Footwear Exports Earn $82 Million in 11 Months, Down 20% YOY

EghtesadOnline: A total of $82 million worth of different types of footwear were exported from Iran during the current Iranian year’s first 11 months (March 21, 2021-Feb. 19), registering a 20% decline compared with the similar period of last year, according to a member of the Association of Managers and Experts of Iran’s Shoe Industry.

News ID: ۷۸۷۷۶۹

14 March 2022

“Footwear exports stood at close to $105 million in fiscal 2020-21,” Ali Lashgari was also quoted as saying by IRNA.

According to the official, Iran’s footwear market is valued at $2 billion per year.

“Over the past few years and after the reimposition of economic sanctions, local producers managed to increase their market share from 75% to 95% last year,” he added.

Noting that between 2013 and 2021, the average price of imported footwear into Iran was $3 per pair, he said cheap imports have caused harm to the domestic industry as local producers mostly aim to make shoes costing around the same $3.

“The cheap imports mainly coming from China and the UAE rob local businesses of sales opportunities,” he said.

There are 12,000 producers of footwear, leather and bags in Iran, which have created direct jobs for more than 500,000 people.

Mohammad Reza Davarpanah, a member of Producers and Exporters of Synthetic Leather Association, said 85% of raw materials for footwear production is procured domestically and 95% of the required machinery are manufactured inside the country.

In the fiscal 2018-19, imports of 1,400 types of commodities were banned to support local producers of these goods. Footwear and bags were among this long list.

“As this regulation came into effect, foreign exchange rates experienced an upsurge, making prices of foreign shoes unaffordable for Iranians. Therefore, the smuggling of these goods also decreased, making way for domestic producers to show their capabilities and at the same time work on increasing the quality of their products and updating their knowledge of contemporary global fashions,” Alireza Ajdarkosh, the head of Shoes and Related Industries Guild Union, has told Fars News Agency.

The Producer Price Index for shoe industry has exceeded general inflation and Iran-made shoes have lost their comparative advantage in exports, Lashgari had said earlier.

“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 the export of shoes in terms of value. They are followed by Pakistan, Turkmenistan and Armenia,” he said.

He blames foreign currency fluctuations in the early months of the Iranian year and the 40% inflation rate for the decline in exports 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 beyond 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. 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 annual and year-on-year inflation of 34.5% and 26.4% in the month ending June 20, 2020,” he said.

Lashgari noted that the increase in overhead expenses, including wages, transportation and fuel, overshadows the costs of raw materials. This increase cannot be compensated even with the local currency’s depreciation against the US dollar.