Illegal shoe and leather product imports from Thailand and China have created a major threat to the local industry. Due to the free flow of finished leather products to the country the local industry is finding it difficult to compete with the foreign produce. Over 50% of Sri Lankan products are manufactured as a cottage industry.

According to the production manager, DSI Samson Group, Gamini Ratanayake who is now in Thailand, Sri Lankan companies import raw material for shoes direct from Thailand. ‘Sri Lankan manufacturers have to pay 10% duty in addition to other customs and freight charges’, he has said. Companies also have to bear the high electricity charges and other overheads before a final product is released to the market.

He stated that local shoe producers have almost folded due to the competition. When local manufacturers send their products to the market they find imported items freely available at a cheaper price. The customs duty per imported shoe is around Rs100 (US$ 2.28) but since the products in question are smuggled in this does not apply.

Thailand has very good air links with Sri Lanka and this is a major reason why illegal items find their way to Sri Lanka. China is much more advanced in the leather product manufacturing business but until now there has been limited accessibility between the two countries. ‘However, with air and sea links improving China would be the biggest threat for the local industry in the future’, Ratanayake said.

He asks that the 10% duty imposed on Thailand for the export of raw materials be waived. Negotiations have already taken place in this area and the Thai government has agreed in principle, according to the treasurer of the Thailand Sri Lanka Business Council, which was set up this year. A visit by the President, Chandrika Bandaranike Kumaratunga, to attend the BIMST EC Summit in Thailand and the signing of six bilateral agreements with Thailand has made matters easier.