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Pakistan Shoe Industry

Pakistan Shoe Industry

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Published by: Shaheen_83 on Oct 28, 2010
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03/30/2013

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Pakistan Shoe Industry Analysis1.
Problems and challenges
:
Pakistan’s leather industry has great potential to grow and it has resources which can behelpful. But in these days leather industry has called for immediate measures to save this vitalsector that has been facing pressure for the last 18-months in the backdrop of persist decline inleather and leather exports mainly because of the affects of war on terrorism which restricted theforeign buyers from Pakistan.
 
According to the data revealed by the Bureau of Statistics, theleather exports have been declined by 28.83 percent, leather apparel and clothing by 25.49 percent, leather gloves by 9.42 percent and leather footwear by 2.49 percent. However, other leather goods showed upward trend by 8.41 percent but total decline during the year was 22.24 percent from $1220.121 million of 2007-08 to $948.800 million during the financial year 2008-09. The leather apparel and clothing recorded a loss of 15.88 percent to $165.146 million ascompared to $196.315 million, leather gloves by 59.03 percent from last year $76.070 million to$31.167 million, leather footwear by 13.57 percent from $42.120 million to 36.403 millionduring July-November 2009 as compared to corresponding period of last year.In the global market, the demand for footwear is high and in most of the developing countries itis growing on average. It is also estimated that about 60% of the world’s total consumptionconsists of simple footwear made entirely of non-leather materials and that for the remaining40% only the upper part of the shoe is made of leather. According to UNCOMTRADE data,Pakistan footwear exports for the year 2006 were about US$ 135 million.Out of total footwear exports, leather footwear accounts for 43.15%, which makes leather footwear extremely significant.
One of the most important problems hindering the growth of footwear industry is higher energy prices. Increasing energy and inputs prices leads to an increase in the cost of productionthat influences the expected production of the industries and thereby exports.
Industries do not have footwear training institutes of quality and repute and in result thereis a lack of skilled labor force. Thus there exists a problem of absorption capacity in advancedmachinery.
Outdated production methods are still prevailing in the shoe factories.
Improper availability of raw material.University of Management & Technology
 
Pakistan Shoe Industry Analysis2
There is no mechanism of collaboration between Industry units and other related researchorganization and academic institution to improve their productivity.
Transport and utility infrastructure facilities are not adequate.
Industry is facing high competition from China providing cheaper footwear product inmarkets.
Heavy taxes in the form of sales tax and income tax on retail businesses.
Growth trends in the industry:
 
The special subsidized rates for Pakistan’s worldwide footwear trade have helped increase theexports to the extent of 250 per cent in the last couple of years. Export of shoes has shown anincrease of 13 per cent in the previous fiscal year till Apr against the corresponding period of lastyear. If the support was not withheld the footwear industry would have certainly crossed the$2000000. Pakistan’s footwear industry manufactures around 120 million pair annually for localconsumption and it exports 2 million pair per annum roughly and the average price charged for each pair stands around $10. Its share in Pakistan’s total exports is about to touch the figure of $200 million.Volume of Pakistan’s footwear exports grew at a considerable rate of 16% for the years 2003 and2004. The share of Pakistan’s footwear exports in the world’s total footwear exports is about0.18% while it is 1.6% for India and 29% for China in the year 2006. For Pakistan it rose from0.16% to0.23% in 2005 and decreased to 0.18% in 2006. Footwear exports share in Pakistan’stotal exports rose to 1% in 2005 from 0.7% in 2002 and it accounts for about 0.8% in 2006 of Pakistan’s total exports. India’s footwear exports account for about 1.6% of total exports whilefor China the same is 2.2% in the year 2006.The current industry structure is monopolistic competitive. The industry has entered into mass production especially local industry. There are 306 manufacturing sites in Lahore which are 59%of total Pakistan and 44 manufacturing units in Karachi which are 8 % of total in Pakistan. Infootwear industry price is the dominant force these days both for manufacturers and buyers because of bad economic and political situation. For manufacturer cost is issue and for buyer income issue. Asian economies such as China and India are enjoying a notable growth inchanging circumstances across the world. Pakistan also has great potential for higher growthUniversity of Management & Technology
 
Pakistan Shoe Industry Analysis3however the political threats, socio economic environment and lack of updated technologies areobstruction in the way of progress.This sector has pivotal importance in terms of providing and creating jobs, earning of foreignexchange with the help of exports and fulfilling the local consumption requirements.Both in Pakistan and around the globe, the demand for footwear is increasing. Pakistan is one of the most populous countries in the World and according to an estimate with an average population growth of 2.25 %, about 3 million children have been born during the year 2005-06,signaling the growing demand for footwear in Pakistan. It is also estimated that about 60 percentof the World’s total consumption consists of simple footwear made entirely of non-leather materials and that for the remaining 40 percent only the upper part of the shoe is made of leather.In the manufacturing of footwear, most frequently used material consists upon leather, manmadematerials, rubber / canvas / synthetic and textile along accessories. Different type of shoesare being produced by the local industry e.g. sportsmen, army, disabled persons and safety shoesfor the industrial workers etc. The population of Pakistan is expected to be about 172 million inthe year 2010. Keeping in view the growth in population, the growth in the demand of footwear industry is also anticipated.Footwear industry is changing rapidly. Industry is moving towards high competition because of overcapacity interims of supply and manufactures are offering similar kind of product to almostsame target market. Because of local manufactures and imports of footwear’s from china. 
We can also see the growth trends with the help of table that how footwear industry vary in the past:
Pakistan’s share in the international market is hovering at about 1.5% from the last fiveyears, earning an average foreign exchange of US$ 681 million per annum. According toFederal Bureau of Statistics data, Pakistan exports for the year 2001 were about US$ 763million. Out of total leather exports, leather footwear accounts for 50.93%, which makesleather footwear extremely significant.
Value in $ million
LEATHER FOOTWEAR 85115, 85124 & 8514
1995 1996199719981999WORL 21,47723,08322,77122,05321,049Growth % age 7% 1%-3%-5%
University of Management & Technology

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