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Twist in shoe import policies and social responsibility of domestic producers

In the Iranian year of 1395, there were two noticeable turning points in Iran’s shoe imports and growth in production rate of leather shoes:

First: Iran Custom’s reports on official and legal importation of shoes in 1395 shows a 3.6 times increase in comparison with the previous year. Second: The international figures show a 44% decrease in exportation of shoes into Iran, from 2015 to 2016. Third: According to the reports by Central Bank of Iran, the total production rate in large industrial shoe and leather production workshops (those with more than 100 staffs) saw a 0.9% increase in production in the 1395 year, compared to the previous year. Fourth: based on in-field studies, the growth rate of medium and small production units (less than 100 crews) experienced a slight decrease in the same time span. The author tries to study the trilateral effects of the mentioned changes, replacement of smuggling with legal importation and the social responsibility of domestic producers.

The reports published by Iran’s custom say that legal shoe importation in the years 1392, 1393, 1394 and 1395 has been respectively: 3.4, 6.8, 5.1 and 18.5 million dollars which shows the official importations of shoes have increased by 3.6 times from 1394 to 1395.

The international sources announced shoe exportation to Iran in 2013, 2014, 2015 and 2016 have respectively been 229, 557, 389 and 216 million dollars, which shows a 44% increase only during the last year.

In other words, if the average rate of shoe exportation during the 4-year time span is about $352 m, and the average official and published figures of shoe importation during the 4 years under investigation is $8.4m, the proportion would be 42. Comparing the obtained proportion with the average proportion of the rates to each year’s figure, we would come to 67, 85, 76 and 11.6.

Decline in smuggling and increase in official and legal importation, along with decrease in the proportion of Iran’s shoeexportation to the official importation has decreased from the average 42 to 12 in 1395. This shows a revolution in international exchanges in the field of shoe industry and every sort of ignoring this progress by domestic producers will endanger the way back to the balanced situation.

The investigations carried out in analytical statistics unit in shoe industry bulletin during 1392 to 1395 show that the effects of society’s low purchase power for products as bags and shoes are ponderable.  If the price inflation in all products and services for a single household in 1393- 94- and 95 (equal to 22.3, 9.7 and 9%) is compared with retail rate growth during the same period (equal to 15.6, 11.9 and 6.2%), and in the month of Ordibehesht in 1396, (equal to 9.8 and 6.1%), we will find out that Iran’s consumption has severely decreased. Iran’s weaker stratums, who are not able to afford sufficient amount of shoe products, are not capable enough to tolerate the increasing rate of inflation, until a revolving thing happens in people’s purchasing power and on the other hand in quality of retailing and services provided by domestic producers.

This happens, even if we do not take into consideration the 50% share of semi built parts in combination with official importations, and say that shoe imports with 55% of interest is financially beneficial, and do not care about the real secret behind the increase in official importation. (Do some of the domestic shoe producer tended to import pre-built pieces of shoes? Or they preferred to import illegally rather than legally?). The important thing is that according to the prevailing statistics during the year of “resistance economy, production and employment”, as the Supreme Leader puts it, it is expected that the smuggling will be replaced with legal importation of shoe products, because the illegal process would be more risky if the strict monitoring of the government is taken into consideration.

If we want to do a real investigation of the situation, we should gain a bilateral understanding of the paradox flowing through the domestic shoe industry. The shoe industry is facing stagnation because the purchasing power of a large number of people in need has had a sharp fall. The structure of production and distribution straggles and the trained human force is limited to workshops. The distribution network is not smart. The customers wait a long time in purchasing queues, pressures coming from sanction, affecting the value-added tax, equal insurance fee for the employee and employers, such as IranKhodro and petrochemical companies, ill banking system and no practical ideology on support of entrepreneurship and domestic producers. Furthermore, because of high transaction prices and low supplement of raw material, the production has been so much lower than the capacity. This would change the preference from legal and official exportation to smuggling in the domestic shoe industry.  This would impel the importers to apply for import license for shoes with ID or without ID card. On the other hand, it is expected that economic, industrial and commercial authorities put the resistance economy, production and employment policies into action to reduce the inclination to smuggling and simultaneously increase people’s desire to use domestic-made products. This could be viable using social network advertisement, which is so common among people nowadays. It also could create a new capacity for the domestic shoe producers, contributing the industry’s development.

What is necessary to be considered by the domestic shoe producers and the commercial committee of the current government, after the changes in shoe importation, is that the domestic producers should emphasize on their social responsibility in their potentials to attract customers. The director staff of the resistance economy should also efficiently use the advices and experiments of professional and executive cabinet in the industry, as Iran’s shoe industry workshop did. This would contribute detection and obviation of the prevailing impediments through the industry’s progress path, and strengthen production and exportation as the most important factor against smuggling.

It is expected that the action give more jolly, hope and bolubility to the entrepreneurs, investors and producers. 1396 Eid-Al Fitr

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