Footwear sector heats up on new Indian entry
The entry of an Indian footwear company manufacturer into the domestic market under the Board of Investment (BOI) approval threatens the very survival of Sri Lanka’s footwear manufacturers accustomed to trade in the protected local market.
Veekesy Slippers Lanka Pvt Ltd, a subsidiary of Veekesy India, has set up a factory in Negombo with substantial financial resources, and advanced technology. This is a threat to the very survival of local companies accustomed to trade in protected market, Footwear and Leather Products Manufacturers’ Association has warned.
In a letter to the President, the association noted that this company is a major player in the Indian footwear industry with a capacity of more than 150,000 pairs per day.
With this strength, they have an additional advantage over Sri Lankan industry on procurement of raw material, machinery, moulds, etc. Due to their scale of operation they have a huge bargaining power over local industrialists, the association pointed out.
This advantage alone will help to kill the entire local footwear industry which has survived in Sri Lanka during the good and bad periods, a spokesman of the association told the Business Times.
This will be an opening for Indian companies to set up factories to manufacture products like confectioneries, biscuits readymade garments, cable, vegetable products and even enter retail trade in a big way, he warned.
At present the minimum investment requirement to qualify for Section 16 projects is US$ 250,000, under which this company got approval. This can be either 100 per cent foreign investment or a joint venture investment with a local collaboration. Foreigners have to remit a minimum of $1 million if they are to undertake trading activity
With this very minimum requirement the Indian company has received the opportunity to enter the local market without any restriction, he said.
When contacted, General Manager of the company Fahad Farook noted that they will start production of slippers at the factory initially and consider turning out shoes in the latter stages.
Veekesy Slippers Lanka has adhered to all BOI requirements and received necessary approvals for the Indian venture; he said adding that they have no intension of ousting the local companies. “We are willing to discuss any issues with the association at a one-to-one meeting as Veekesy is also in the same business,” he said.