tau Province
3. Level 540,000VND/month applies to others regions
Minimum wage - Foreign Investment
According to Government Decree 168/2007/ND-CP regarding minimum wage in Foreign Invested
Enterprises (FDI) effected from January 1, 2008 are as follow:
1.Level 1,000,000VND/month for enterprieses located in urban districts of Ho Chi Minh and Ha Noi
2. Level 900,000VND/month for enterprieses located in suburban districts of Ho Chi Minh and Hanoi,; Ha
Long City (Quang Ninh); Bien Hoa City (Dong Nai); Long Khanh Town; Nhon Trach, Long Thanh, Vinh
Cuu and Trang Bom of Dong Nai Province; Thu Dau Mot town, Thuan An, Di An, Ben Cat, and Tan Uyen
Districts of Binh Duong Province; Vung tau City of Ba Ria – Vung Tau Province
3. Level 800,000VND/month applies to others regions
The lowest wages use to pay to trained workers (including workers were trained by the enterprise) must be
at least 7% higher than the minimum wage mentioned at Article 1 of this Decree.
According to Decision 708/1999/QD-BLDTBXH of the of the Ministry of Labor – Invalid and Social
Affair dated on June 15, 1999, Article 3. Employer shall not use the minimum wage as stated at Article 1
above to pay to skilled and trained workers (including workers were trained by the enterprise).
Salary Scale
According to Government Decree 114/2002/ND-CP dated on December 2002, article 5, point 3 regulated
that the employer shall be responsible to establish the salary scale and wage table for all workers in the
organization, the wage a quota shall be established after having consultation with trade union and
announces the salary scale and wage table to all employees once established. The salary scale shall be
registered and approved at the local labor department prior its implementation
Delay in payment
According to Viet Nam Labor Law article 59, An employee shall be entitled to receive his wage directly, in
full, in a timely manner, and at the place of work.
In special cases of late payment of wages, the employer must settle the outstanding wage within one month
and pay to the employee compensation equal to at least the interest earned on the amount due calculated by
reference to the interest rate of saving deposits published by the State Bank at the time when the wage was
due.
Withholding Deposits
According to the Viet Nam Labor Law, Article 60, the workers have the right to be informed of the reason
for any deductions from their wage. Before making any deduction, the employer must consult with the
Executive Committee of the trade union of the undertaking. The total of deductions is not allowed to
exceed 30% of the workers’ wages in any month.
Trial Period
According to the Viet Nam Labor Law, article 32, the employer and the employee shall agree on a trial
period, the duration of the trial, and the rights and obligations of the parties. The wage of the employee
during a trial period must be at least seventy (70) per cent of the normal wage for the job. The trial period
90
shall not exceed sixty (60) days in respect of works which require specialized or highly technical skills, or
thirty (30) days in respect of other works.
According to Government Decree 44/2003/ND-CP, Article 7, the employer and the employee shall agree
on a probation stipulated in Article 32 of the Labour Code, as follows:
1.The duration of the probation shall not exceed 60 days in respect of the job which requires technical or
professional skills of a person graduated from a junior college or a college at higher level.
2. The duration of the probation shall not exceed 30 days in respect of the job which requires skills of a
person graduated from a vocational high school, or a technical worker or an employee with general
qualification.
3. The duration of probation shall not exceed 6 days in respect of other employees.
4. Upon the expiration of the probation, the employer shall notify the employee of the trial work results. If
the trial work results satisfy the employer’s requirements, the two parties shall enter into a labour contract.
Where the employee is not notified of the trial work results but continues to work, this means he is
accepted to work officially.
Training
According to the Viet Nam Labor Law, Article 23, section 2, the business which recruits trainees or
apprentices for subsequent employment in the business for a period specified in the training or
apprenticeship contract shall not be required to register but are not entitle to collect fees for such training.
The training or apprenticeships period shall be counted as a period of service with the business. Where
trainees or apprentices directly engage or participate it to production during the training or apprenticeships
period, they shall be paid at a rate agreed between the two parties.
Allowance for dangerous conditions
According to the Viet Nam Labor Law, Article 104, section 1, persons working in dangerous and toxic
conditions shall receive allowances in kind, and enjoy preferential treatment in respect of hours of work
and of rest, in accordance with the laws.
Downtime
According to the Viet Nam Labor Law, Article 62, during the time of work interruption the laborer is paid
as follows:
- If the interruption is caused by the labor user, the laborer shall receive his full salary;
- If it is caused by the laborer, he shall not receive pay; the other laborers in the same unit who must stop
working shall receive a pay as may be agreed upon by the two parties but must not in any case be lower
than the minimum wage;
If the interruption is caused by an interruption of power or water supply beyond the control of the labor
user or by any other force majeure causes, the pay shall be agreed upon by the two parties but must at any
rate not be lower than the minimum wage.
Overtime compensation
According to the Viet Nam Labor Law, Article 61, workers performing overtime work shall be paid wages
as follows: 150% on week days, 200% on weekend days, and 300% on holidays and paid leave.
According to the Government Decision 114/2002/ND-CP, Article 10, section 1, 2 and 3 regarding overtime
calculation. Overtime compensations = Hourly rate *150%, 200% or 300%*overtime hours. The overtime
calculation is base on actual piece wage if that worker earns on piece wage
Night shift Allowance
According to the Viet Nam Labor Law, article 61, section 2 An employee who works at night as referred to
in article 70 of this Law shall be paid an additional allowance of at least thirty (30) per cent of the standard
day shift wage.
Night shift Overtime compensation
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According to Circular 14/2003/LDTBXH of the Ministry of Labor dated on may 30, 2003 regarding wage
calculation for workers working in FDI enterprieses. Point 3, part C, that Where an employee works
overtime during the night-time, the wage payable for his overtime working hours is calculated as follows:
- For an employee who is paid a wage by reference to time:
Wage for additional night-time working hours = (Actual hourly wage) x 130% x (150%, or 200% or 300%)
x (the number of additional night-time working hours).
Benefits
Annual Leave
According to the Viet Nam Labor Law Article 74 regarding annual leave, workers shall be entitled to
annual leave with full pay after 12 months of employment in the enterprise or with the same employer as
follows:
- 12 working days, for persons working in normal working conditions
- 14 working days, for persons engaged in hard, harmful or dangerous work, or person working in areas
with hard living conditions, and for persons under 18 years of age
- 16 working days for persons engaged in especially hard, harmful or dangerous work and persons engaged
in hard, harmful or dangerous work in areas with hard living conditions.
Workers with less than 12 months of employment shall be entitled to annual leave in proportion to the
length of service, and may be compensated with money.
Statutory Holidays
According to the Viet Nam Labor law, Article 72, the laborer is entitled to obstain from work and receive
full pay on the following holidays
- 1 day Calendar New Year
- 4 days Lunar New Year
- 1 day Hung Vuong King Annivesary
- 1 day Victory Day,
- 1 day International Labor Day,
- 1 day National Day
In case the above holidays coincide with weekly non-working days the laborer is entitled to take one day’s
leave on the following day.
Social Insurance
According to the Viet Nam Labor Law Article 141 providing regulations on mandatory Social Insurance
(“SI”) and Health (“HI”) respectively, a factory with more than 10 employees has to contribute to SI and HI
at the rates as follows: (i) 15% for SI and 2% for HI on the salaries/wages of the factory will be contributed
by the employer; and (ii) 5% for SI and 1% for HI on the same will be contributed by the employee as soon
as the trial period has been finished.
Medical Insurance
According to Article 2 of Decree 58/1998/ND-CP dated 13 August 1998 issued by Government, medical
insurance contribution rate in case of non State owned economic organizations with 10 employees or more
shall be 3% of salary, wages and other allowances (if any) as stated in the labor contract in accordance with
regulations of State, in which the employer shall contribute 2%, and the employee shall contribute 1%
Social security for Temperary workers.
According to the Viet Nam Labor Law, Article 141, Section 2. In respect of employees who are employed
under labour contract with less than three months term, social insurance contributions shall be included in
the wage paid by their employer in accordance with Government decisions so as to enable the employees to
participate in social insurance on a voluntary basis or to make their own insurance arrangements. When the
above-mentioned labour contract is expired and the employees continue to work or a new contract is
concluded, the compulsory social insurance scheme as stipulated in clause 1 of this Article shall be applied.
Female Labor
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According to the Viet Nam Labor Law, Article 113, the labor user is not allowed to use female labor for
heavy or dangerous jobs or jobs whtich necessitate contact with noxious substances having harmful effects
on the reporductive and child rearing function of the woman laborer, the list of such substances is to be
published by the Ministry of Labor, Ward Invalids and Social Welfare and the Ministry of Public Health.
Those businesses using female labor for the above mentioned jobs must adopt plans of retraining in order
gradually to transfer these women laborers to other more appropriate jobs, increase measures for health
protection, improvement of the wokring conditions or reduction of the working time.
Pregnancy/Maternity Leave
According to the Viet Nam Labor Law Article 115, no employer shall employ female workers as of their
seventh month of pregnancy to work overtime, at night or in distant locations. Female workers performing
strenuous work, on reaching their seventh month of pregnancy, shall be transferred to lighter work, or shall
have their daily hours of work reduced by one hour but shall still receive their full wage.
According to Law of Social Security, No. 71/2006/QH11, Dated on June 29th, 2006, Article 29 pregnant
workers are entitled to 5 days leave for pre-natal checks with pay
Maternity benefit
According to the Viet Nam Labor Law, Article 114, the woman laborer is entitled to take a leave before
and after child birth totalling from 4 to 6 months according to prescriptions by the Government, depending
on the working conditions and the character of the job, whether it is a heavy or noxious job or a job in a
remoted region. If she gives birth to two or more children, the mother is entitle to another 30 days of leave
for each additional child. The rights and interests of the women laborers durin ghte childbirth leave are
defined in Articles 141 and 144 of the Code.
Child care
According to Viet Nam Labor Law, Article 116, Point 2, where a high number of female employees are
employed, the employer shall have the responsibility to assist in making arrangement for crèches and
kindergarten or in covering part of the expenses incurred by female employees to place children in crèches
or kindergarten.
9. Maximum work hours
According to the Viet Nam Labor Law, Article 68, normal working hours shall not exceed 8 hours per day
or 48 hours per week. The employer has the right to determine the working hours on a daily or weekly basis
provided that the workers are notified in advance.
According to Circular 15/2003/TT-BLDTBXH, of the Ministry of Labor – Invalid and Social Affair, giving
guidance of the Government Decree 109/2002/ND-CP, regarding overtime work requirements. Article 2,
Part 1.1; the employer can request for a overtime work for the following conditions; to solve technical
problem, to meet the urgent deadline
Maximum Overtime
According to the Viet Nam Labor Law, Article 69, employers and workers may agree on additional hours
to be worked, provided that the total may not exceed 4 additional hours in a day, or 300 additional hours in
a year;
According to Circular 15/2003/TT-BLDTBXH, of the Ministry of Labor – Invalid and Social Affair, giving
guidance of the Government Decree 109/2002/ND-CP, regarding overtime work requirements. Article 2,
Point 2.1, paragraph;
a. Employer must reach an agreement with individual employees for a voluntary overtime work.
b. Total overtime hour per day must not exceed 4 hours, and 3 hours per day for those workers who involve
to specially hard & harmful works.
c. Total overtime hours per week must not exceed 16 hours for normal works and 12 hours for specially
hard & harmful works.
d. Total overtime hours in 4 consecutively days must not exceed 14 hours for normal work and 10 hours for
hard and harmful works.
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e. Workers are entitle to 30 minute dinner break and shall be included as overtime hours if they have to
work more than 2 overtime hours per day
Day of Rest
According to the Viet Nam Labor Law, Article 72 regarding time of rest:
1. In every week, each employee shall be entitled to a break of at least one day (24 consecutive hours)
2. An employer may arrange for the weekly day off to fall on a Sunday or another specified day of the
week.
3. Where, due to the nature of the work, it is impossible for the employees to have a weekly day off, the
employer must ensure that the employees on average have at least four days off in a month.
Young workers
According to the Viet Nam Labor Law, Article 122 the hours of work of young workers shall not exceed 7
hours per day or 42 hours per week.
According to the Viet Nam Labor Law, Article 119 young workers are workers under 18 years of age. At
place where young workers was employed, separate records shall be kept mentioning in full name, date of
birth, work assigned, and results of periodic health checks, and shall be produced upon demand by labour
inspector.
According to the Viet Nam Labor Law, Article 121the employment of young workers is prohibited to hard
and work exposed to harmful substances as determined in a list issued by Ministry of Labour, Invalids and
Social Affairs.
11. Environment
According to Government Degree 175-CP dated October 18, 1994 regarding environmental safety. All
enterprises, including manufacturers, hospital, hotel, restaurant… where used solid wastes, liquid wastes
and gas wastes need a treatment before discard to outsider, the treatment systems must be approved by the
Department of Environment.
12. Communication and Record Keeping/Monitoring and Compliance Work Contracts
According to the Viet Nam Labor Law, Article 28, an employment contract shall be made in writing and
must be in duplicate, with each contracting party retaining one copy.
According to the Viet Nam Labor Law, Article 26 an employment contract is an agreement between the
worker and the employer concerning remunerated employment, conditions of work and the rights and
obligations of each party in the employment relationship.
According to the Viet Nam Labor Law, Article 27, Point 3, Parties are prohibited from signing labor
contracts for seasonal work or specific task with a term of less than 12 months to carry out work of a
regular nature for more than 12 months, except in the case of the temporary replacement of a workers who
is called up for military service, are on maternity leave or on other temp
According to the Viet Nam Labor Law, Article 29, A labour contract must include the following main
provisions: the nature of work, time of work, time of rest, the amount of pay, the place of work, the
duration of the contract, conditions regarding occupational safety and hygienic and social insurance, health
insurance and annual leave for the employee.
According to Government Decree 39/2003/ND-CP dated on April 18, 2003 regarding work and
employment, Article 8, Section 2; the employment file shall be including the following documents; job
application form, resume, medical certificate, copy of certificates and others such as copy ID card.
Term of contract
According to The compulsory social insurance scheme shall apply to enterprises, bodies and organizations,
which employ the employees under labor contract with definite term of over 3 months and labor contract
with indefinite term. In these enterprises, bodies and organizations, the employer and the employees shall
pay contributions to social insurance funds in accordance with the provisions of Article 149 of this Code
and the employees shall be entitled to social security benefits in the event of sickness, work accidents and
occupational diseases, maternity, retirement and death.
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According to the Viet Nam Labor Law, Article 27, point 2. When a labour contract as indicated in sub
clauses (b) and (c) of clause 1 of this Article is expired and the worker continues to work, both parties shall
have to conclude a new contract within 30 days from the date of the contract expiration; if there is no
conclusion of a new labour contract, the signed contract shall become a contract with indefinite term.
Where both parties conclude new contract, which is a contract with a definite term, they shall only be
permitted to conclude for such one more time limit, after that if the worker still continues his /her work, a
labour contract with indefinite term must be signed.
Postings
According to the Viet Nam Labor Law, Article 83 regarding Discipline and factory regulation. The factory
regulation must contains the following methods:
- Time of work and time of rest.
- Orderly in the factory.
- Health and safety in the production areas.
- Discipline practice in the factory.
- The factory regulation must be communicated to every worker working in the factory and posted in
essential areas of the factory.
Factory internal regulation register
According to Viet Nam Labor Law, Article 82, section 3. An employer must register the internal labor
regulations document with the provincial labor office. The internal labor regulations shall be effective and
binding as from the date of registration. No later than ten (10) days after the receipt of the internal labor
regulations document, the provincial labor office must issue confirmation of the registration. If the labor
office fails to issue such confirmation after the expiry of the period referred to above, the internal labor
regulations document shall become effective.
Attachment 07 : cotton textile value chain in Zambia / individual costs of dyeing
and weaving
Source: Global Development Solutions, LLC
Labor
13.9%
Electr.,fuel
31,1%
Water
2.6%
Overhead
2.6%
Chemical
36.2%
Mainten.
5.2%
Salaries
9.4%
Lint Cotton
27.4%
Spinning
17.4%
Twisting
5.2%
Weaving
19,0%
Dyeing
28.2%
Admin
4.9%
Labor
6.3%
Overhead
3.9%
Electr.,fuel
31.3%
Salaries
17.4%
Mainten.
10.9%
Total cost of fabric in Zambia (2007): US$ 4.49/kg;
Benchmark South-Africa: US$ 4.59;
Benchmark Cambodia: US$ 4.59
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Attachment 08: Product segment upgrading
Quality / how customer perceives
Desired
Viet Namese
standard of
future CMT,
brand licensing,
own branding
Premium
segment
High
Standard
segment
Medium
M
Low
Current Viet
Econom.
segment
Low
Namese standard
of many RMG
companies. Some
have upgraded
already
Medium
High
Price
Consistency corridor
Source: Export seminar RMG – W.Wiegel
Remark: no price (added value) improvement without increased and improved customer
perception of quality (Quality perception = product quality, environment, external
conditions, reliability, raw material, in-time delivery, service quality, degree of second
grades, time and quality of sampling, etc.). Therefore: The type of production (CM,
CMT, RTU) and the quality of overall service has impact to social and environmental
compliance!
Attachment 09 : Standard selection decision tree
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Attachment 10 : EU buyer purchasing selection criteria:
What are buyers´ responsibilities in relation to social and environmental compliancy ?
Buyers purchasing criteria (quote)
Life-Line-Bemontex/NL- sourcing through
buying house and direct sourcing: We only
accept the merchandise if the fundamental
human rights have been taken into consideration.
We also request a safe and healthy environment
for those who are involved in the production of
our merchandise
KarstadtQuelle/GER - own office in BD: We
have a CoC that is part of our buying conditions.
We consider it our responsibility to monitor the
implementation of the CoC and help the
suppliers to improve on all aspects and
requirements stipulated in the CoC that are not
fully met.
Tom Tailor/GER – sourcing through buying
house: The main task for the buyers is to
increase the knowledge in the production units to
enable the management to improve their social
performance.
HEMA B.V./NL – sourcing through buying
house: buyers should only place orders at
suppliers which are fully compliant with our
requirements (BSCI + company Code of
Conduct).
Calida AG/CH – direct sourcing: We will fulfil
the BSCI requirements
Peek & Cloppenburg/GER–sourcing through
buying house: monitoring, auditing, training
where necessary
NEXT/UK – sourcing through buying house: To
ensure factories are audited prior to placing
production and to work together with our
suppliers in achieving compliance
AB Lindex / SWEDEN – own office in BD: As
we are the customer, we can put the `pressure`
on the companies. We prefer to work with the
companies with good CoC
Addidas/GER – direct sourcing: The Social and
Environmental Affairs Team (SEA) monitor
guides and advises the suppliers on ways how to
improve working standards and works closely
with sourcing to ensure adherence to the
workplace standards
Tchibo/GER – direct sourcing: The buyers
should be an active part of the qualitfication
process, as their behaviour influences the
suppliers´ performance. Suppliers have to be
treated as partners
SCAPINO/NL – direct sourcing, buying houses:
Make factories, agents and other involved parties
aware of our CoC and our link-up with BSCI.
Also to see factories, discuss this topic and report
back to management in order to determine
PUMA AG/GER – direct sourcing, buying
offices: In order to define its responsibilities,
PUMA created the PUMA S.A.F.E. Concept,
which creates a symbiotic relationship between
our environment, employees, business partners
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priorities in BSCI compliance audits
and other stakeholders. Four cornerstones:
Social, Accountability, Fundamental,
Environment
METRO Group/GER – direct sourcing, buying
houses: To improve social and environmental
standards of suppliers
OTTO/GER – sourcing through buying houses:
buyers must consider social standards in their
buying decisions
World Cat Ltd./PUMA sourcing/Hongkong –
direct sourcing: economically successful and
ethically responsible society as well as an intact
environment - highlights that meet to focus
equally on social, environmental and financial
aspects in our day to day business
INDITEX/Spain – direct sourcing: due to the
fact that Inditex does not have any buying house,
our commercial team are key people in Inditex to
take any decision in terms of implementing
social and environmental standards.
New Look Retailers Ltd / UK – direct sourcing:
the purchasing company's responsibility is to
make sure firstly that the potential supplier
understands the stunned that all factory working
conditions expected and the consequences of
consistent breach of peace or failure to embark
on an improvement program.
What are the suppliers´ responsibilities – in relation to social and environmental
compliancy
Suppliers responsibilities (quote)
Life-Line-Bemontex/NL- sourcing through buying
house and direct sourcing: ENVIRONMENTAL
ISSUES
Life-Line lists all forbidden chemicals through the
Dutch - and the E.U. Legislations. They do not
accept the following components in our deliveries
(details see attachment)
Addidas/GER – direct sourcing:
The adidas Group expects from its business
partners to conduct themselves with fairness,
honesty and responsibility in all aspects of their
business. Business partners have to follow
standards and practices consistent with the Group's
policies and values.
Tom Tailor/GER – sourcing through buying house:
The management of the supplier should be willing
to implement certain standards. Without interest in
improvement it is impossible to support the
suppliers
HEMA B.V./NL – sourcing through buying house:
Suppliers must understand CSR and environmental
requirements and must be willing to develop their
factories to comply with these requirements.
Calida AG/CH – direct sourcing:
He has to fulfil the BSCI requirements
Peek & Cloppenburg/GER–sourcing through
buying house:
He has to be willing to improve the implementation
of standards
KarstadtQuelle/GER - own office in BD:
Suppliers must be aware of his duties to ensure a
safe and fair working environment for his workers.
They must be ready to invest in their
implementation of management systems.
Tchibo/GER – direct sourcing:
To be in compliance with local labour laws and
international standards. To treat the workers fairly.
To be honest and transparent with regard to existing
problems
SCAPINO/NL – direct sourcing, buying houses:
to fully follow local laws, to respect and implemt
our and BSCI code-of-conduct and to press local
groups to take responsibility for their own
country/people
PUMA AG/GER – direct sourcing, buying offices:
PUMA expects all suppliers and licensees to adopt
the standards mentioned in the S.A.F.E. manual,
which is revised on a regular base
METRO Group/GER – direct sourcing, buying
houses:
OTTO/GER – sourcing through buying houses:
Work on implementation to meet the requirements
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Both, social and environmental standards following
our code of conduct and at least ILO standards
as defined in our code of conduct
Esprit/GER – direct sourcing:
There will be no more grey area for our supplier to
avoid improvement of social practice in dealing
with their employees.
NEXT Plc/UK – buying house and own office:
To fully comprehend compliance requirments and
to be open and honest in dealing with issues
AB Lindex/Sweden:
Suppliers are fully responsible, governments need
to control implementation of laws
New Look Retailers Ltd/UK / direct purchasing
Suppliers should fully understand what the
purchaser is asking for should be willing to discuss
requirements with the buyer
INDITEX SA/Spain
All suppliers who are working with Inditex have to
comply with the Inditex Code of Conduct for
External Manufacturers and Suppliers
Do companies with own CoC and workplace standards accept other codes?
Those with own codes do generally not accept other standards: K&L Ruppert/Germany;
PUMA/Germany; Adidas/Germany-also harmonizing with other brands in order to avoid
conflicting situations; HEMA/NL – combining own Maxeda CoC with BSCI;
Preferred codes
German, Dutch, Swiss buyers who comply with BSCI do not except another standard and
insist on BSCI standard audits, some accepting local law as minimum standard. Most of
them would except SA8000 as well (BSCI and SA8000 is considered similarly
acceptable);
British buyers (NEXT), complying with ETI base code and Jo-in, recommend Brand
collaboration in order to deal in best possible way with the multitude of codes;
Swedish buyer (LINDEX) does not accept only local standards. Achieved standards must
be internally recognized, e.g. SA8000
German buyer (KARSTADT-QUELLE) would accept local standards if they are at least
compliant to BSCI
German buyer (TOM TAYLOR) would accept local standards as long as it is at least as
strict as international standards
Dutch buyer (HEMA) is not willing to accept local standards because the comparison
and discussion of details of conflicting issues is too demanding. One single code for all
suppliers would their objective
German buyer (ADIDAS) would support strong government regulation and enforcement
as an alternative to individual codes – local partners are required to adhere to there
standards or to local standards – whichever is higher
Spanish buyer (INDITEX S.A) recommends that the Inditex CoC is been applied by all
suppliers in the supply chain in Bangladesh
German buyer (METRO BUYING GROUP) only accepts minimum requirements of BSCI
and would not accept other CoC or local standard
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German buyer (OTTO GROUP) prefers BSCI and Otto Group CoC. They would not
accept a local code. BSCI is based on ILO and considers local law. Supplier has to
comply with BSCI as minimum standard
British buyer (NEW LOOK RETAILERS Ltd) prefer ETI Base Code. If suppliers fall short
of standard, they are expected to work on shortfall over agreed period of time
Main conclusions
 International retailers and CMT buyers with own code of conduct insist on own
codes introduction and would not accept other standards
 Most large EU based retailers (without own CoC) are linked to BSCI, accept local
standards with the condition that they are not below BSCI standard
 Some do not accept local standards at all for their buying decisions
Buyers´ experiences with other supplying countries related to social compliance and
auditing– benchmarking Bangladesh (quoting)
Scapino BV-Nederland: Bangladesh is absolutely the worst. China is far more advanced
already and also on government level improving. Factories understand that the need to
implement these things to make business, they do not see it as a problem but engage in it
as an opportunity to increase business. Overall prices drop because they perform better;
Esprit-Germany: China, India and Laos are comparatively underperforming in
complying with such social standards, and there are a lot of reasons including cultural
background, people understanding about such needs, etc. to cooperate with our program
requirements;
K&L Ruppert-Germany: Bangladesh is right now on the level of China 10 years ago;
Tchibo-Germany: There are similar areas with needs of improvement worldwide,
especially regarding wages and working time. However overall supplier performance is
better in other countries, e.g. Turkey, Viet Nam, Thailand, etc. The current political
situation in Bangladesh makes the implementation of compliance programs even more
difficult;
Adidas-Germany: Variable levels of enforcement by government has demanded Adidas to
put in place extensive resources to support in-country compliance;
CALIDA-Switzerland: We started with BSCI 2006 – till yet we have good experience;
Tom-Tailor-Germany: Tom Tailor started auditing companies according to BSCI
standards in the beginning of 2006. As this topic is a steadily growing issue the buying
houses are not yet able to cope with it without support from the buyers. In the first view
the topic seems to the buying houses and the factory management as an additional
expense factor which is in the step not important. Some buying houses and suppliers
made good improvements during the last year. Very often the suppliers have problems to
fulfil the point of over time as employees are asking for over time which are paid with a
higher rate;
KarstadtQuelle-Germany: it depends on the country and – as always – on the people in
charge. In China, where the government is pretty alert now, we make good progress,
same in India. Thailand, for example, is still very difficult because of reluctant suppliers
and lack of awareness;
Next plc-United Kingdom: Currently sourcing from 50 countries;
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AB Lindex-Sweden: We are working with China, India, Turkey, etc. There are different
problems in different countries du to culture;
INDITEX S.A-Spain: Inditex is focused in six main clusters (i.e. Portugal, Marocco,
Turkey, Bangladesh, China and Spain) and in its mentioned clusters, Inditex is fully
devoted implement its commitments related to social and compliance programmes;
PUMA-Germany: Puma´s standards are applied globally with consideration to the
specific local requirements and the context of compliance within that country. The audit
process is conducted in al similar fashion in all countries. Issues found during the audits
are either due to negligence, ignorance or malicious intent and the corrective action
proves for each supplier factory is prepared accordingly. Supplier capacity building
programs has been recently introduced as a regular activity of our social &
environmental compliance program, and the results of such programs are being distilled
and incorporated into our regular auditing standard/practice and further capacity
building projects;
Metro Group-Germany: In all countries we note increasing responsibility in social
compliance;
OTTO-Germany: The implementation process in Bangladesh is slow compared to other
sourcing countries;
New Look Retailers-United Kingdom: Much is depending on the attitude and willingness
of the supplier and his/her influence and pro-activity with the factories they use. When
they understand what the purchasing company requires and why, in terms of compliance,
they must be able to drive the improvement program forward, given support from the
purchasing company but not constant policing. This is far too costly and risky for the
purchase. Looking at productivity and efficient working with the supplier is often helpful
as hours/wages can potentially be improved without factory profitability suffering;
Attachment 11 : Value Chain Analysis Methodology
A market driven Value Chain approach includes the following elements:
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