Cheap Shoe Imports Hurting Domestic Footwear Industry

EghtesadOnline: The import of cheap and low-quality footwear has caused serious damage to domestic shoe industry, says Ali Lashgari, a board member of Iran’s Chamber of Commerce, Industries, Mines and Agriculture.

News ID: ۷۸۶۹۹۶

11 September 2021

According to the official, from fiscal 2013-14 to fiscal 2020-21 (last Iranian year), a total of $2.12 billion worth of shoes were imported to Iran, mostly from China, the UAE, Turkey, Italy, India and Thailand.

“Considering the role of the UAE in [re-]export of Chinese products to Iran, it is estimated that about 88% of imported shoes come from China and the rest from Turkey, Italy, Thailand and India,” he was quoted as saying by ICCIMA’s news portal.

Italy has the highest average shoe export price of $57.72 per pair. The average for Chinese-made shoes was at $4.68. For Turkey, it stands at $3.38 and India $9.5. The average price of a pair of imported shoes in the world increased from $9.7 to $11.2 from 2010 to 2018.

“Europe has the highest average import price [$14.94] and Africa has the lowest import price [$2.67],” Lashgari said, adding that the average price of shoes imported to Iran from five countries in 2018 included China with $4.68, Italy with $57.11, Turkey with $3.29, India with $8.28 and Thailand with $10.99.

The highest export price of Chinese shoes in the same period was related to leather shoes with $14, the figure was $73.61 for Italy and $14.10 for Turkey.

“Since the largest share of Chinese shoes exports to the world [about 42%] at a price of $3.72 belongs to the 6402 Harmonized System code (aka HS code), which belongs to plastic shoes and the country's share in exports to Iran is about 88%, it can be concluded that the main imported shoes in Iran had an average price range of $3.7 and less than $4,” he added.

According to the official, the import of shoes at prices much lower than the world’s average do not help develop the domestic production. He identified this as a major obstacle to employment and production in the shoe industry, which has led to the closure of some small and medium shoe workshops, because most of the imported shoes could have been produced domestically.

Decline in Exports

The Producer Price Index for shoe industry has exceeded the general inflation rate and Iran-made shoes have lost their comparative advantage in exports, according to Lashgari.

“Shoe exports in the first quarter of the current Iranian year [March 21-June 21] decreased by 6.8% in value and 16% in weight compared with the same period of last year,” he said.

“Average exports of shoes over the past four years [March 2017-21] stood at 32,000 tons worth $98 million annually, i.e., $3.3 per kilogram on average. A total of 46,000 tons of shoes worth $105 million with an average price of $9.2 per kilogram were exported last year [March 2020-21], indicating a 28.9% and 36.7% increase in value and weight year-on-year.”

The official noted that Iran exported 7,345 tons of shoes worth $18 million ($2.47 per kilogram on average) during the first quarter of the current year, registering a decrease of 8.6% in value and 16% in weight compared with the same period of last year while the average price per kilogram of this exported item rose by 8.6% year-on-year.

“Iraq, Afghanistan and Azerbaijan account for 90% of Iran’s shoe exports; Iraq with 50%, Afghanistan with 18% and Azerbaijan with 13.8% are Iran’s main trading partners in shoe exports in terms of value. They are followed by Pakistan, Turkmenistan and Armenia,” he added.

Lashgari blamed the fluctuation of foreign currency exchange rate in the early months of the Iranian year and the 40% inflation rate for the decline in export of shoes.

“Producer inflation for shoe industry exceeded the general inflation rate in Q1. Despite the depreciation of local currency against the US dollar, costs incurred by factors that are out of the control of industrial managers have resulted in an immense pressure on the industry and a runaway inflation. For example, the annual inflation rate of shoe industry stood at 42.7 in the month ending June 21 compared with 37.9% in the month ending April 20,” he said.

“Year-on-year inflation rate of shoes stood at 51.6%, 53.8% and 56.3% in the months ending April 20, May 21 and June 21, respectively, compared with the annual and year-on-year inflation rates of 34.5% and 26.4% in the month ending June 20, 2020.”

Noting that shoe industry creates as many jobs as car industry in Iran (500,000 jobs), Lashgari said, “The increase in overhead expenses, including wages, transportation and fuel, overshadows the costs of raw materials. This increase cannot be compensated even with the depreciation of local currency against the US dollar.”