Sharp decline of footwear industry over twenty-year period
Since the transition to the market-oriented economy, the structure of Latvia’s national economy has changed significantly with the transformation from a manufacturing to a service-based economy. The footwear industry is one of the industries in which competitiveness declined significantly during the period of market liberalisation. Today, the total added value of the footwear industry is relatively small, and there is no registered trade union in the industry.
History of footwear industry
In Latvia, the production of footwear at a manufacturing level was introduced in the second part of the 19th century. In 1912, footwear manufacturing companies employed 6,800 people, and the largest companies were located in the capital city Riga on the Baltic coast. In 1939, there were 84 footwear factories employing 1,400 people. Statistics show that in 1938, 2,140 pairs of footwear were manufactured, 79% of which were made from rubber.
In 1979, 23 million footwear pairs were produced, 57% of which were made from rubber. Latvian footwear was sold in the Soviet territory, with 32% of all production output being exported to other Soviet Union countries.
In 2000, 468,200 pairs of footwear were manufactured by about 20 companies operating in the sector. Although statistical data on the industry are limited, there is a possibility to determine the direction of the footwear industry in Latvia. In 2008, in comparison to 2000, footwear manufacturing declined by 67% (from 468,000 pairs of footwear to 156,000 pairs), and compared to 1990, it declined by 99% (Table 1). In 2007, 168,000 pairs of women’s footwear were sold, accounting for 58% of the country’s total footwear production and amounting to a total value of €34 million (about LVL 23.9 million as at 18 December 2009).
|Leather, rubber and felt footwear||23,331,000||20,570,000||2,153,000||468,000||289,000||156,000|
Source: Latvian Central Statistical Bureau (Latvijas Statistika)
According to data for 2007, 27 companies were registered in Latvia that were connected with footwear production (Table 2). However, according to experts of the Association of Textile and Clothing Industry (Vieglās Rūpniecības Uzņēmumu Asociācija, VRUA), the number of footwear manufacturers is extremely small: four or five companies produce footwear mainly for export. The largest footwear manufacturing companies, which are mainly focused on the export market, include: Stīvens, Aleksandra un Ko, Elegants and Baltijas Apavu Fabrika.
|Number of enterprises||27||29||41||31||29|
|Turnover (€ million)||1.97||2.44||2.55||2.19||n.a.|
|Number of employees||333||378||325||251||207|
Note: n.a. = no data available.
Source: Latvian Central Statistical Bureau
Since the transition from a planned to a market economy in Latvia, the number of employees in the footwear industry declined significantly: in 1989, there were 11 thousand employees in tanning and dressing of leather and footwear; in 1996, there were about 2,200 employees in the tanning and dressing of leather, manufacturing of bags, and the footwear industry, in comparison with 207 employees in 2007.
Footwear industry’s contribution to economic development
The footwear market in Latvia is characterised as a sector mainly geared towards import production. China is the main import market of footwear, accounting for more than 50% of all imports. Data from 2005 reveal that 53% of all footwear imports came from China (3.8 million pairs of footwear), 11.5% from Estonia (5.3 million pairs) and 7.4% from Lithuania (3.2 million pairs). The value of footwear imports in 2005 was €48 million (LVL 33.7 million), 16% of which came from China.
The downward trend of the industry is determined by the low level of competitiveness of local manufacturers. According to data from VRUA, the price for footwear made in Latvia is 5.6 times higher compared with that from China’s. When comparing the price for footwear produced in several EU countries with that from China, footwear from the Czech Republic is 9.4 times more expensive, from Denmark it is 11 times more expensive and from Italy 17 times more expensive.
Since 2006, an anti-dumping tax was imposed on footwear from China and Vietnam. However, the average price for imported footwear has not changed significantly: an average of €2 (LVL 1.40) for a pair of footwear.
The share of value added produced in the footwear industry was only 0.05% of total output in manufacturing. No trade unions or employer organisations operate in Latvia’s footwear sector due to its insignificant ratio in the manufacturing sector.
Irina Curkina, Institute of Economics, Latvian Academy of Sciences