Shoemakers need govt support to step up exports

LAHORE: Global fashion trends are changing and Pakistan needs to upgrade its footwear sector to increase exports, which merely stand at 0.1 percent in the world’s total market size of almost $142 billion.

Pakistan Footwear Manufacturers Association (PFMA) Chairman Muhammad Younas in an interview with The News said that the shoemaking industry needed to develop in accordance with the global trends through technology adoption. Government support and industry adoption are crucial to increase the exports and Pakistan’s share in global footwear, he said.

Presently, the government offers adjustments of sales tax on import of machineries, but it takes years after imports. “It is suggested that all machineries, technologies and software related to footwear sector may be exempted from all types of import duties, sales tax and other taxes.”

Younas pointed out that Pakistan was the 8th largest producer of footwear in the world, providing employment to more than one million people. However, Pakistan’s share is negligible in world footwear exports at $122 million.

Pakistan has great potential to enhance its export and could further generate employment in the country if the government seriously helped out the footwear sector.

“We believe that we can enhance footwear exports if the government provides us level playing field with our competitor countries. Our rebates may be equal to the rebate of Bangladesh,” the PFMA chairman said.

Product development could be made to meet the need of international buyers. New markets could be explored with 100 percent Export Development Fund (EDF) subsidy, especially if the government also reduces the cost of doing business.

Prime Minister Imran Khan’s objective of employment creation with minimum energy consumption could also be achieved by this sector as the footwear industry is labour intensive with limited power consumption. “In no time, hundreds of thousands of jobs can be generated by facilitating the existing footwear industry and establishing new ones.”

The new projects should be export focused which would also help earn the much needed foreign exchange, Younas added.

PFMA chairman pointed out that the country was exporting much below than its annual consumption of shoes. The total annual domestic consumption was 411 million pairs of shoes, while consumption was 424 million pairs. Pakistan annually imports 24 million pairs of shoes, while exporting only 11 million pairs.

Despite all odds, Younas shared that the exports of footwear were on a growth trajectory as total exports in 2016-17 stood at $95.74 million, which increased to $108.125 million in 2017-18 and reached to $122.181 million in 2018-19.

However, he said the government’s all out supports and industry efforts were needed to make leaps and bounds in footwear exports.

Currently, Germany is leading importer of shoes from Pakistan, followed by Italy, United Kingdom, Netherland, France, Australia, Ireland, Afghanistan, US, South Africa, and Belgium. All high end consumer markets are importing Pakistani footwear, expect Afghanistan. This means that Pakistani footwear has acceptability and a competitive edge in these markets, and share could be increased, Younas asserted.

PFMA chairman believed that the sector lacked a level playing field when it comes to regional competitors, who get different types of grants to help them increase their exports, whereas in Pakistan the footwear sector has only been getting 1.82 percent in rebates since 2009.

This he said was less than leather, even though footwear was a value-added leather product. “The rebate needs to be revised and enhanced at par with other regional competitors. The PFMA has already submitted a case to the government for enhancing duty drawback rates to minimum eight percent which should be processed immediately.”

In 2018, the State Bank of Pakistan decided that banks should obtain 100 percent cash margin on the import of items, including anti-fungus packaging stickers and sheets,

cutting board for cutting presses, thermoplastic toe-puff and counter material, hot-melt shoe adhesive, refills for marking of leather before cutting and paints solvent based for footwear.

All these imported items are used in manufacturing of shoes. A large number of footwear manufacturers import these materials from China and other countries to meet their local and export market customer demands and a huge investment is involved, as local sole manufactures cannot meet all the demand.

So, the 100 percent cash margin on import creates huge financial problems for manufacturers.

The PFMA chairman urged the authorities concerned to exclude these raw materials from the SBP circular. Additionally, the PFMA also requested the government to increase the import duty on footwear from present $2 per pair to minimum $6 per pair, to protect the local industry from dumping.

Further, the incentive of rebate on export should be doubled from 3.5 percent to seven percent. The government should also zero-rate all raw materials and component import of the footwear industry along with zero percent custom duties, sales tax and regulatory duties.

Younas suggested that Pakistan should sign FTA with countries, such as Japan, that import leather products. Japan’s annual import of footwear was 670 million pairs and Pakistan through FTA could fetch a good share from this market, he added.