The Filipino Shoe Industry

The shoe industry in the Philippines is modest in size, is made up largely of very small units of production with low levels of capitalization, pays meager wages, even by local standards, and is characterized by much informalization of employment structures. The industry is strongly concentrated in geographic terms. The National Capital Region, which includes Marikina City, is by far the dominant center of the industry with 39. 3 percent of all establishments and 53 percent of all employment. From the 1950s to the 1980s, the Philippine shoe industry experienced a boom owing from strong local and international demand.

During these years, many Filipinos wore locally-made shoes such as the Ang Tibay and Mabuhay brands, and carried locally-made leather handbags and purses. These products were also exported to foreign markets or ordered by local Chinese distributors for marketing in the provinces. At the end of the 1970s and the beginning of the 1980s, the industry was even able to capitalize on a passing fashion trend in the United States, and it experienced a short-lived bonanza in exporting snake-skin shoes to New York and other large American cities.

With the liberalization of the Filipino economy and the rising tide of competition from Chinese manufacturers, the Marikina shoe industry is now in the throes of a major crisis, with no end in sight. Until the 1980s, the shoe industry in the Philippines was protected by the high tariff barriers then in force as part of the overall national policy of import substitution. The industry accordingly prospered in a modest but definite way on the basis of its more or less complete command of domestic markets.

In the 1980s, import substitution policies were largely abandoned by the Philippine government, and over the 1990s trade liberalization accelerated greatly. Since the 1990s, footwear groups in Marikina and other areas have been warning against the influx of cheap goods from China, Korea, Taiwan and other countries due to liberalization, which intensified when the country became a member in 1995 of the World Trade Organization (WTO). One effect of this policy shift has been a notable rise in imports of foreign shoes into the country since the early 1990s with China leading the way as the main source of supply.

In 2003, more than half of the total value of Filipino shoe imports was ascribable to China. By contrast, Filipino exports of shoes have fallen dramatically over the same period, though the aggregate statistics are somewhat misleading here because a large portion of the export trade until the mid-1990s was made up of athletic shoes, and hence much of the recent decline is actually an effect of the closure of the foreign-owned plant where they were made. That said, exports have continued to dwindle, even after the disappearance of these plants.

Over a short period up to the mid-1990s, the Philippines also had a number of large foreign-owned plants employing cheap labor to make athletic shoes, but these operations have now almost entirely shifted to even lower-cost sites in other parts of Southeast Asia, most notably to Vietnam. The 1995 Annual Survey which records all data in terms of the 1977 Philippines Standard Industrial Classification (PSIC) informs that there were 1,920 establishments classified under PSIC code 324 (Manufacture of Leather Footwear) in the Philippines as a whole in 1995.

The total number of employees in the same year was 21,701. Of all establishments in the industry, fully 80. 7 percent had fewer than ten workers. Average monthly earnings amounted to USD 53. 33 in establishments with fewer than ten workers and USD 143. 94 in establishments with ten or more workers, at then prevailing exchange rates. For purposes of comparison, we may note that average monthly earnings in Filipino manufacturing as a whole were USD 259 in 1995. True enough, shoe imports have been arriving in increasing volumes year after year.

From 1997 to 1999, the country imported an average of 38. 5 million pairs of shoes. By 2001-2003, the volume zoomed 56 percent to 60. 2 million pairs. And this only covers legally imported shoes. Smuggling has also reportedly become rampant although government has yet to release actual figures of the extent of the problem. One of the principal factors underlying the continuing weakness of shoe exports from the Philippines is the ever-intensifying competition on world markets from producers in other low-wage countries.

The Philippines with its relatively minuscule export figure of USD 36. 2 million in 2003 ranks far below and shoes remain minor item in the overall structure of the Filipino economy. Even in 1995, when trade in Filipino shoes was much higher than it is now, exports still only amounted to 1. 1 percent of the overall value of domestic shoe production. The small quantities of shoes that continue to be exported from the Philippines are purchased mainly in neighboring countries of Asia and in the Middle East.

Little or no export activity is currently directed to high-income countries. Nevertheless, the impact has been disastrous for local shoemakers, particularly in Marikina and Laguna. Almost a century of rich shoemaking tradition in Marikina was lost when many small manufacturing firms closed down, retrenched workers, sold Chinese imports themselves or entered into exploitative subcontracting arrangements with foreign corporations. From 513 registered manufacturers in 1994, there are only 145 remaining in the country’s shoe capital.

For most of its history, the shoe industry of Marikina City functioned as a small and modestly energetic cluster of firms, not much given to innovative gestures, but thriving in an unassuming way on their command of the domestic market. At present, 80 percent of the Philippine market is dominated by imported shoes and leather products from China. Filipino shoemakers have to compete for the remaining 20 percent of the market with imports from other countries. http://www. bulatlat. com/news/5-44/5-44-shoe. htm http://journals. upd. edu. ph/index. php/kasarinlan/article/download/435/400