Fraudulent shoe imports cause over US$112.5 mln forex loss to Sri Lanka
View(s):Illegal and undervalued footwear imports are badly hitting local industry and resulting in potentially a massive foreign exchange loss annually to the country, local manufacturers warned. They say Sri Lanka is losing over US $112.5 million annually in much needed foreign exchange as a result of cheap footwear imports from countries like China and India. Local manufacturers are on the verge of collapse as they cannot compete with cheap imports.
A spokesman of the Sri Lanka Footwear and Leather Products Manufacturing Association told the Business Times that the legal and illegal influx of foreign footwear flooding the local market as well as the import of parts of shoes for assembly in Sri Lanka without much value addition and avoidance of CESS has badly hit Sri Lankan manufacturers badly.
Annual footwear requirement locally is approximately 40 million pairs. According to a recent survey, market share of local manufacturers has fallen to 50 per cent from 80 per cent in 2012 and imports have increased to 50 per cent from 20 per cent as a result of duty reduction, he revealed.
Local footwear manufacturers are now calling for an import duty increase to safeguard the domestic industry.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.
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. In a letter to Finance Minister Ravi Karunanayake, the association pointed out that the local industry has more than 30,000 direct employees through 1500 large, medium and small enterprises island-wide and most of these enterprises are on the verge of closing down.
More than 1000 cottage type household entrepreneurs (cobblers) who create employment for 40,000 or more are also struggling to survive, the letter disclosed. DI, Bata and a few more companies use many sub-contractors but due to the market vulnerability the number has reduced to 200 from 500. Most of them who lost this opportunity of supplying to big brands have ventured to other fields of marketing and this led to short supply in the local market.
Several companies who could not survive left this field, some became importers while one manufacturer committed suicide as he could not pay wages for workers due to bankrupcy, the association spokesman said. The association has urged the Finance Minister to reintroduce the duty structure prevailing for footwear imports before 2011 November budget of 30 per cent import Duty on CIF Value or Rs. 100 per pair whichever is higher and maintain the current CESS of Rs. 500 as it is.
It has also proposed to introduce a new CESS for shoe upper imports in addition to the prevailing import duty of 30 per cent duty and CESS of Rs 250, and permit duty free import of on quality accessories not manufactured locally on the recommendation from the Ministry of Industries (similar facility already in place for leather).