Nepal is slowly becoming self-reliant on footwear production, and they are getting fit into the lifestyle of Nepalese people. But shoe smuggling has jeopardized local shoe market.
--BY PEMA YANGZOM SHERPA AND HIMA B.K.
The Nepalese Shoe Industry is flourishing, seeding a hope of potential to enthusiastic entrepreneurs, industrialists, and future manufacturers. Recently, the shoe manufacturers and companies have received a positive response from their customers and have given them a sense of happiness.
The Covid-19 outbreak created economic havoc globally, eventually crippling Nepal’s economy as well. Like most other industries, the shoe industry of Nepal also suffered a loss during these dreadful years. The decline in monthly sales led to a decrease in the sales revenue of the manufacturers. As a result, the companies could not pay rent, salaries, and basic expenses, let alone make investments.
Despite the ongoing Covid-19 pandemic, Nepali entrepreneurs have risen again and are back in business. Every cloud has a silver lining. Based on the current population of 30 million in Nepal, 90 million pairs of shoes and slippers are in demand in the domestic market. To meet up to this demand, there are shoe companies that have emerged with their new collections, competing against foreign brands.
To support local Nepali brands, the Footwear Manufacturer’s Association of Nepal organizes FMAN Footwear Business Expo every year. It is a national-level industrial exhibition that aims to enhance the market of Nepali leather goods and footwear industry production. They held the 2079 expo on 26th April 2022 in the Bhrikutimandap Exhibition Hall. There were 1500 stalls, which were mostly small indigenous shoes and slippers. They have occupied over 60 percent of the market, which was an encouraging and proud moment for the Nepalese. Footwear designed for males, females, and kids was available in the exhibition with attractive discounts. There were over 1000 models of shoes available at the expo, which attracted more customers.
In recent years, shoe companies in Nepal have introduced several quality services and footwear collections. The local Nepalese has responded positively to this new addition and has grown love towards the Nepalese brand.
Aman Gautam is the Director of Caliber Shoes, one of Nepal's leading and most popular footwear companies. When asked about the current market for shoes in Nepal, he shared his view with the New Business Age. The young director said that the footwear industry is growing every day in Nepal. “People are really leaning toward locally manufactured products because of reliability and affordability. They have created some level of a soft corner for MADE IN NEPAL products these days,” the director added.
The rich history of Caliber dates back to over 20 years. Moving forward with the vision, “To be in every Nepalese step”, the company has numerous services to offer with a great collection of footwear ranging from sports shoes, casual footwear, formal shoes, boots, and many more. This Nepalese shoe brand uses the highest grade microfiber on their products, which contributes to the higher durability and aesthetically pleasing design.
Not only does Caliber Shoes value the designs of their shoes, but also their customer's satisfaction. It provides 24/7 customer service, a 6-month warranty policy, and also free returns for its customers. There are a total of 42 outlets of Caliber shoes all over the country maximizing the accessibility for the Nepalese.
Likewise, another renowned shoe prodigy is Ahmed Dullah, the founder of Dullah Shoes. He put his best words forward and expressed his positive view of the shoe industries in Nepal.
“The current market looks promising and should improve for the better in the coming days”, Dullah said.
Dullah Shoes is the Nation’s pride, delivering exceptionally quality shoes made of the highest quality calf/buff leathers and lambskin. It has been over 10 years since Mr. Ahmed launched Dullah Shoes, with new additions in other lines of products like handbags, wallets, backpacks, crossbody bags, duffel bags, and also card holders.
In the context of Nepalese brands competing with foreign brands, Mr. Dullah put forward his view in New Business Age. According to him, if the government provides effective schemes and proper facilities to the shoe manufacturers then the existing and upcoming shoe companies could compete with foreign brands in Nepal shoulder to shoulder.
Similarly, the Marketing Manager of Black Horse Shoes, Mr. Dinesh Shrestha, also added his opinion on the same topic. “The market for shoes in Nepal is growing and developing in a healthy way. Customers love Nepalese products and we have received amazing feedback on our footwear collections. Young entrepreneurs interested in shoe-making business can hop into this industry as this is a growing sector with immense opportunity. With a little push from the government, the market for our Nepalese shoe brands will become a successful one”.
Black Horse Shoes is another popular footwear company in Nepal. They have been operating since 2014 and have created an image of themselves as the best leather shoes in the market. This company has footwear of all kinds like formal school, party, and casual shoes as well which are made with the best quality raw materials.
According to the Footwear Manufacturer’s Association of Nepal, the production has increased from 43.9 million to 56.5 million at present. Their aims for the shoe industry are to establish training centers for the production of an indigenous skilled workforce, provide assistance for developing curriculum and support Nepali footwear manufacturers and exporters in the international market. Currently, the industry has provided various jobs and has around 55,000 workers working in the region. They have also estimated that one-third of the workers are women who have been working extremely well. All the footwear manufacturers and companies in Nepal are working towards expanding this industry further and slowly exporting more Nepali shoes to the international market as well. Meanwhile, in the home country itself, the shoe market is gradually moving forward to become a successful industry in Nepal.
In an investigative reporting published in the ArthikAbhiyan Daily, sister publication of New Business Age, Hima B.K. writes," Entrepreneurs have complained that the self-reliant Nepali footwear industry has been badly affected due to smuggled shoes imported from India and China by lowing invoicing. Indigenous footwear manufacturers, which have been meeting about 65 percent of the demand for domestic consumption, have responded that they have reduced production now.
Entrepreneurs say that the country's famous and old shoe industry is currently producing only 20 percent of its capacity. Other industries have been producing only 50 to 60 percent. The industrialists are skeptical that the government will provide 8 percent cash subsidy for the export of footwear through the budget of the coming fiscal year (FY) 2022/23. The experience of the industrialists is that smuggling has increased tremendously for the last 3/4 years.
Vidushi Rana, executive director (branding and marketing) of Kiran Shoes Manufacturers, which produces the country's oldest shoe brand Goldstar, said there were many problems in the footwear industry. Rana said that Goldstar, which used to operate 24 hours a day and exported 70 percent, now runs only 6 hours. "Only 20 percent of the total capacity is produced by footwear company," she said adding that, "The Nepali market has been overwhelmed by smuggling and low invoicing shoes."
Rana claims that Goldstar now directly employs 3,000 people. "But, it is not certain when it should be reduced to one thousand / five hundred," she said. According to Rana, when the market is flooded with smuggled goods, the production has to be reduced, it has become difficult to compete and the interest on bank loans cannot be paid. She complained that the state has not been able to protect the manufacturing industry even though the import-based economy occupies a large part of it.
High costs are a major challenge for indigenous industries. "Cheap goods are smuggled in from India and China," said Rana. Even though it looks like they have paid customs duty, they have been deceived as out of ten imported, they pay tax to only one pair of shoes, so the shoes have come under under-invoicing (low invoicing).
Chhabilal Poudel, owner of Asian Footwear Pvt. Ltd. at Mechinagar-15 in Jhapa, which produces 2 million pairs of shoes annually, also agrees that smuggling and low invoicing are the main problems of the indigenous industry. "My industry has an annual capacity of 4 million pairs of shoes," he said. "At present, only 50 percent of the shoes are produced." The state is losing revenue.
Gyanendra Prasad Dahal, chairman of Mega Shoes Industries Pvt. said that despite the annual production capacity of 3 million pairs of shoes, only 60 percent is being produced now. The domestic industry has not been able to benefit from the government's increase in customs duty through the budget, he added, However, production has to be reduced as his company cannot compete with the footwear with the ones imported from India and China due to low price.
Nani Raj Ghimire, president of Shubhakamana Footwear Products, who is also the president of Shoe Producers Association of Nepal, said that it was difficult to compete with the import of shoes due to smuggling and low invoicing and the industry had to close down. He said that the state has not been able to stop such activities and the revenue has been lost and the smugglers have benefited. Showing the data of the customs department, he said, "In the fiscal year 2020/21, it is seen that 41.146 million oais of shoes have been imported." It has been imported at Rs 176 per pair and has generated only Rs 76.08 per pair.
"No shoe can be imported for Rs 176," said Ghimire. Its production cost is Rs 350. It is seen that 41.11 million pair was imported last year.
"As of mid-April, 2.8 million pairs of shoes have been imported," Ghimire said. How do you compete with low-cost footwear? '
Even though the same amount of shoes was imported last year, it is seen that 27 million pairs of shoes were imported in the first nine months of this year. In this regard, he estimates that 25 million pairs of shoes will be imported in the current fiscal year. Shoe manufacturers are not happy with the decline in imports. "Indigenous products could have taken over the market share and replaced imports," Ghimire said. Due to this, our estimate is that by mid-July, 25 million to 30 million pairs of shoes will be supplied through smuggling. '
Ghimire says that smuggling can be stopped even by asking if there is a VAT bill and a bill invoice by the Inland Revenue Department and the Revenue Investigation Department.
'Made in Nepal' and 'Made for Nepal' have also been included in the budget. He said that any footwear within Nepal should be imported by mentioning Made for Nepal and specifying clear MRP. The production capacity of the footwear industry in the country is 160 million annually."