The Sports Goods Sector in Pakistan - TRTA i

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oth. The employees also enjoy 14 days casual leave and 10 days sick leave. If an employeedoes not avail of the entitled leave, he or she is also rewarded by receiving a payment for theuntaken leave.Skilled workers in the footwear sector can earn as much as US$200 or more per month duringpeak production periods.The footwear sector is a good paymaster and an equal opportunity employer. Women haveproved to be useful workers in stitching departments and earn the same wages as their malecolleagues. At times, their professionalism and efficiency levels are even better.2.1.4 Growth in the sectorFootwear exports have shown constant average growth of 25% annually in the last five years.As the footwear industry is very small and has a high degree of dependence on imported rawmaterials, this exceptionally good growth can give the wrong impression and needs to beviewed with caution. Part-time and dubious exporters often over-invoice to claim unjustifiedrefunds from the Government. Of the total footwear exports from Pakistan, only 40% aredestined to Europe and a large percentage is directed towards the Gulf States. The possibilityof preparing over-invoiced documents for export to Gulf States is quite huge.However, the growth prospects still seem positive. The footwear industry has a good name inEurope. Pakistan’s products in the lower to middle range are well received. The country isrecognised for its leather. With recent anti-dumping on China and Viet Nam and with theannouncement in 2006 of 6% R&D, the Trade Policy provides a good platform for thefootwear sector.2.2 Reasons for fluctuations in exports and imports2.2.1 Reasons for fluctuations in exportsExports in the last five years showed an increase. As most of the big shoe manufacturersstarted importing shoes from China and Far East countries, small exporters started to move out.Before 9/11 in New York in 2001, the import duty was 4.5%. After that, the import duty wasreduced to 0% for three years due to the Anti-Narcotics Act. While India at that time waspaying 4.5% import duty, Pakistan had an edge over India. Exports are only in documents andfalse invoicing is done very frequently, to claim duty drawback and sales tax.After three years, the European Union did not accept Pakistan’s request to keep the duty rate at0%. Unfortunately, the 4.5% duty was imposed again on Pakistani footwear manufacturers.Bangladesh and Sri Lanka now have preferential status, i.e. 0% duty on imports. TheBangladeshi market is growing very fast. Many big European companies have entered theBangladeshi and Sri Lankan markets as buyers and their goods have a better image thanPakistan’s.In Europe anti-dumping was imposed on Chinese and Vietnamese products in March-April2006 from 11% to 17% on leather/synthetic footwear. China was the largest supplier to theEuropean Union, and 17% was a huge duty.18 International Trade Centre
Another big opportunity lies for Pakistan, as some importers now want to shift part of theirbuying to other countries. Nevertheless, there are many hurdles that need to be addressed.PFMA is asking the Government to give 8.5% R&D of the FOB value to the footwear industryso that exports can grow from around US$150 million to US$500 million in the next fiveyears. The contribution is currently 6%.The following steps should be taken to improve footwear exports:• The R&D amount to be made available to exporters for better product development.• Establish material testing labs, which have affiliation with known internationallaboratories.• Establish a footwear institute that can provide direction, technical support and otherassistance to the factories.• Create a conducive environment to encourage investment in manufacturing of footwearlasts, moulds and soles.• Sponsor international training of technicians in footwear factories.2.2.2 Reasons for fluctuations in importsIn the last five years, imports have increased. Reasons for this increase are as follows:• From China, large quantities of synthetic shoes were imported in the last three to fouryears. These shoes are stylish and cheap. FOB prices are low. They are under-invoicedand misdeclared, although the import duty is 25%. This has drastically hurt localmanufacturing.• Big retailers like Bata and Servis started importing massively.• Smuggling is a common practice.2.3 Pricing structure of footwear industry2.3.1 Pricing structureTable 2.4 Average unit value in US$ (FOB Pakistan), 2000-2005Unit 2000–01 2001–02 2002–03 2003-04 2004-05Total footwear 5.55 5.92 6.46 7.19 7.36Leather footwear 6.79 7.53 8.76 8.89 9.64Canvas footwear 1.57 1.64 1.99 2.26 2.32Other footwear 3.49 4.32 3.12 3.78 5.01Source: PFMABefore 9/11 the conversion rate was PKR 64/US$1. Immediately after 9/11, it dropped to PKR58/US$1.International Trade Centre 19
Page 1: The Footwear Sector in Pakistan—
Page 7: Table of contentsAcknowledgementsAb
Page 10 and 11: the interest of buyers has dropped
Page 12 and 13: 4 International Trade Centre
Page 14 and 15: • Recommendations aimed at indivi
Page 16 and 17: Production capacitySince the data a
Page 18 and 19: Figure 2.1 Footwear manufacturing p
Page 20 and 21: No. Activity Information Input requ
Page 22 and 23: Table 2.2 Price trade structureRaw
Page 24 and 25: WholesalerIs an importer/stockist w
Page 28 and 29: Duty drawback rates at 9/11 in 2001
Page 30 and 31: equirements for the components of f
Page 32 and 33: It is becoming increasingly difficu
Page 34 and 35: Table 2.6 Product classifications r
Page 36 and 37: HS codeProduct categoryValueUS$’0
Page 38 and 39: Table 2.10 Pakistan’s major impor
Page 40 and 41: setting design niches. China’s ma
Page 42 and 43: 640320 - Leather slippersLeather sl
Page 44 and 45: Table 2.12 United States tariffs ap
Page 46 and 47: Table 2.14 Japan tariffs applied to
Page 48 and 49: Much of the rubber is sourced from
Page 50 and 51: One needs to keep in mind, of cours
Page 52 and 53: were of Italian origin in 2005. Thi
Page 54 and 55: since the Chinese footwear exports
Page 56 and 57: • To endeavour with other recogni
Page 58 and 59: 3.1.3 Functional scopeThe functiona
Page 60 and 61: correctly in a state of suspended a
Page 62 and 63: Ministerial Decision on Notificatio
Page 64 and 65: Demand for proactive supportive rol
Page 66 and 67: Figure 3.3 Relevance intensity of t
Page 68 and 69: However, all these exceptions are a
Page 70 and 71: Relevance for the footwear sectorTr
Page 72 and 73: include the Ministry of Commerce, M
Page 74 and 75: Agreement on Trade-Related Investme
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Agreement on safeguardsThis agreeme
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and removal of import quotas, impor
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Table 3.2: Top 10 buyers of Pakista
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GermanyGermany is the fifth export
Page 84 and 85:
4 Obstacles and shortcomings to exp
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Training institute/ human resources
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• The European Union should give
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Marketing• Market research• Fai
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Bilateral trade committeesA large n
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• Sponsors trade delegates to des
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6 Conclusion and recommendations6.1
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6.2 The way forward - if we had a m
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Most of the members do not have an
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SimilarprojectsFDDI: Footwear Desig
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• The upper now needs to be given
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98 International Trade Centre
Page 108:
M/s Five Star Marketing LtdM/s Foot
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