A total of $100 million worth of shoes and synthetic leather were exported from Iran during the last fiscal year (ended March 20, 2021), director of Iran Shoemakers Association said.
Speaking on the sidelines of the Tenth International Exhibition of Footwear, Bags, Leather and Related Industries, also known as MPEX 2022, Rasoul Shajari added that $76 million of the total sum pertained to footwear and the rest to synthetic leather, IRNA reported.
The official noted that 220 million pairs of shoes are made in Iran annually, adding that the industry has created direct jobs for around 500,000 people.
“MPEX 2022 opened on Jan. 11 at the Tehran International Fairgrounds and will run through Jan. 14. This year, apart from Iranian businesses, companies from Italy, China and Turkey have also participated,” he said.
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. Footwear and bags were among this long list.
“After 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 global fashions,” Alireza Ajdarkosh, the head of Shoes and Related Industries Guild Union, told Fars News Agency.
The official added that Iranian businesses active in footwear production need to do serious work in branding to do better in domestic and international markets.
Alireza Jabbarian, the head of Tabriz Cordwainers Union, noted that before the footwear import ban took effect around three years ago, the local shoe industry was under serious threat from contraband entering the country in huge consignments.
“Around that time, the country’s shoe industry saw a 40% decline in production, mainly because Chinese shoes were being either imported or smuggled to the country. These were mostly cheap shoes, lacking in quality.”
Stressing that since the ban on shoe imports, Iran’s shoe industry has seen significant growth.
“At present, domestic companies are producing footwear with a quality on par with international standards that can also satisfy Iranian consumers,” he said.
Cheap Shoe Imports Hurting Domestic Footwear Industry
Import of cheap and low-quality footwear has resulted in serious damage to domestic shoe industry, says Ali Lashgari, a board member of Iran’s Chamber of Commerce, Industries, Mines and Agriculture.
According to the official, from the fiscal 2013-14 to fiscal 2019-20 (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 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 while the average for Chinese-made shoes is $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.
Lashgari noted that Europe has the highest average import price ($14.94) and Africa has the lowest import price ($2.67), 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, which figure was $73.61 for Italy and $14.10 for Turkey,” he said.
“Since the largest share of Chinese shoes exports to the world [about 42%] at an average price of $3.72 belongs to the 6402 Harmonized System code (aka HS code), which belongs to plastic footwear and the country's share in exports to Iran is about 88%, it can be concluded that the shoes imported to Iran had an average price range of $3.7-4.”
The orientation of imported shoes cheaper than the world average did not help develop the domestic production, which led to the closure of small- and medium-sized shoe production units and reduced employment, 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, such that Iran-made shoes lost their comparative advantage in exports, according to Lashgari.
Shoe exports in the first quarter of the current year (March 21-June 21) decreased by 6.8% in value and 16% in weight compared with the same period of last year,” he was quoted as saying by Tehran Chamber of Commerce, Industries, Mines and Agriculture’s news portal.
“The average exports of shoes over the past four years [March 2017-21] stood at 32,000 tons worth $98 million annually, i.e., an average of $3.3 per kilogram. 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,” he said.
“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. The average export price per kilogram of this item rose by 8.6% year-on-year.”
Lashgari said 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, which are followed by Pakistan, Turkmenistan and Armenia.
He blamed fluctuations of foreign currency exchange rates 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 which are beyond the control of industrial managers have imposed 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 of 34.5% and 26.4% in the month ending June 20, 2020.”
Noting that the shoe industry creates as many jobs as the 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.”
