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					                                     Footwear Industry Profile
                                                (As of 04 April 2011)

Introduction

Footwear manufacturers are geographically dispersed in Metro Manila, Laguna,
Antipolo, Bulacan, Cebu and in the Philippine Economic Zone Authority (PEZA) areas
like Cavite, Bataan, Mactan, and Subic. Footwear made in these places have their
distinct characteristics. For instance, shoes manufactured in Marikina are mostly
dressed, handcrafted leather shoes for medium to high-end users. Laguna is known for
its ladies dress and casual synthetic leather shoes while Rizal is famous for its slippers
and sandals. PEZA locators, on the other hand, are manufacturing athletic or rubber
shoes of well-known brands such as Nike and Tretorn.

The industry is currently facing some challenges, with many firms closing or folding up.
As shown in Table 1, there were over 1,153 manufacturers employing 16,600 personnel
in 2005. However, as of 2009, which is the latest available data from the National
Statistics Office (NSO), the best estimate indicates that there are only 1,072 footwear-
manufacturing companies in the country, which employ over 12,155 personnel.

From 2005 to 2009, there was a 14% decline in employment and a 7% decline in
establishments in the Footwear Industry.

     Table 1: Number of Employment and Establishments Engaged in the
                 Footwear Industry by Region (2005 & 2009)

                                                  Manufacture of Footwear             Manufacture of Footwear
                                                          (2005)                              (2009)
                   AREA
                                                Establishment   Employment        Establishment     Employment
                                                   1, 153          16, 600             1, 072          12, 155
  NATIONAL CAPITAL
                                                    414             6,598               380            6, 051
  REGION
  CORDILLERA ADMINISTRATIVE
                                                      4               21                 4               19
   REGION
  ILOCOS REGION( (includes CAGAYAN
                                                      9               35                 7               21
   VALLEY)
  CENTRAL LUZON                                     229             2,952               181             872
  CALABARZON & MIMAROPA                             387             3,700               384            3, 606
  BICOL REGION                                       21               58                 20              52
  WESTERN VISAYAS                                     9               49                 9               34
  CENTRAL VISAYAS                                    45             2,635                49            1, 000
  EASTERN VISAYAS                                     5               12                 4               8
  NORTHERN MINDANAO                                   9              428                 8              399
  DAVAO REGION                                       14               59                 14              43
  SOCCSKSARGEN (ZAMBOANGA
  PENINSULA,                                          7               53                 3               36
  CARAGA)
  ARMM                                                 s               s                  s               s
Source: National Statistics Office: 2005 & 2009 List of Establishments
Note: s - Data suppressed for confidentiality reasons (under Commonwealth Act 591 of 1940)




Footwear Industry Profile as of 04 April 2011                                                                    1
Prepared by BOI OID - SPD
Figure 1 shows the different locations of the footwear establishments. Most of them are
located in the CALABARZON and the National Capital Region because of the availability
of the materials needed in manufacturing the merchandise.

                       Figure 1: Location of Footwear Establishments




                                     Others
                                      11%
                                                  CALABARZON
                        Central Luzon                                       CALABARZON
                                                      36%
                            17%                                             National Capital Region
                                                                            Central Luzon
                                                                            Others

                               National Capital
                                   Region
                                    36%




Source: NSO 2009 List of Establishments


Product Coverage

The Footwear Industry product coverage includes leather footwear, which are dress
shoes, non-leather footwear, sports footwear, slippers and sandals, and parts of
footwear.

          Leather footwear - includes footwear with leather uppers and outer soles of
          leather, rubber, plastic, wood, cork, or other materials.
          Non-leather footwear - includes footwear with uppers of rubber, plastic, textile or
          other materials and outer soles of rubber, plastic, wood, cork, or other materials.
          Sports footwear - includes footwear with uppers of leather, rubber, plastic, textile
          or other materials, specifically for athletic or sports purposes.
          Slipper and sandals - includes footwear with uppers of leather, rubber, plastic,
          textile or other materials and outer soles of leather, rubber, plastic, wood, cork or
          other materials.
          Parts of footwear - includes stiffeners, outer soles, uppers, gaiters, shoe shanks,
          cleats, toe caps, rubber straps, or similar articles.

Footwear product coverage/classification by Harmonized System (HS) and Philippine
Standard Commodity Classification (PSSC) is shown in Annex A.




Footwear Industry Profile as of 04 April 2011                                                    2
Prepared by BOI OID - SPD
Characteristics

Based on the BOI registered firms as of 2009, the footwear industry consists of 24 firms
with 30 projects generating an estimated employment of 11,060 people.

As of December 2010, the members of the Philippine Footwear Federation, Inc. (PFFI)
and the Sigla ni Kapitan Moy (Sikap Mo Inc.), two of the industry associations for the
footwear industry, has decreased. They now have fifty-eight (58) and thirty-five (35)
members from sixty-eight (68) and seventy (70) members, respectively.

Most of the manufacturers are family-owned where the management is handed down
from generation to generation.1 The enterprises range from micro to medium scale
industries and the products are commonly for medium to high-end markets. Many
companies are also accepting subcontracting arrangements with department stores and
boutique owners. Factories of popular local brands such as Chancellor, Colours, Gibi,
Figlia, Mendrez, Rusty Lopez and Valentino are found in Marikina. Only a handful of
companies have ventured into export.

The CALABARZON-MIMAROPA region (San Mateo-Rizal, Binan and Pagsanjan-
Laguna) recorded some 384 footwear manufacturers with an estimated 3,600 workers
as of 2009.2 The footwear capital of Laguna, Liliw, is known for its fashionable “home-
made” style slippers and shoes. The products are low-priced shoes, slippers or sandals,
generally for the local market.

The locators in PEZA, on the other hand, are big manufacturers owned by foreign
investors or joint ventures with Philippine companies. These companies are all
exporters and have highly mechanized equipment. The list of footwear manufacturers
under PEZA is shown below.

                         List of Footwear Manufacturers under PEZA
                                                (As of February 2011)


                   Company Name                                          Ecozone

    Chela Manufacturing Corp.                              Cavite Economic Zone I

    Paramount Footwear Co., Inc.                           Freeport Area of Bataan

    S.S. Ventures International, Inc.                      Freeport Area of Bataan
Source: Philippine Economic Zone Authority 2011




1
    Pearl State Sector Report 2006 (June 2008)
2
    National Statistics Office 2009 List of Establishments Industry and Trade Statistics


Footwear Industry Profile as of 04 April 2011                                              3
Prepared by BOI OID - SPD
Raw Materials

Raw materials used in footwear manufacture are both local and imported. Local raw
materials are tanned leather usually used in wrapping while imported ones are synthetic
leather and some metal parts. Availability, quality, price and time span of delivery are
some of the factors that concern raw materials. This can affect the production and price
of the finished product. The major raw materials used in footwear manufacturing
process are as follows:

       Upper (Synthetic Leather, Tanned) and Upper Lining (Synthetic Leather, Tanned
        Leather)
       Chemicals and Adhesives
       Nails, Threads and Buckles
       Heels, Insole and Outsole
       Cotton tape
       Welt and Foam
       Leather dressing, Shoe Laces and Shanks
       Packaging and Label


Marketing Structure

Local Demand

Most of the footwear manufacturers seem to be contented with the local market for the
following reasons: (1) higher profit margin, (2) lesser paper work, (3) lesser people to
deal with and (4) no pressure on the delivery time. Local markets rely on direct selling,
boutiques, and department stores to sell their products. Few enterprises have their own
stores. The industry’s highest production is during the months of October, November
and May. This can be attributed to Christmas and school opening seasons. The lowest is
during the month of July, caused by clearance and inventory sales.

World Demand

The export performance of footwear manufacturers is striving with the economic crisis
and stiff competition form other ASEAN nations. Several exporters were able to get
licensing agreement with manufacturers of branded shoes like Nike, Tretorn, Adidas,
Hush Puppies and Florshiem for children. In order to promote Philippine footwear in the
world market, manufacturers/firms participate in trade fairs, business missions, and
Internet or online brochures/catalogues.

The Tables below show the Philippine footwear export and import performance
alongside with the world. A great volume of imports is from China, which is at the same
time the top exporter in the world. This can be attributed to China’s cheap raw materials
and labor cost. However, USA, which is top importer of footwear, is a third major
Philippine’s export partner.




Footwear Industry Profile as of 04 April 2011                                          4
Prepared by BOI OID - SPD
Table 2 shows the export and import in value of Footwear Industry for the years 2003-
2009.

      Table 2: Imports and Exports of Footwear Products (US$) 2004-2009

           YEAR                                   EXPORT                             IMPORT
       2010 (Jan-Mar)                            6, 970, 012                           N/A
             2009                                23,442,648                         43,149,457
             2008                                31,985,124                         40,707,363
             2007                                26,479,674                         45,312,165
             2006                                23,027,735                         37,394,589
             2005                                15,143994                          16,575,572
             2004                                34,451,037                         42,132,741
             2003                                45,955,614                         55,550,168
Source: National Statistics Office 2010


In 2009, the total export trade value of the Philippine footwear industry is $23,442,648
and the total import trade value of the Philippine footwear industry is $43,149,457.
Figure 3 shows the import and export performances of the footwear industry, which
illustrates the inconsistency of the industry in the past several years.

       Figure 3: Import and Export Performance of the Footwear Industry
                                  (2003-2009)

               50,000,000
               45,000,000
               40,000,000
               35,000,000
               30,000,000
                                                                                        EXPORT
               25,000,000
                                                                                        IMPORT
               20,000,000
               15,000,000
               10,000,000
                 5,000,000
                          0
                               2003       2004       2005      2006   2007   2008




Footwear Industry Profile as of 04 April 2011                                                    5
Prepared by BOI OID - SPD
Tables 3 and 4 below show the top exported and imported products of footwear sector
as of 2009.

           Table 3: Top Exported Products of Footwear Sector as of 2009

                  Description                        Trade Value (in $US)
Sports footwear; tennis shoes, basketball shoes,          8,735,099
gym shoes, training shoes and the like | Sports
footwear equipped with spikes, studs bars
Other | Orthopedic shoes                                   5,016,500
Outer soles and heels, of rubber or plastics | Of          1,149,439
rubber
Other | With outer soles of rubber or plastics and         686,679
uppers of
Other footwear, incorporating a protective metal           624,170
toe- cap | - Other footwear, incorporating a
protective metal toe-cap
Other | Slippers, rubber                                   526,866

           Table 4: Top Imported Products of Footwear Sector as of 2009

                    Description                      Trade Value (in $US)
Other | With outer soles of leather or composition       28,360,202
leather
Sports footwear; tennis shoes, basketball shoes,          11,291,826
gym shoes, training shoes and the like | Sports
footwear equipped with spikes, studs bars
Footwear with upper straps or thongs assembled             2,211,933
into the sole by means of plugs
With uppers of textile materials | Slipper with            1,847,998
outer soles of wood or cork
Other | With outer soles of rubber or plastics and         1,837,569
uppers of
Other footwear, incorporating a protective metal           1,649,705
toe- cap | - Other footwear, incorporating a
protective metal toe-cap

Top Footwear Manufacturers
1.  Nike Philippines Inc.
2.  SS Ventures International, Inc.
3.  Paramount Footwear Co., Inc.
4.  Production Village Corporation
5.  Stefano Footwear Corporation
6.  Beach Rubber Co., Inc.
7.  Philippine Shoe Expo Marketing Corporation
8.  Soltec Inc.
9.  Islander Footwear Manufacturing Corporation
10. Mendrez Shoes Manufacturing Corporation

Footwear Industry Profile as of 04 April 2011                                    6
Prepared by BOI OID - SPD
             Table 5: Top 5 Export Partners of Philippine Footwear 2009

                   COUNTRY                               FOB Value (in $US)
                  Netherlands                                4,934,967
            United States of America                         2,986,385
                     Japan                                   2,402,738
                    Mexico                                   1,499,144
                     France                                   692,787
                 Other partners                             10,926,627
Source: National Statistics Office 2009

Table 5 shows the top five export partners of the Philippine Footwear Industry in the year
2009. Bulk of footwear products are exported to Netherlands (21%), followed by the USA
(12.7%), Japan (10.2%), Mexico (6.4%) and France (3.0%) respectively.

             Table 6: Top 5 Import Partners of Philippine Footwear 2009
                  COUNTRY                           Trade Value (in $US)
                     China                              19,107,830
                   Indonesia                             6,311,981
                  Hong Kong                              4,633,788
                   Viet Nam                              4,530,026
                   Singapore                             2,814,691
                 Other partners                          5,751,141
Source: National Statistics Office 2009


Table 6 shows the top five import partners of the Philippine Footwear Industry in the year
2009. China (44.3%) and Indonesia (14.6%) are the two major import partners followed
by Hong Kong (10.7%), Vietnam (10.5%), and Singapore (6.5%).


Incentives

Under Section 3 of the Republic Act No. 9290 – The Footwear, Leather Goods and Tannery
Industries Development Act, the incentives are awarded to accredited footwear enterprises
for a maximum period of ten (10) years. Such incentives are as follows: (1) Zero duty
on imported capital equipment, (2) additional deduction from gross income of fifty
percent (50%) of the expense incurred in training programs approved by appropriate
agency, (3) inclusion, promotion, advertising and sale of locally manufactured finished
product in duty-free shops and (4) tax credits.




Footwear Industry Profile as of 04 April 2011                                           7
Prepared by BOI OID - SPD
Firms can also register with the Board of Investments if their products are for export.
Under Book I of the Omnibus Investments Code, BOI-registered enterprises are given a
number of incentives in the form of tax exemptions and concessions. These are:

(a) Fiscal Incentives

             1. Income Tax Holiday (ITH)
                      Six (6) years- new projects with pioneer status
                      Four (4) years- new projects with non-pioneer status
                      Three (3) years- expansion/ modernization projects
            2. Six (6) years- new or expansion projects in less developed areas or 30
                poorest provinces in the Philippines.
            3.     Duty Exemption on Imported Capital Equipment Spare parts and
                accessories
             4. Exemption on Wharfage Dues, Export Tax, Duty, Impost and Fees
             5. Tax Exemption on Breeding Stocks and Genetic Materials
             6. Tax credits (for export producers only)
            7. Tax credit on tax/duty portion of domestic breeding stocks and genetic
                materials
             8. Tax credit on raw materials and supplies
             9. Additional Deductions from Taxable Income
            10.Additional deduction for labor expense
            11.Additional deduction for necessary and major infrastructure works

(b) Non- Fiscal Incentives

          1. Employment of foreign nationals
          2. Simplification of customs procedures
          3. Tax and Duty-free Importation of Consigned Equipment for a period of ten
             (10) years
          4. Privilege to operate a Bonded Manufacturing warehouse

(c) Incentives for Regional Headquarters and Regional Operating Headquarters
    in the Philippines


Also, PEZA provides the following fiscal incentives for existing PEZA-registered
enterprises-Export enterprises registered with the Export Processing Zone Authority.

(a) Income Tax Holiday

          1. 100% exemption from corporate income tax
          2. Four (4) years ITH for Non-pioneer Project
          3. Six (6) years ITH for Pioneer Project

(b) Three (3) years ITH for Expansion project (ITH applies to incremental sales)

(c) Upon expiry of the Income Tax Holiday - 5% Special tax on Gross Income and
    exemption from all national and local taxes.



Footwear Industry Profile as of 04 April 2011                                        8
Prepared by BOI OID - SPD
(d) Tax and duty free importation of production equipment and machineries, breeding
    stocks, farm implements including spare parts and supplies of the equipment and
    machineries.

(e) Exemption from export taxes, wharfage dues, impost and fees.

(f)   VAT Zero Rating on local purchases of goods and services, including land-   based
      telecommunications, electric power, and water bills

(g) Exemption from payment of local government fees such as Mayor’s Permit,
    Business Permit, permit on the Exercise of profession/Occupation/Calling,
    Health Certificate Fee, Sanitary Inspection Fee, and Garbage Fee


Support/ Cooperation of Industry Associations
The Board of Investments works with the various footwear industry associations:

            1. Philippine Footwear Federation, Inc. (PFFI)
            2. Sigla ni Kapitan Moy (Sikap Mo Inc.)
            3. Marikina Footwear Federation, Inc. (MFFI)




Footwear Industry Profile as of 04 April 2011                                        9
Prepared by BOI OID - SPD
Useful Contact/s:

Board of Investments (BOI)
Address        :   2F 385 Sen. Gil Puyat Ave., Makati City
Tel No.        :   (632) 890-9329
Fax N.         :   (632) 890-3080
Contact Persons:   Rudy B. Caña, Director, Special Programs Department
                   Angelita F. Arcellana, Division Chief, Other Industries Division
Email          :   rbcana@boi.gov.ph, afarcellana@boi.gov.ph


Philippine Footwear Federation, Inc. (PFFI)
Address        :    #20 Russet St., CITC Compound, SSS Village, Marikina City
Tel no/s       :    (632) 942-4228
                    (632) 934-0574
Fax no/s       :    (632) 942-4228
                    (632) 941-1178
Contact Person :    Mr. Roger Py – President
E-mail         :    the_pffi@yahoo.com


Sigla ni Kapitan Moy (Sikap Mo Inc.)
Adress          :   No. 289 L. De Guzman St., Concepcion, Marikina City
Tel no/s        :   (632) 948-8863
Contact Persons:    Mr. Mahar Jardiolin – President
                    Ms. Mercy Santos – General Manager

Marikina Footwear Federation, Inc.
Address        :   157 M. A. Roxas St. Calumpang, Marikina City
Tel no/s       :   (632) 645-3143
                   (632) 645-9327
Fax no/s       :   (632) 645-3143
E-mail         :   junpasco@yahoo.com
Contact Person :   Mr. Lito Lopez - President


Liliw Footwear Association
Address        :   Liliw Laguna
Tel no/s       :   (6349) 563-2431
Fax no/s       :   (6349) 562-0350 c/o DTI - Laguna
Contact Person :   Amy Moneda - Chairperson


United Footwear Manufacturers Association, Inc. (CUFMAI)
Address        :   Tangasan, Valladulid, Carcar, Cebu City
Tel no/s       :   (6332) 487-9080
Fax no/s       :   (6332) 487-9081
Contact Person :   Mr. Algerico Sandoy - President




Footwear Industry Profile as of 04 April 2011                                         10
Prepared by BOI OID - SPD
                                                                                    Annex A

                          Footwear Industry Product Coverage

   HS               PSSC                                    Description
6401                               Waterproof footwear, rubber, plastic (Wellingtons etc)
 6401.10                           Waterproof footwear with outer soles and uppers of
                                   rubber/plastic with metal toe cap
 6401.91          851.3101         Waterproof footwear with outer soles and uppers of
                                   rubber/plastic, no toe cap, covering the knee
 6401.92          851.3102         Waterproof footwear with outer soles and uppers of
                                   rubber/plastic, no toe cap, covering the ankle but not the
                                   knee
 6401.99                           Waterproof footwear with outer soles and uppers of
                                   rubber/plastic nes
6402                               Footwear nes, with outer sole, upper rubber or plastic
 6402.12          851.2100         Ski-boots, cross country ski footwear and snowboard
                                   boots with outer soles and uppers of rubber/plastics
 6402.19          851.2300         Sports footwear other than ski boots, cross country ski
                                   footwear, snowboard boots with outer soles and uppers
                                   of rubber/plastics
 6402.20          851.3201         Footwear with outer soles and uppers of rubber/plastic
                                   straps fix to sole by plugs
 6402.30          851.1300         Footwear, soles and uppers of rubber/plastic, metal cap
                                   toes (excl waterproof)
 6402.91          851.3202         Boots, soles and uppers rubber/plastic covering the ankle
                                   (excl waterproof)
 6402.99          851.3202         Footwear, outer soles and uppers rubber/plastic nes
6403                               Footwear with uppers of leather
 6403.12          851.2200         Ski-boots, cross country ski footwear and snowboard
                                   boots
 6403.19                           Sports footwear except ski-boots, cross country ski
                                   footwear and snowboard boots
 6403.20          851.4100         Footwear, soles/uppers of leather, uppers leather strap
                                   instep and big toe
 6403.30          851.4200         Footwear, outer soles of
                                   rubber/plastic/leather/composition of leather, platform
                                   wood base, uppers leather, no insole
 6403.40          851.1500         Footwear, uppers of leather with metal toe-cap (excl.
                                   water proof)
 6403.51                           Footwear, soles, uppers of leather, cover ankle (excl.
                                   water proof)
 6403.59                           Footwear, outer soles and uppers of leather other than
                                   covering the ankle (excl. water proof)
 6403.91                           Boots, sole rubber or plastic upper leather (excl. water
                                   proof)

Footwear Industry Profile as of 04 April 2011                                             11
Prepared by BOI OID - SPD
 6403.99                           Footwear, sole rubber/plastic/leather/composition of
                                   leather, uppers of leather (excl. water proof)
6404                               Footwear with uppers of textile materials
 6404.11                           Sports footwear, sole rubber or plastic, upper textile
                                   (tennis, basketball, gym, training shoes etc)
 6404.19                           Footwear, sole rubber/plastic, upper textile, not sports
 6404.20                           Footwear, sole leather/composition of leather and uppers
                                   textile material
6405                               Footwear nes, sole not leather, rubber or plastic
 6405.10                           Footwear, nes uppers leather/composition of leather
 6405.20                           Footwear, nes upper textile material
 6405.90                           Footwear, other than uppers leather/composition of
                                   leather/textile material
6406                               Parts of footwear, in –soles, heel cushion, gaiter, etc.
 6406.10                           Footwear uppers and parts thereof, except stiffeners
 6406.20                           Soles and heels for footwear, of rubber or plastic
 6406.91                           Parts of footwear of wood
 6406.99                           Parts of footwear nes, gaiters and leggings etc

Source: National Statistical Coordination Board (NSCB)




Footwear Industry Profile as of 04 April 2011                                            12
Prepared by BOI OID - SPD

				
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