Sri Lanka’s footwear industry faces a threat of collapse
Sri Lanka’s footwear industry is on the verge of collapse due to a flood of imported shoes in the market as a result of duty reductions given from the 2011 budget, manufacturers complained.
Local footwear manufacturers are now calling for an import duty increase through the 2013 budget, to safeguard the domestic industry.
The duty reduction given for imported footwear from the 2011 budget has exerted an adverse impact on the local shoe industry especially for firms producing high quality, upmarket footwear, a top official of the Sri Lanka Footwear and Leather Products Manufacturers Association told the Business Times.
The government should intervene to stop the dumping of imported shoes, he said adding that the sale of imported footwear as well as the complete components of shoes for assembly in Sri Lanka has led to many importers avoiding paying cess.
The sales of locally made shoes have dropped due to imports, he added. Local manufacturers have submitted a memorandum to the Finance Ministry urging the authorities to re-introduce the previous duty structure of 30 per cent import duty on CIF value or Rs. 1000 per pair whichever is higher
They have also suggested imposing a cess of Rs. 500 and permit only the import of footwear against a letter of credit and to permit duty free import of quality accessories not manufactured locally.
There is a high expectation amongst the manufacturers that the government will intervene to protect local manufacturers and therefore they have asked for concessionary or interest free loans to fund on machinery tools, and working capital.
Protectionist measures from the government will be essential to the development of the local footwear industry, he said.
According to a study conducted by the Export Development Board, local production of leather per week is around 40 tonnes.
However, the study forecasts that the supply of leather will increase within the next five to 10 years with the rapid growth in the dairy sector.
The study revealed that the quality of locally produced leather is poor due to several reasons including lack of regulations, quality standards, wrong animal rearing practices and cruel slaughtering practices.
As a result Sri Lanka has to import leather inputs for the local leather goods manufacturing industry.
From 2002, successive governments introduced and supported a special ‘safety net’ for the local footwear industry.
This was done to protect the local industry from cheap imports and groom the industry towards export promotion.
This helped manufacturers to survive at a critical period, they said.
Sri Lanka’s exports of footwear and leather products in 2012 were $10 million and $16 million, respectively.
The industry at present employs about 20,000 people directly and indirectly and includes 10 large export companies, 30 medium scale companies and about 3000 small scale manufacturers. A diverse range of modern shoes like canvass and rubber boots, thongs, sports shoes, leather shoes etc. are produced, using a variety of raw materials.
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