Leather industry strapped for cash

5 February 2001

The local tanning industry has called on the government to give it more financial assistance in order to enable it to produce 80 million ft² of leather a year by 2010 and become more competitive in a domestic market dominated by foreign products. Viet Nam Leather Shoe Corporation (VNLSC) officials said they want the government to help the domestic tannery business develop by giving access to bank loans pegged at interest rates of only between 2-3% a year over 10 and 15 year terms. VNLSC officials also proposed that the government provide financial incentives for local companies to invest in their operations, particularly in developing industrial wastewater treatment projects. They said the local tanning industry is making an important contribution towards providing finished leather for several local industries involved in the production of footwear, cases, bags, and other accessories. However, it is having trouble meeting demand. This is evident in the fact that local industries have to spend at least US$100 million on importing 80 million ft² of finished leather a year to meet their production needs. Vietnam does not have a developed cattle industry and, therefore, has a shortage of hides for processing. They are also of poor quality. Meanwhile, according to the Viet Nam Leather and Shoe Association (VNLSA), the local tanning industry has a chronic shortage of capital to develop production. Therefore, it cannot afford to spend the large amounts of money needed to buy special-purpose equipment and build modern, large-scale workshops for tanning. To address this problem, many businesses have borrowed money from banks, which has increased production costs and the price of local tanned hides. Domestic tanning enterprises have also called for Government assistance because they cannot afford to build the necessary wastewater treatment systems. To improve the situation ahead of receiving government support, the VNLSC has reorganised the buying of raw hides and processing and marketing of leather products to make them more competitive here and overseas. Consequently, in the first nine months of last year VNLSC tanneries produced 931,000 ft2 of dressed hides, a year-on-year increase of eight per cent. VNLSC officials are confident that with government assistance, the industry will develop strongly and will be able to meet local demand and increase exports of leathergoods. Promoting the development of the local tanning industry would also benefit several other local industries, including cattle raising and leathergoods production, they said. For the year 2000, the local tanning industry set itself a target of making between 13 million and 15 million ft² of tanned hides to supply local manufacturers.

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