Footwear remains one of Hong Kong's biggest export categories, despite the fact that shipments dropped last year following healthy gains in 2005. EU anti-dumping duty and the relocation of much production to mainland China have taken their toll, although local companies are confident that quality and innovative designs offer the key to the future, as Vicky Sung reports.

Footwear was Hong Kong's tenth biggest export category in 2006, with overseas shipments valued at HKD46bn (US$6.0 bn).

This gave the category a 1.9% share of Hong Kong's total exports. But the value reflected a decline of 2.1% year-on-year from 2005 after a healthy gain of 8% (HKD47.8bn) from 2004 to 2005.

Nevertheless, the 2006 figure was higher than either 2003 or 2004, at HKD 44.8bn and $44.4bn respectively. In terms of percentage share, footwear exports have declined from 2.5% in 2003 to 2.1% in 2004 and 2005, and 1.9% in 2006.
Hong Kong's footwear exports are predominantly re-exports, in comparison to domestic exports which are a very minor story. Re-exports accounted for 99.9% of footwear's export total, and most of the activities originated from mainland China (96% of re-export).

Total exports, re-exports and re-exports that originated from mainland China, all fell, by 2%, 2% and 3% respectively.

Domestic exports however grew an astonishing 47%, regaining some of the loss experienced in 2005 (-58%). In terms of value, domestic exports have swung from HKD86.0m in 2003, to HKD93.0m in 2004, HKD39.0m in 2005 and HKD57m in 2006.

This is partly due to phase 3 of the CEPA (the Hong Kong Closer Economic Partnership Arrangement with mainland China), under which all products of Hong Kong origin (including footwear) have enjoyed tariff-free treatment since 1 January 2006.

Export markets
The top ten export markets for Hong Kong's footwear in 2006 were the US, Japan, the UK, China, Canada, Germany, Netherlands, Italy Australia and Taiwan. The US accounted for nearly half (45%) of the total exports, with the EU at 20%, and Japan at 11%.

However, the US' percentage share has been declining - from 50.4% in 2003, to 49.3% in 2004, 46% in 2005 and 45.2% in 2006. 

Exports to the US, Japan, the UK, Germany, the Netherlands and Italy all suffered from a decrease ranging from -3.3 for the Netherlands and -4% for the US, to -25.7% for Germany. The EU25 reflected a decline of -6% after a strong gain of +47% in 2005.

Spain and Denmark, though not in the top ten export destinations, showed a strong increase of 40.2% and 34.9% respectively. China also had a remarkable surge of 22.3%, due partly to an increase in re-exports of footwear parts, after single digit growth in the previous three years.

Footwear exports to the US are subject to tariff duties of between 0 and 48%, while import tariffs to the EU range from 3% to 17%, and from 3.4% to 30% for Japan.

The EU has also levied anti-dumping duty of 16.5% on certain leather footwear from mainland China since October 2006.

Manufacturing strengths
At the end of 2005, there were 1,491 import-export companies and only 16 manufacturers in Hong Kong's footwear industry, employing 6,760 and 65 employees respectively.

Manufacturers that re-located their production off-shore (mostly to mainland China) in order to reduce operating costs are now considered import-export companies.
Hong Kong produces a wide range of footwear, but it is particularly strong at manufacturing women's dress and casual shoes of real or synthetic leather. Some companies make men's casual shoes and an increasing number is turning to children's shoes.

Many of those who now operate in Mainland China began as OEM (original equipment manufacture) but with improved design capabilities they are now engaged in ODM (original design manufacture) projects and some even have their own R&D and quality control departments.

While many firms choose to continue to sell to mass merchandisers such as Wal-Mart, Target, Costco and Kmart, others have developed OBM (original brand manufacture) operations.

Well known local brands such as Le Saunda, Mirabell, Staccato and Joy & Peace are keenly interested in developing their brands abroad. Presently, they sell their products through their own retail stores including in Macau and mainland China.

Some are also venturing into niche markets, such as Dr Kong Foot Care which specialises in healthy footwear.
Design development
An annual Footwear Design Competition organised by the Trade Development Council together with the Federation of Hong Kong Footwear Ltd began seven years ago. The event has helped encourage and develop local design talent as well as enhancing the quality of Hong Kong's footwear industry.

For the 2007 design competition held in February, more than 900 entries were submitted in six categories: children's shoes, sports shoes, men's shoes, ladies' boots, ladies' sandals, and ladies' shoes plus three corporate categories.

In addition, there were a number of special awards sponsored by corporations within the shoe and leather industry. The criteria for judging focused on creativity, fashion aesthetics and ease of production.

For the first time in its seven year history, the judging panel awarded two grand prizes for the designs themed 'Snow & Ice' by Ka-Wai Li and 'Raindrop' by Shiu-Ying Lui. 
Announcing the results of the competition, Mr Yiu Tang, chairman of the design competition committee and chairman of the Federation of Hong Kong Footwear Ltd, said: "Hong Kong's footwear industry, with production in China, has emerged to be a global player.

"Today, of 100 pairs of shoes produced, 60-70 pairs are made in mainland China. The future for Hong Kong's footwear industry relies on improved, fashionable and creative designs and own brand development."
Mr Vincent Fang, legislative council member for wholesale and retail, added that footwear is no longer a necessity but a fashion item. "Designing fashionable styling is the key to Hong Kong industries' future.

"Only with quality and innovative designs and branding can Hong Kong's footwear industry survive, meet the challenges and excel in the international market."