The Sports Goods Sector in Pakistan - TRTA i

Executive summaryIndustry overviewPakistan produces annually around 240 million pairs of footwear of which approximately20 million pairs are exported. The industry has had a significant increase in export in recentyears – exports now stand at around US$150 million per year.Pakistan has a large footwear sector, which mostly belongs to the unorganized cottage sector.Craft manufacturers/cobblers cover a large portion of footwear manufacturing in Pakistan andonly around 20% of the sector is organized.There is an immense export potential in the footwear industry of Pakistan, but also manyhindrances. The main obstacle is time-consuming product development, for which new toolsand material are required.The most important need of the industry is to create a long-term policy that can facilitateexporters in overcoming such limitations. Pakistan's share of the global footwear market ofover US$70 billion is around US$150 million only. The region – including India, China,Bangladesh and Viet Nam – is well known for footwear manufacturing, so the major buyerscannot ignore Pakistan. However, the conditions for growth in export require a combination ofproduct development and close cooperation with buyers in order to secure some flexibilityfrom their side.Trade issues in generalThe Government, through the Trade Development Authority of Pakistan (TDAP), providesmarketing and promotional support to the sector by subsidising exporters’ participation in tradefairs and trade delegations. For the fiscal year 2006-07, the Government announced 6% of itsbudget to be spent on research and development (R&D) activities.However, the implementation of government policies is so slow that they lose their impact.Moreover, the Government’s repayment process of duty drawback and various taxes, such assales tax and import duty, is very long and cumbersome. Delays in the repayment of dutydrawback unnecessarily block exporters’ cash flows.The footwear industry in India is growing rapidly. Some key raw materials can be importedfrom India at competitive prices, but the Government of Pakistan has restricted imports ofmaterials from India. The Pakistan Footwear Manufacturers’ Association (PFMA) has severaltimes voiced its concern to the Government to liberalise import conditions, but no attention hasbeen paid to their advice. Generally, the industry feels there is a lack of long-term policy andvision from the Government for the footwear sector of Pakistan.At company level, the most important strength is entrepreneurial commitment; there is a verystrong desire to succeed in all kinds of circumstances. However, most companies and exportersare small and medium-sized enterprises (SMEs). The standard and process of productdevelopment is not very effective or efficient. Among exporters, there is a tendency to copyeach other’s designs and, because of the overlapping product lines of most of the companies,International Trade Centre 1