Workers handle shoes at Inlay Shoe factory in Kyaikay-North Bandagon village in Bago Division

SHOE manufacturers in Myanmar have enjoyed robust sales due to an abundance of large orders from Japan and a lack of domestic competition, according to industry sources.

“We do not need to rely on European and US markets since Japan alone consumes more than one million shoes a year,” said U Thet Lwin Shwe, the deputy chief executive officer of Inlay Shoe Manufacturing Co. Ltd, one of the portfolios of the well diversified Kambawza Group of Companies conglomerate.

He said there is still plenty of room for new shoe factories in Myanmar to fill the high volume of orders from Japan.

“There are three other factories in Yangon that manufacture shoes for export, two of which have a lower capacity than ours,” he said.

The domestic industry is likely to attract even more orders from Japan in the future as Myanmar offers ‘generalised system of preferences’ (GSP) favours, which allow import tax exemptions, U Thet Lwin Shwe said.

Bangladesh is Myanmar’s main competitor for shoe orders from Japan.
“However, Bangladesh does not have the GSP favour system, political security is more favourable in Myanmar, and the shipping period is longer from Bangladesh,” U Thet Lwin Shwe said.

The Inlay factory, established in 2001, is the largest shoe manufacturer in Myanmar in terms of production capacity and workforce, the latter of which numbers more than 1500.

“More than 90 per cent of our total production goes to Japan, and the rest goes to South Korea,” U Thet Lwin Shwe said.

However, in the latter market Myanmar faces tough competition from China
“Although Myanmar can compete with China in terms of labour costs, shipping from China to South Korea is quick and costs little since the two countries are close together,” U Thet Lwin Shwe said.

He said that if more raw materials were available domestically the shoe manufacturing industry would operate more smoothly and develop more quickly.

“At the moment only about 20 per cent of the raw materials we use – including rubber for insoles, and foam and cardboard boxes for packaging – come from domestic sources,” he said.

However, U Thet Lwin Shwe said the main raw material, leather, is difficult to obtain domestically in Myanmar since no farm animals are specifically bred for it.

“Most cows and horses in Myanmar have been used for hard work, and some have been beaten, so their skin is not suitable for use as leather,” he said.

He said the company plans to establish an outsole factory in the future but knows the investment will be high, as they will have to buy machinery, chemicals and other equipment.

“But if we can operate at full capacity, we can cover the cost of the factory within two or three years,” he said.

U Myint Lwin, the director of New Way Industry, which operates shoe and garment factories, said the industry will develop more quickly if orders from Japan can be filled on time.

“Sometimes we are unable to meet deadlines for orders because we have to take time to import the raw materials, and then export the finished products to the ordering countries,” he said.

According to industry sources, other delays are caused by regulations requiring all manufacturing under the cutting, manufacturing and packaging (CMP) system to be approved first by the Myanmar Investment Commission and then by the Directorate of Trade under the Ministry of Commerce.

“So sometimes we cannot accept every order as we have to consider the time limit,” U Myint Lwin said.

Most countries only allow 45 to 50 days to go through the entire process and fill their orders, he said

New Way Industry suspended operations in late April due to a shortage of orders but U Myint Lwin said he hoped to reopen by the end of June.

U Myat Thin Aung, the chairman of the Myanmar Industries Association, said that opening new shoe factories requires huge amounts of money, so foreign direct investment (FDI) is necessary.

“But whether we will get the necessary FDI is questionable, and then it takes a lot of time to get permits to import the relevant equipment into the country, otherwise we have to pay 21 per cent of the value of the machinery in commercial taxes and customs duty,” he said.

Despite these problems, he said the high volume of foreign orders ensures a bright future for Myanmar’s shoe manufacturing industry.