THE MARIKINA SHOE INDUSTRY

Introduction

For decades, the Marikina shoe industry has been considered as a vital part of
Philippine economy, providing employment opportunities to approximately 300,000
workers and generating almost 65% of the citys total revenue. During the 1950s to
the 1970s, the Marikina shoe industry was responsible for almost 80% of the shoe
production in the Philippines, and enjoyed a prestigious share of the Asian market
for footwear, especially in the 1960s when Marikinas craftsmanship was
considered second only to Japans.

However, policies of trade liberalization, coupled with aggressive competition from

other Asian countries led to the gradual deterioration of the industry. The relentless
importation of cheap shoes and other footwear products offered stiff competition in
the local market and has resulted in the widespread loss of livelihood for many
residents, as manufacturers and shoe factories closed shop.

In fact, research shows that the number of registered shoemakers in Marikina has
drastically declined over the years, from 722 in 1991 to 632 in 1993. By 1994,
Marikinas six major shoe manufacturers were already producing shoes not for local
consumption but for international brands such as Reebok, Nike, Sketchers and LA
Gear. By 2003, there were only two major shoe manufacturers left, namely Stefano
Manufacturing and Trident International Trading Corporation.

Latest figures from the Board of Investments (BOI) show that as of 2009,
approximately 24 registered firms exist, majority of which can be classified as
micro, small to medium-sized enterprises owned by families or under sole
proprietorship. A substantial number of unregistered shoemakers also existed in the
city at various times, though these have probably closed shop due to their
precarious economic standing.

Given such a dismal situation, the National Economic Protectionism Association

(NEPA) recognizes the pressing need to revitalize the industry for the benefit of
Marikina entrepreneurs, shoemakers and residents. Ultimately, the modernization of
the Marikina shoe industry will prove beneficial not only to local manufacturers and
residents, but also to serve to boost the Philippine economy as a whole, considering
that back in its prime, the Marikina shoe industry managed to earn almost $ 200
million in exports alone.

Brief Background

The Marikina shoe industry can trace its roots back to 1800s, when a well-to-do
landowner named Don Laureano Guevara brought back a pair of imported shoes
from England and instructed his workers Tiburcio Eustaquio, Ambrocio Sta. Ines and
Gervacio Carlos to replicate them. After the trios success, Guevarra ensured the

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propagation of the shoe industry by teaching other locals the craft of shoemaking.
Because of his invaluable contribution to the birth of the Marikina shoe industry,
Don Laureano Guevarra, also known as Kapitan Moy, would go down in history as
the founder of the Marikina shoe industry.

By 1935, the industry has flourished to the extent of producing 260,078 pairs of
ladies shoes and 86,692 pairs of mens shoes. Over the years, the industry enjoyed
steady growth and even became one of the chief exporters of footwear to the
United States, Europe, Australia, Hong Kong and Japan. By the 1960s, the Marikina
shoe industry was responsible for 80% of shoe production in the Philippines.

It must be noted that the peak of the Marikina shoe industry coincided with the
golden era of Philippine manufacturing during the 1950s. The nationalist laws and
President Garcias Filipino First policy engendered a pro-Filipino businessman
environment that saw the blossoming of the Filipino entrepreneur. In fact, the years
between 1949 and 1959 saw the establishment of 67,890 new businesses,
corporations, partnerships, and single proprietorships that reached a cumulative
capital of P1, 554,204.00.

However, the deregulated economic regime from 1965 onwards resulted in the
rapid decline of Philippine industries and manufacturers, including Marikinas
footwear industry. As such, domestic manufacturing collapsed under the onslaught
of free trademany companies unable to cope with peso devaluation and the
lifting of import controls soon closed shop, in the process laying-off thousands of
workers and professionals. Those that survived did so thru partnering with foreign
companies or cronies associated with the Marcos regime. Still, there were others,
because of its smallness or non-strategic economic position managed to survive and
flourish in the globalized period. Specifically, former First Lady Imelda Marcos
attempted to promote Marikina shoes in the international arenaciting superior
craftsmanship and design. Unfortunately, such a campaign was not sustained and
was insufficient to protect the industry amidst the flood of imported footwear that
soon saturated the local market.

By the late 80s to the early 90s, with the impending entry of the Philippines to the
GATT/WTO, the Marikina shoe industry had to compete with the influx of cheap
imports whose quality and lower prices are often preferred by consumers. In
particular, stiff competition from inexpensive Chinese and Vietnamese imports has
left many local manufacturers unable to cope, resulting in massive lay-offs and
bankruptcy in Marikinas shoe industry.

Issues and Problems

Production

As mentioned above, the production of shoes in Marikina are largely limited to small
micro, small to medium-sized enterprises owned by families or under sole

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proprietorship. Research shows that production is often a labor-intensive process,
with low productivity aggravated by outdated equipment and technology used.
Because the local leather and tannery industry is currently grappling with obsolete
machinery, low work productivity and inefficiency, the majority of leather and other
raw materials necessary for shoe production are often sourced abroad. Thus, many
manufacturers need high capitalization for operations.

Because of the absence of a comprehensive research and development program,

manufacturers are unable to upgrade their designs and equipment, leaving them
incapable to compete with international product standards and quality control.

Shoe Components and Accessories

One of the major challenges in developing the Marikina shoe industry lies in the
sourcing of shoe components and accessories. Because the Philippines lacks a
modernized tanning infrastructure that has the capacity to process leather hides,
approximately 80% of shoe components such as shoe lasts, heels, counters and top
lifts are imported from other countries. As such, shoe manufacturers are often prey
to exorbitant tariffs and smuggling of shoe components. There is also an absence of
product quality standards for shoe components and accessories.

Manpower

Because of the seasonal nature of shoe production in Marikina, there is a shortage

in new labor entrants to the industry, with majority of the workers mostly coming
from the older generation. The average employment level ranges from 20-60
workers per company, with wages ranging from P250-P350 a day. There is a
pressing need to enhance worker productivity and efficiency.

Marketing

Even though many local manufacturers opt to produce womens shoesowing to

the quicker fashion cycle of womens footwear as compared to menthere are no
specific markets catered by the industry. There has been no identified target
markets and product categories implemented industry-wide. There is also a pressing
need to develop marketing and promotional efforts among domestic and
international markets. The influx of cheap imported shoes from Asian countries such
as China and Vietnam has exacerbated the situation.

Institutional Aspects

a. Policies and Legislation

The institutionalization of Republic Act No. 9290, otherwise known as The Footwear,
Leather Goods and Tannery Industries Development Act, was a substantial
accomplishment towards the development of the Marikina shoe industry. However,
many provisions of the law have yet to be enacted and implemented fully.

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Exorbitant tariffs and the continuing proliferation of smuggled imported shoes
continue to plague local shoe manufacturers. As of the present no efforts have
been made to establish an inter-agency coordinating body that would address the
issues and concerns raised by stakeholders within the Marikina shoe industry.

b. Credit and Finance

There is a scarcity of credit and financing opportunities for local shoe

manufacturers.

Current Opportunities and Prospects

Despite the problems and issues confronting the Marikina shoe industry, the future
still remains bright. With a major retooling in the industrys operational methods in
place, the revitalization of the industry is possible.

In particular, there is an urgent need to address one of the primary factors hindering
the development of the Marikina shoe industrythe lack of credit and finance
opportunities to new and existing shoe manufacturers. The lack of capital is one of
the reasons why manufacturers are unable to upgrade their facilities, train their
workers, develop marketing strategies and make production and distribution more
efficient and expedient.

As seen in the experience of Vietnam whose shoe industry boomed after consistent
State support, the help of the government is vital towards the rejuvenation of the
industry. Indeed, facilitating the transfer of government funds to aspiring
entrepreneurs and shoe manufacturers can help address the multitude of problems
and issues that the industry confronts at present, particularly in acquiring updated
tools of production that will make the products more durable and competitive.

The establishment of cooperatives of local shoe manufacturers will not only help
unite a highly-divisive industry that will aid in formulating a vision and long-term
perspective of the shoe industry but can also strengthen the link between shoe
manufacturers and government support agencies and mechanisms.

Not only will the government provide much-needed financial support for the
development of the industry, it can also serve as the industrys main client,
specifically in providing quality footwear for government employees and men in
uniformi.e. combat boots and work shoes for soldiers and policemen. This way,
the industry is ensured with a steady supply of orders and clients.

In conclusion, concerted efforts by the local shoe manufacturers, the local

government units, concerned government agencies, private organizations and other
stakeholders contribute greatly towards pushing Marikina shoes from being a
backward enterprise into becoming an actual thriving industry. ###

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