LNP – Local footwear industry threatened by illegal imports

The Sri Lankan footwear industry is facing severe challenges due to a surge in low-cost, illegally imported shoes that avoid taxes, according to industry sources.

This influx threatens local manufacturers, despite their capability to meet the entire domestic demand. Investigations reveal a widespread racket involving the import of foreign-manufactured shoes through illegal channels, facilitated by certain corrupt customs officials.

These shoes are released into the market at prices significantly lower than locally-produced footwear, causing a substantial drop in market competitiveness for local brands.

Each imported pair is typically subject to a Rs.2,000 tax, yet these illegal imports avoid such charges, leading to an annual tax revenue loss of approximately Rs.35 billion.

Neville Perera, Chairman of the Sri Lanka Footwear and Leather Products Manufacturers Association said due to these concerns, the local industry is under threat, putting 300,000 jobs at risk and destabilising a market valued at around Rs.150 million annually.

Approximately 85 per cent of this market meets local needs, with the rest allocated for export. However, challenges from the COVID-19 pandemic and financial instability have compounded issues, while illegal imports from China and India have worsened matters.

These foreign goods, often surplus items sold by weight at extremely low prices, are being introduced to Sri Lanka’s market cheaply due to tax evasion, making them more affordable than local products, which must adhere to strict tax and regulatory requirements.

Mr. Perera emphasised that, until now, local manufacturers have refrained from requesting government support, preferring self-sufficiency.

But with illegal imports on the rise, the association is now seeking tax relief and stricter enforcement of import regulations to help local businesses remain competitive.

Local manufacturers are crucial suppliers to key sectors such as schools and the military, further underscoring their importance to the country’s economy and essential needs.

In response, the association has appealed to the government for stronger measures against unauthorised imports, including a potential complete ban on imported footwear. Local producers benefited from a temporary ban on imports during the COVID-19 period.

This ban allowed them to expand their production capacity, and many even invested in new machinery to meet the demand created by the absence of foreign products in the market.

The footwear sector consists of 10 large companies, 30 medium-sized enterprises, and around 3,000 small manufacturers, collectively employing approximately 300,000 people.