Shoes

A mission for Accomplishment of a Comprehensive sector study regarding the opportunities of Complementarities and Industrial Integration in the Leather
and Shoes Sector in the Member Countries of the Agadir Agreement ( Egypt - Jordan - Morocco & Tunisia)
FINAL REPORT
Prepared by Mahmoud Qattous and Terry McCallin
Amman, September 2009
T a b l e
of Contents
A mission for Accomplishment of a Comprehensive sector study regarding the opportunities of Complementarities and Industrial Integration in the Leather and Shoes Sector in the Member Countries of the Agadir Agreement (Jordan, Tunisia, Egypt & Morocco)
Final Report 8 8 8 8 9 10 11 11 12 14 15 19 20 21 21 21 22 23 24 24 25 26 26 26 27 27 27 29 31 31
1.
GENERAL FRAMEWORK
1.1. OBJECTIVE 1.2. OVERVIEW OF WORLD LEATHER PRODUCTS INDUSTRY. 1.2.1. THE INFLUENCE OF POPULATION 1.2.2. REGULATORY FACTORS 1.2.3. WORLD MARKET ORIENTATION 1.3. FINANCIAL CRISIS 1.3.1. OVERVIEW 1.3.2. STRATEGY FOR SURVIVAL 1.4. GLOBAL SOURCING 1.4.1. EUROPEAN MARKET TRADE CHARACTERISTICS FOOTWEAR 1.4.2. LEATHER GOODS 1.4.3. HIDES AND SKINS AND LEATHER 2. 2.1. GLOBAL TRADE INDICATORS OF LEATHER INDUSTRY GLOBAL IMPORTS AND EXPORTS:
2.1.1. HIDES AND SKINS AND FINISHED LEATHER. 2.1.2. PERSONAL LEATHER GOODS 2.1.3. LEATHER FOOTWEAR 2.2. EUROPEAN UNION IMPORTS AND EXPORTS 2.2.1. HIDES AND SKINS AND FINISHED LEATHER 2.2.2. PERSONAL LEATHER GOODS 2.2.3. LEATHER FOOTWEAR 2.3. INTRA AGADIR TRADE 2.3.1. HIDES AND SKINS AND LEATHER 2.3.2. LEATHER GOODS 2.3.3. FOOTWEAR 2.3.4. RAW MATERIALS AND INPUTS 2.3.5. HIDES AND SKINS 3. AGADIR GROUP ANALYSIS 3.1. JORDAN
Leather and Shoes Sector
Mahmoud Qattous and Terry McCallin
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3.1.1. INDUSTRIAL SETTING AND INSTITUTIONAL FRAMEWORK 3.1.2. NATURE OF THE SECTOR 3.1.3. TYPE AND SIZE OF COMPANIES 3.1.4. SECTOR TYPES OF PRODUCTION AND CHARACTERISTICS 3.1.5. INSTITUTIONS AND NUMBER OF WORKERS 3.1.6. PRODUCTION ADDED VALUE 3.1.7. FOREIGN DIRECT INVESTMENT (FDI) 3.1.8. COST OF PRODUCTION 3.1.9. FIELD VISITS COMPANY PROFILES 3.1.10. STRENGTHS AND WEAKNESSES OF THE SECTOR 3.2. TUNISIA 3.2.1. INDUSTRIAL SETTING AND INSTITUTIONAL FRAMEWORK 3.2.2. NATURE OF THE SECTOR 3.2.3. TYPE AND SIZE OF COMPANIES 3.2.4. SECTOR TYPES OF PRODUCTION AND CHARACTERISTICS 3.2.5. INSTITUTIONS AND NUMBER OF WORKERS 3.2.6. PRODUCTION ADDED VALUE 3.2.7. FOREIGN DIRECT INVESTMENT (FDI) 3.2.8. COST OF PRODUCTION 3.2.9. FIELD VISITS COMPANY PROFILES 3.2.10. SWOT ANALYSIS 3.3. MOROCCO 3.3.1. INDUSTRIAL SETTING AND INSTITUTIONAL FRAMEWORK 3.3.2. NATURE OF THE SECTOR 3.3.3. TYPE AND SIZE OF COMPANIES 3.3.4. SECTOR TYPES OF PRODUCTION AND CHARACTERISTICS 3.3.5. INSTITUTIONS AND NUMBER OF WORKERS 3.3.6. PRODUCTION ADDED VALUE 3.3.7. FOREIGN DIRECT INVESTMENT 3.3.8. COST OF PRODUCTION 3.3.9. FIELD VISITS COMPANY PROFILES
31 31 32 33 34 34 35 36 36 38 39 39 41 41 42 44 44 44 44 45 46 47 47 48 49 50 51 52 52 52 52
Final Report 54 55 55 56 57 59 61 62 62 62 63 66 67 67 68 68 72 74
3.3.10. SWOT ANALYSIS 3.4. EGYPT 3.4.1. INDUSTRIAL SETTING AND INSTITUTIONAL FRAMEWORK 3.4.2. NATURE OF THE SECTOR 3.4.3. TYPE AND SIZE OF COMPANIES 3.4.4. SECTOR TYPES OF PRODUCTION AND CHARACTERISTICS 3.4.5. INSTITUTIONS AND NUMBER OF WORKERS 3.4.6. PRODUCTION ADDED VALUE 3.4.7. FOREIGN DIRECT INVESTMENT 3.4.8. COST OF PRODUCTION 3.4.9. FIELD VISITS COMPANY PROFILES 3.4.10. SWOT ANALYSIS 3.5. GROUP IMPACT FACTORS 3.5.1. PRODUCTIVITY 3.5.2. INDUSTRY ORGANISATION (ITALIAN METHOD) 3.5.3. BENCHMARKING 3.5.4. THE TURKISH MODEL 3.5.5. THE VIETNAMESE MODEL
3.5.6. IDENTIFICATION OF OPPORTUNITIES OF DIAGONAL ACCUMULATION OF 76 ORIGIN PROMOTING COOPERATION AMONG AGADIR COUNTRIES: 3.5.7. SUCCESS STORIES 4. 4.1. 4.3. 4.4. 5. 5.1. 5.2. 6. 6.1. CONCLUSIONS SWOT ANALYSIS SUMMURY COOPERATION POSSIBILITIES: AGADIR STRATEGIC PLAN: DEVELOPMENT OF STRATEGY INTRODUCTION FORMULATING A GENERIC STRATEGY FOR THE GROUP ACTION PLAN ASPECT 1 - PRODUCTION 78 79 79 80 81 82 86 86 87 93 93
4.2. DRAFT FINDINGS (RECOMMENDATIONS):
Final Report 6.1.1. LEATHER 6.1.2. FOOTWEAR 6.1.3. PERSONAL LEATHER GOODS 6.2. ASPECT 2 - MARKETING 6.2.1. LEATHER 6.2.2. FOOTWEAR 6.2.3. PERSONAL LEATHER GOODS 6.3. 7. 7.1. 7.2. 7.3. 7.4. 8. 8.1. 8.2. ASPECT 3 INVESTMENT SUMMARY OF ACTION PLAN PRODUCTION MARKETING INVESTMENT
93 97 102 105 105 107 121 125 132 132 137 140 141 142 142 145 Table of Annexes
ACTIONS REQUIRED FOR THE AGADIR ZONE ARTISAN HANDCRAFT SECTOR PRIORITISATION OF ACTION PLAN SHORT AND MEDIUM TERMS PLAN LONG TERM
ANNEX I 1. GLOBAL IMPORTS AND EXPORTS ALL LEATHER PRODUCTS ANNEX II 1. EU IMPORTS AND EXPORTS ALL LEATHER PRODUCTS ANNEX III 1. GLOBAL TRADE OF AGADIR COUNTRIES LEATHER PRODUCTS ANNEX IV: 2008 UPDATE OF AGADIR TRADE STATISTICS 1.EXPORT & IMPORT OF THE AGADIR LEATHER & FOOTWEAR SECTOR IN 2008 2.GROWTH OF EXPORT & IMPORT OF THE AGADIR LEATHER & FOOTWEAR SECTOR FROM 2007 TO 2008 IN % :
145 145 169 169 177 177 195 195 195
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1. GENERAL FRAMEWORK
1.1. Objective.
This study aims at: 1.1. Diagnosing cooperation fields between the 4 member countries (Morocco, Tunisia, Egypt and Jordan) of the Agadir Agreement through analyzing the possibilities of Complementarities and Industrial Integration in the Leather and Shoes Sector. Enhancing regional trade exchanges between the Agadir Agreement member countries. Boosting exports towards the European Union in the Leather and Shoes sector. Attracting European and other foreign investments towards the Agadir Agreement member countries. Overview of World Leather Products Industry.
Every country in the world has a leather products industry in one form or another and every country is a market for finished goods, the biggest of which is footwear. The manufacture of products, especially footwear, pulls through the development of the tanning industry. Tanners and leather products manufacturers are mutually interdependent. Most of the world population has some sort of foot covering. Even people in the poorest of African and Asian countries manage to obtain some sort of shoe. As populations increase and living standards rise so does the demand for shoes. This may not be the case for leather goods, bags, wallets, belts, garments etc. as they are more of a luxury item than a necessity. The growth in this sub sector tends to lag behind footwear. With the rapid urbanisation, particularly in developing countries, there will be more demand for footwear and personal leather goods (PLG) of better quality. The days of turning out cheap products will be over in the next 5 10 years. The biggest manufacturer in the leather industry; China, has brought this about by selling products on a price basis of such inferior quality (mostly out of synthetics) that there has been a reaction against them by consumers. This is also true for other Far East suppliers; namely Viet Nam, Hong Kong, and to some extent Indonesia. However in this context China is in the process of upgrading its products and changing its image of a mass producer of cheap inferior quality synthetic products to better quality leather items. 1.2.1. The Influence of Population Today the world population is over 6.5 billion and is expected to cross the 9.0 billion threshold by 2050. In global terms population growth will be highest in the Indian sub continent and Asia mainly China. The population in Europe is predicted to decline. Africa and Latin America will increase. North America will show a moderate increase.
population reference bureau (USA)
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The expanding markets for leather products by potential customers in terms of size rather than per capita consumption are: Asia Africa India China. Those showing only modest growth are: Europe Latin America North America The average world annual growth rate for the next 6 years is estimated at 1.125% per annum. During the next 15 years the population over 55 is predicted to increase by 35.1% in Europe. For manufacturers of leather products and shoemakers in particular, the shift in the age demographics from a relatively young population to an ageing one is significant. This will entail new marketing plans, techniques and products to appeal to this particular market segment, based around comfort, value for money and conservative styling. 1.2.2. Regulatory Factors The personal leather goods and footwear manufacturing industries are regarded as environmentally friendly ones. Very little problem waste is generated in the manufacture of products. Many thermoplastic materials are recycled including the newer developments in toe puff and counter materials. Solvents are used in sprays and cement attaching. However these are being replaced by water based finishes and adhesives. The result of this clean technology is that there are few extra regulations imposed on the industry. The tanning industry produces large amounts of solid and liquid but as technology improves this becomes less and less. The European Union has its own rules. Azo dyes, PCPs and nickel derivatives (all potential chemical carcinogens) are forbidden in leather. PETA (people for the ethical treatment of animals) have lobbied hard in the leather goods industry to the extent that some buyers refuse to order shoes made with Indian leather particularly in Germany. For some years the EU has been pushing for an eco label to be used on all footwear signifying its ethical and non polluting origins. This is a voluntary code at present. It is a law and requirement in the EU market that each half pair of shoes must have a pictogramme on them identifying what materials the uppers, linings and soles are made from. This is to stop the practice of passing off some materials as real leather. All packaging that is imported to the EU must be recyclable and be strong enough to maintain necessary standards of safety (outside cartons must not disintegrate during transport). A recent development has been the introduction of the REACH programme in 2007 which concerns the Registration, Evaluation, Authorisation and restriction of CHemicals. It came into force on 1st June 2007 and replaces a number of European Directives and Regulations with a single system. It has several aims among them: To make the people who place chemicals on the market manufacturers and importers responsible for understanding and managing the risks associated with their use. REACH applies to substances manufactured or imported into the EU in quantities of 1 tonne per year or more. Generally, it applies to all individual chemical substances on their own, in preparations or in articles. This is a complicated system for the control of potentially hazardous chemicals used in manufacturing. Consulting companies have sprung up who will guide organisations through the new regulations and there are many web sites
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available. A dialogue should be opened with suppliers to see what is required of leather product manufacturers in terms of registration. There is an implied threat if no registration is done where needed then products will be banned from the EU market. However the tanning industry is essentially based on the chemicals used in production. REACH has probably more relevance in this sub sector compared to footwear, and PLG. 1.2.3. World Market Orientation The manufacturing of leather products takes place in the East with the major market being in the West. The main consuming markets in the world for leather products are Europe (27); the biggest, and North America. These areas are the target markets for many leather products manufacturers who aspire to be exporters. The footwear manufacturing industry (which is a barometer of the rest of the leather products manufacturing industry) in these areas has declined year after year for the past 20 years, as they loose the battle with imports. Per capita consumption in recent years has shown a very modest increase. The effects of imports have been to decimate the local manufacturing industries. Only in certain special situations has the local industry still managed to survive. In Europe, the Italian manufacturing industry survives because of innovation in terms of being the world fashion leader. Product development, design, and styling still has its heart in Italy. (Although for sports footwear this also occurs in USA). Spain and Portugal only just survive because of a lower cost base than Italy. France, Germany, UK and USA are struggling to survive in niche markets. However all these industries are showing declines in manufacturing year after year as imports take a larger market share. The difficulties in Europe and to a certain extent the difficulties in China, produce an opportunity for the manufacturers in the Agadir countries to capture new customers and / or attract new Foreign Direct Investments (FDI). The trend in market supply is for smaller orders; more often, of different styles. The countries are close to the biggest market in the world and have strong relationships with Italy, France and Spain, and to a lesser extent with Germany, UK, Benelux and Portugal. China has recently been forced by international pressure to re-value its currency, labour shortages are developing in the east of the country and wage rates are increasing. The EU currently has anti dumping legislation in place against China which is predicted to be extended for another two years, it imports leather, and it can also be difficult to deal with and is unpopular with buyers. Companies buy from China because they have to not because they want to. However China is not going to stand still. It is already developing new Shoe Cities to encourage more efficient manufacturing. It has opened a warehouse in Spain. It is alleged it has plans to open retail shops in Europe. Other players in the international market are also developing their industries, notably India and Viet Nam. India has not yet reached its potential on the world market. It is also building new shoe cities aimed at the export market. Leading footwear players like Adidas, Puma and Nike are likely to shift some of their purchasing and production from China to India over the next three years. In December 2008 The Indian government has approved plans to build a footwear complex and footwear components park in Chennai. The government will invest $3 million in the complex and $2.1 million in the components park. A Footwear Design and Development Institute is also being established in Chennai and is expected to be up and running by the 2010-11. The government has also approved proposals to establish a leather goods park in Kolkata, West Bengal ($1.1 million) and a leather complex in Andhra Pradesh ($ 6.2 million). India has witnessed promising technology inflow and foreign direct investments. The entire leather sector is now de-licensed and de-reserved, paving the way for expansion on modern lines with state-of-the-art machinery and equipment.
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The Vietnamese footwear industry is targeting export growth of 12%13% in 2009 according to the Leather and Footwear Association. Vietnam is now targeting the Africa and the Middle East markets. The manufacturers in the Agadir countries can replace Far East supply with products produced nearer to the market by flexible production techniques. However to develop more Business to Business (B2B) opportunities in Europe, time is of the essence for Agadir Countries before the Far East / India suppliers re-group.
1.3.
Financial Crisis
1.3.1. Overview
Strategic economists say the current crisis is going to be more difficult than first expected. World economic growth is expected to slow sharply, with the UK (-2.9%) among the hardest
GROWTH IN 2009 Country World China India Brazil EU27 UK USA

IMF estimates
GDP Growth Rate 0.5% 6.7% 5.1% 1.8% -2.0% -2.9% -1.6%
Developing countries such as China and India should fare better. Reports from Thailand say that the countrys footwear exports to the US, one of its most important export destinations, have fallen dramatically. Figures show that shoe exports to the US previously accounted for 35% of Thailands total shoe production, but now accounts for just 27%. As a result, many Thailand exporters have decided to turn their attention to countries in the EU. Exports to EU countries now account for 40% of the countrys total footwear production. Many footwear manufacturers have also shifted from low-end shoe production to medium and high-end production in order to appeal to markets looking for better quality shoes. This constitutes a threat to Agadir Countries. China and India are already taking steps to shore up their leather products industries with extra incentives for exporters somewhat against the spirit of the WTO/GATT agreements. The director general of Spains labour ministry, has told the countrys footwear industry that the first payments undera support package first announced in October 2007 will become available during the month of March 2008. The Spanish government was firmly committed to the so-called Footwear Plan, which will make specialist training available to workers in the footwear industry and help employers keep workers (especially older workers) on during economically challenging times. In all, the government has promised to makeUS$ 59 million available to the industry. Portugal is to invest $1.2 million in the textile and leather industries in an attempt to boost exports by investments in technology, training and marketing. It can be seen therefore from the above examples that the competition in the world market is going to get fiercer than before as more and more countries assist their leather industries, creating a very challenging market place for the Agadir Countries.
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According to Tunisias National Leather and Footwear Federation (FNCC), the value of exports from both sectors from the country has fallen by 11% since November. Most export-focused producers in Tunisia concentrate around 95% of their efforts on the European market, which has been badly hit by the economic downturn, leading to fewer orders and fewer sales. Some Tunisian companies have seen sales decline by 2025% and some have closed down. Tunisia is the strongest country of the Agadir group. The fact that it is being negatively impacted in this way will mean the other countries will probably be affected more seriously. Entrepreneurs are reluctant to discuss in detail the state of business especially if they are having problems. However evidence from visits in Tunis suggests that shoe manufacturers are suffering a down turn of up to 50% in production levels. Manufacturers of personal leather goods also report declines but at a less severe level of 30%. Both industry sub sectors are developing new products in order to gain new sales. One well developed tannery in Tunisia which is export oriented is planning for a reduction of 20% in sales for 2009/10. Most of Egypts business in tanning is geared to export to semi processed leather. These companies have been affected by the decline in world export markets, reporting a 20-40% decline in orders. This brings them close to the breakeven point and in some cases beyond. Shoe factories are less affected because they are mostly geared to the local market. One major footwear exporter in Egypt has experienced a 30% drop in orders even allowing for the fact that FOB prices have been lowered by 1015%. Other companies in more specialized market segments are surviving well in export (and local) local markets e.g. childrens footwear. The companies in leather goods sector which export show a mixed picture with some companies holding up well and others showing a decline in activity of 30 50 % depending on which market they serve and which products they make. Manufacturers of ladies bags for export to Europe are surviving well. Makers of small leather goods, briefcases etc have problems especially in the duty free market. The tanneries in Morocco are facing great difficulties being exporters of semi finished leather. Production in the sub sector is down by around 40% for those companies still operating. 2 large tanneries remain idle. Evidence from visits to the footwear manufacturing sector suggests that business here on exports is also down by 3040%. In leather goods the picture is mixed. Those companies operating in niche markets with specialist products are holding their place in the market. The others in the main stream are showing declines of up to 50% in sales. The trading part of Jordans industry seems to be holding up well as evidenced by the trade statistics, especially in the area of travel bags, satchels etc. which are traded in the region rather than the depressed markets of Europe. Shoe manufacturing is also holding up well geared to the local and regional markets. Niche markets are the key here with industrial safety boots and medical shoes doing well with expansion plans for 2009. 1.3.2. Strategy for Survival In some ways the Agadir Countries have advantages that should be exploited. The proximity to the EU market with the short/short production scenario referred to above should be built upon. European distributors are running lean inventories of stock in their warehouses. They will require supply and manufacture of small and frequent orders of a variety of products, styles and colours. This advantage should be aggressively marketed in Europe. Companies must protect their market share as much as they can. To do this they will probably need financial assistance and Government and banks should be willing to make soft loans to allow this to happen. Governments should be lobbied to for the need to provide new easier loan guarantee schemes that cover the exporters to the EU. It is expected that the EU distributors will be asking for more financial incentives and facilitation in payment as the crisis continues.
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No doubt business activity in spite of all stimulus packages on offer is going to decline. (See Tunisian experience above). Companies should be prepared for this and stress testing their operations so that they know to what level business can decline to without causing catastrophe. Agadir companies, as a matter of some urgency, should now consider the Pan Agadir market of 130 million consumers. They should claim this market as their own. Now is the time to look for other markets to augment the inevitable decline in Europe. The individual leather associations in the 4 countries should monitor the leather products market to ensure there is no threat of dumping from Far East suppliers. Any customs loopholes or non legitimate repackaging practices that may appear for imports from other nearby areas should be addressed. New innovative products now need to be developed using different manufacturing techniques to reduce costs. The engineering of products should be studied to reduce the amount of materials used, speed up production, increase productivity and further reduce costs. (See shoes in particular made by Clarks, Ecco, Nike, Addidas etc). Niche marketing is another powerful tool for survival. Many companies in the Agadir Group are allied mostly to the fashion side of the market by their contractors. The grey market is increasing year on year. There are many segments to this sub market. It should be investigated with an open mind to seek out opportunities which could help in filling the gaps left by the decline in the fashion business. SURVIVAL STRATEGIES
Develop short / short manufacturing Do not loose customers protect market share Consider more penetration of Pan Agadir market Consider regional market through Jordan Monitor local markets for unfair import practices Niche marketing overseas and local Strict financial controls (stress test( Crash programme on cost reduction and increase productivity More financial facilities and extended loan guarantee schemes by Governments and Banks
For the future industrialists should take on board the lessons to be learned from this experience. It is less difficult to survive this type of market crash if a company is diversified. Relying on 1 market segment as a strategy is fine in expanding economies. Companies should now question the benefits of sub contracting. This has served the industry well for a number of years but now perhaps it is time for a rethink. Other market segments, countries, and regions should be investigated. Reliance totally on 1 export market has some risks. Many companies take the view that a strong local market presence is a prerequisite for exporting. Technological levels are also important to give production diversity, cost reduction and increases in productivity. Investing in new technology in market downturns can be a difficult concept to implement but the future is for lean manufacturing. Companies need to gear up for this and keep abreast of developments as they arise. There has to be
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a continual investment in technology rather than investment holidays just because the market is buoyant and profits are rising. Along with technology there needs to be a quick reaction, just in time reliable supply chain for raw materials. Intimate relationships have to be built with suppliers. The supply chain must be managed either in partnership or by self sufficiency by vertically integrating. New products are required. Niche marketing insulates companies to an extent from market downturns. They are usually less competitive and large companies tend to ignore them. Making me too products is not the answer. STRATEGIES FOR FUTURE
Market diversification local, region, export Market segmentation New innovative products (CAD1) by segment Niche markets Upgrade manufacturing with new technology (CAM2) Managed supply chain for raw materials Increase quality levels Reduce prices Reduce costs (see technology above) Increase productivity set targets
1.4. Global Sourcing
Over the years, sourcing companies have become more expert at managing the supply chain. However, even now allowing for advances in international inventory management, it still takes up months or more from inception to get a leather good into a retail shop. Much is said about the shorter and shorter lead times demanded by retailers. Presently the system used, manufacturing in the east and selling in the west mitigates against this. Lead times have come down from 18 months to 6 months. But 6 months is still a risky time frame when dealing with a seasonal, fashion driven commodity. According to the Management Consultancies Association, cutting supply chain costs along with improving efficiency and productivity is top priority for 94% of organisations. Long supply chains equals increased costs. In the case of the leather products industry, footwear and other leather goods are the result of an integrated industrial value chain, where the quality and commercial success of both intermediate and end products is determined by many different factors in the stages of the chain. For example: the selection and purchase of raw materials and components the production processes marketing, distribution and sales by consumer demand both at home and abroad
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The following illustrates the various factors concerned with product, technology and market that drive the trends observed in the global Leather and Leather Products Industry.
Many of the factors listed are the consequence of the globalisation of markets and of sourcing through subcontracting, joint ventures or direct relocation of manufacturing activities from leather producers of industrialised countries to developing countries. Decision making on the localization of outsourcing in the developing countries depends on the availability of raw materials, lower wage scales and the abundance of trained labour. However the Agadir Countries have an additional inbuilt advantage over their competitors in the global market their proximity to the European and CIS markets. As mentioned above, supply chains are being forced to shorten by current economic conditions. The future will demand shorter and shorter lead times in periods of weeks rather than months with shipments direct to retail shops of smaller and smaller quantities. Agadir Countries are next to the markets but to exploit this they will need to upgrade their technology and communications to cope with the new demands. 1.4.1. European Market Trade Characteristics footwear The EU27 market is the biggest in the world. It is difficult to penetrate but not impossible. Opportunities now are better than they have been for some time even allowing for the current financial crisis. Total EU27 footwear consumption was estimated at US$ 67,072 million in 2006. The average EU consumption per capita was US$ 135 or 4.3 pairs. People in the Netherlands, Portugal, Austria, Denmark, the United Kingdom and France were spending most on footwear, while Bulgarians, Romanians and Hungarians spent the least. EU consumption grew between 2002 and 2006 by an annual average of 1.9%, from US$ 62,324 to US$ 67,072 million. In volume terms the overall increase was 2.2% per annum on average reflecting the serious price competition in the market.
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Source CBI
The above graph illustrates the growth trends in the market over a 5 year period. In some of the EU15 countries (UK, France, Benelux, Spain, Portugal, Greece), the footwear market is polarising into lower quality/price and higher quality/price sectors, whereas in the new EU member states (Czech Republic, Poland, Hungary) a mid-range quality/price sector seems to be developing In the main the EU footwear market in the near future will be influenced by the demand for healthy and comfortable footwear, especially for the growing number of older people, because of the ageing population. There will be a continued shift from formal to casual footwear, especially in the EU15 countries. The demand for formal footwear in the new EU member states with a rising middle class and more women at work will also increase. In 2006, the turnover of the 26,000 footwear manufacturers in the EU27 was valued at US$ 34,890 million, of which an estimated 65% was outdoor leather footwear. Italy, Spain and Portugal accounted for 67% of EU production. From the new EU member states, Romania accounted for almost 10% of the value of production and 12% of production volume. Poland and Slovakia were also sizeable footwear producers. By volume, EU footwear production decreased between 2002 and 2006 from 994 to 727 million pairs with decreases in most countries, except for Romania and Bulgaria. Even the Eastern EU countries are now being seriously challenged by Asian producers. In 2007 the EU accounted for 5% of global footwear production (by number of pairs) and that figure is forecast to continue to fall, despite anti-dumping protectionist measures by the EU against the largest Asian producers, China and Vietnam. The downward trend in value and production over a 5 year period is shown by the following:
Source CBI
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In 2007 imports were valued at US$ 34,905 million, 2,942 million pairs. Germany, France, Italy and the UK were the largest importing countries. Between 2002 to 2006 and 2007 all EU countries increased their imports of footwear. Overall, total EU footwear imports rose in this period by an annual average of about 1% in value and by 3% in volume as a result of more imports of cheap footwear. Footwear with leather uppers, formed nearly 60% of the value of EU imports (34% by volume), which grew by 5.5% year on year between 2002 and 2007. Within this product group, casual outdoor footwear represented over 50%. In 2006 EU footwear imports were 501 million pairs from countries such as China, Vietnam, India, Indonesia, Brazil, Thailand, Morocco and Tunisia worth US$ 7,194 million. The top four importers were UK, Germany, Italy and France. In 2007, around half of EU imports came from other EU countries by value, but just 34% by volume. The leading suppliers to the EU were Italy, Germany and Romania, as well as suppliers with high re-exports such as Belgium and the Netherlands. The world suppliers extra EU are shown in the following chart: Top 10 Extra EU-27 suppliers (in 1000 pairs)
2004 World China Vietnam India Indonesia Brazil Turkey Thailand Tunisia Morocco
2005
2006
2007
Source Eurostat
1.661.659 1.929.858 883.654 1.310.841 298.089 270.108 52.084 52.789 60.259 51.081 28.251 31.495 38.731 30.251 33.719 28.324 17.766 19.771 14.670 14.712
2.096.155 2.504.729 1.487.581 1.845.010 256.692 277.124 60.696 65.983 54.725 63.125 32.717 35.428 27.543 30.134 27.905 28.976 20.478 22.914 15.350 16.532
Share % growth % growth of 2007 20042006-2007 2007 imports 100.0 19,5 50,7 73,7 24,0 108,8 11,1 8,0 -7,0 2,6 8,7 26,7 2,5 15,3 4,8 1,4 8,3 25,4 1,2 9,4 -22,2 1,2 3,8 -14,1 0,9 11,9 29,0 0,7 7,7 12,7
EU exports to the world (i.e.excluding intra EU27 trade) increased between 2004 and 2007 from US$ 6597 million to US$ 7477million (13.3%) and 0.9% in volume from 168.9 to 170.5 million pairs as the following chart illustrates. Top 10 Extra EU-27 export markets (in 1000 pairs)
2004 World USA Switzerland Russia Norway Ukraine Turkey Japan Croatia Canada 168.929 55.069 22.449 10.108 7.667 4.631 5,636 7.163 5.050 6.923 2.798
2005 160.563 42.595 20.493 12.198 8.595 6.426 6.363 7.145 5.249 6.776 3.010
2006 164.793 38.681 22.155 14.410 7.713 6.213 6.790 7.351 5.631 6.185 3.240
2007 170.472 32.506 22.250 18.160 7.990 7.775 7.271 6.557 6.455 5.485 4.202
U.A.Emirates
Share of % growth % growth 2007 exports 2006-2007 2004-2007 100.0 3,4 0,9 19,1 -16,0 -41,0 13,1 0,4 -0,9 10,7 26,0 79,7 4,7 3,6 4,2 4,6 25,1 67,9 4,3 7,1 29,0 3,8 -10,8 -8,5 3,8 14,6 27,8 3,2 -11,3 -20,8 2,5 29,7 50,2
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1.4.1.1 Footwear Distribution Channels Most footwear is supplied in most EU countries through the traditional route, which is from manufacturer to importer/ wholesaler to retailer. Southern EU countries (Italy, Spain, Greece) and the new EU member states (Poland, Slovakia, Hungary) continue to have many small footwear shops. In the middle and northern EU (Germany, Austria) countries many small footwear retailers join a buying group, which negotiates directly with (overseas) manufacturers. In France, Germany and the United Kingdom, there are also large footwear retailers operating local chain or franchised stores, although some of these are having difficulties in recent times. In 2006, there were an estimated 55,000 footwear retail outlets in the EU. Footwear retailing has become more diversified. Consumers can nowadays buy footwear in many different ways, for example at a retail outlet (footwear shop, chain store, sports shop, clothing shop, discounter, hypermarket etc.), at a market stall, a factory outlet or on the Internet. The past few years has seen the continuing growth of discount footwear retailers, but to some extent, especially in the younger market segment the growing importance of fashion in footwear has resulted in the wider availability of footwear in other types of outlets, particularly clothing retailers. The following gives an indication of the types of outlets and their significance to the Agadir group.
OUTLET ANWR Euroshoe Deichmann Salamander C. J. Clark Eram Andre Coim Ecco Shoe Zone Stead and Simpson Gardiner Carrefour Metro Bata Marks & Spencer TYPE Buying group Buying group Chain stores Chain stores Chain stores Chain stores Chain stores Department stores Manufacturer with shops Chain stores Chain stores Wholesaler Super/hyper Super/hyper Chain stores Department stores COUNTRY Germany Benelux Germany and Northern Europe Germany and Northern Europe World wide France France Italy Europe wide UK UK UK World wide Worldwide World wide Mostly UK QUALITY PROFILE Medium high Medium low Medium Low Medium high Medium high Medium Medium Medium high High Low Medium Medium Medium low Medium low Medium Medium AGADIR yes possible possible yes yes yes yes yes no no yes yes possible Possible yes yes
ANWR (Ariston Nord West Ring) is a large buying group representing 1,700 retailers with 4,500 shops. Euroshoe has 530 shops Deichmann operates their shops under their own name and have over 2,500 shops
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C and J Clark is the largest retailer of conventional shoes, (excluding sports footwear) in the world. Bata is another international retailer with a buying office in Italy. The supermarkets and hypermarkets tend to be in the low to medium quality levels and buy in large volumes.
Germany
France 56% 24 13 19 44% 3 8 20 4 5 4
UK 43% 33 3 7 57% 3 5 16 28 4 1
Italy 57% 8 12 37 43% 4 6 12 6 2 13
Spain 70% 15 9 46 30% 11 3 8 4 1 3
Netherl. 77% 38 29 10 23% 3 2 11 3 1 3
Belgium 74% 31 23 20 26% 2 3 10 5 1 5
Footwear specialists Chain stores* Buying groups Independents Non-specialists Department stores Super/Hypermarkets Sports shops Clothing shops Internet/mail order Others**
51% 22 22 7 49% 16 4 13 7 5 4
* Includes multiples, franchised stores and chains ** Includes market stalls and factory outlets
Source Euromonitor
The following chart shows the market share of varying types of distributors of footwear to the consumers. So called footwear specialists have the largest market share with chain stores being the largest group except for Italy and Spain where independent shops predominate. Buying groups are important in Germany, Benelux and to some extent France. Clothing shops are important in the UK especially for the younger fashion element. Department store are relatively important in Germany only Sports shops are of course specialist outlets Footwear distribution is diversified. There are many different outlets.
With personal leather goods the pattern is very similar to footwear. There are specialist shops for all leather garments and accessories. Department stores have in shop areas dedicated to PLG. Quality levels tend to be high. Some footwear shops sell hand bags which complement womens shoes. 14.2. Leather Goods Although the leather goods market is smaller than the predominant footwear market it is still a 50 billion US dollar market in world terms. In Europe the biggest individual markets are the biggest economies Germany, France, UK and Italy. The market in these countries is segmented in the medium to high quality end. Cheaper products tend to be made from synthetics and imported from the Far East and to some extent India.
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Ladies bags are becoming a more important accessory to compliment clothing fashion. Some years ago a bag was viewed as a necessity rather than a fashion statement. Bags no longer have to match shoes in an ensemble but become an item in their own right. A similar scene applies to ladies belts. The leather goods market in Europe is dynamic in that it is gaining more importance in growing in absolute numbers. In this respect it currently more active than footwear even allowing for the fact that footwear is a 60% bigger market in world terms. The active markets for leather goods in Europe are the following major importers:
Trade Map ITC Unit: thousand of US$
The above chart represents the size of the various markets during 2007. The Comtrade Trade Map analysis shows the following EU imports represented 35 % of Global imports EU imports of leading importers are highly increasing particularly Italy with an yearly import growth of 19 % , Spain 16 %, Netherlands 15 %, France 14 %, United Kingdom 13 % EU small importers (Denmark, Ireland and Finland) registered a high import growth respectively of 21 %, 23 % and 17 % per year during the period 2003-2007.
1.4.3. Hides and Skins and Leather Europe is an active trader in hides, skins and leather. The majority of products traded are for export markets. Much of the trade is in semi processed leather for finishing in Europe (particularly Italy and Spain), re exporting to the Far East and for domestic consumption. The market trend is upwards with business increasing year on year up to 2007. The trends are:
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2.
GLOBAL TRADE INDICATORS of LEATHER INDUSTRY
The following gives an indication of the trade flows, both imports and exports, of the various sub sectors within the industry. The statistics all come from the ITC Comtrade Data Base for 2007.
2.1. Global imports and exports:

2.1.1. Hides and Skins and Finished leather. There are many types of finished leather available to the industry. The hide or skin of any animal, reptile or fish can be tanned into finished leather. Many of the exotics e.g. reptiles such as snake, crocodile, Nile perch etc are used for small leather products or as appliqus on larger products. For the most part cow and calf leather are commonly used in the leather products industry and represent 23% of global production. The types of leather and their common uses are as follows:
FINISHED LEATHER Cow Calf Buffalo Baby buffalo Sheep Goat Pig Exotics COMMON USE shoe uppers, personal leather goods, upholstery, saddles, travel bags Shoe uppers, personal leather goods, garments, gloves, Industrial footwear uppers, some shoe uppers Shoe uppers, personal leather goods Shoe linings, garments, gloves, personal leather goods As above Shoe linings, upholstery, travel bags, shoe uppers Appliques, gloves, hand bags, etc
The chart below indicates the total activity for the three sub sectors. Global trade indicators in 2007 imports of hides, skins, finished leather.
From Annex I which shows more details regarding Global imports during the years 2003 2007 it is clear that: Global imports of hides and skins and leather is slowly increasing by 5 % a year during the period 20032007. The world top six importers are major producers and exporters of footwear and leather goods: China, Italy, Hong Kong, Germany, Korea, and Viet Nam. They represent 56% of the global demand.
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The chart below indicates the total activity for the three sub sectors. Global trade indicators in 2007 exports of hides, skins, finished leather.
From Annex I, it is clear that: World trade in finished leather, hides and skins exports grew in value by 5% between 2003 2007, similar to imports. The leading exporting country is Italy with16 % of global exports. Italy is a world leader in finished leather not only for its own needs but also on the global market. USA is second with a market share of 10 %, Brazil 4th with 7%, Germany 5th with a share of 4 %. China is a large importer of leather rather than exporter, in order to meet the needs of its expanding manufacturing industry of footwear and leather goods. 2.1.2. Personal Leather Goods
Global trade indicators in 2007 imports of leather goods:
Annex I shows that: World trade in leather goods grew at an annual rate of 12% from 2003 2007. The six leading importers are developed countries that represent 59 % of global imports. USA is the biggest market with a 22% share. France, Germany and UK have a market share of 18% between them representing approximately 6% each.
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Global trade indicators in 2007 exports of leather goods:
Annex I shows that: World trade in export of leather goods grew in value at an annual rate of 11% between 2003-2007 The leading exporter is China with a market share of 32 %. Italy has a market share of 12 % followed by France with 9 % and Germany 4 %. India has a 3% share The five leading exporting countries of leather goods represented 74 % of global exports. 2.1.3. Leather Footwear Global trade indicators in 2007 imports of leather footwear:
Annex I shows that: World import trade increased by 10% per year from 2003-2007 EU27 accounts for 44% of world imports USA accounts for 23% of world imports EU 15 imports represent 40 % of world imports. Their imports increased year on year (from 8 to 20% during 2003-2007) despite only a moderate increase in consumption (2%). The biggest EU importers are Germany, France, Italy, UK, Belgium, Spain, Netherlands, (see above). The target market for Agadir countries are Germany, France, Italy, UK, Belgium, Spain and Netherlands, for the following main reasons: Agadir exports to EU countries are free of taxes. Germany, France, Italy, UK, Belgium, Spain and Netherlands represent 34 % of the Global demand. Their demand is higher than that of USA (23%) Their demand is dynamic with a yearly increase of 8 to 20 % from 2003 to 2007.
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Global trade indicators in 2007 exports of leather footwear:
Annex I shows that: 2.2. World export trade increased by 10% per year from 2003-2007, same as for imports. China is leading the global exporters with a market share of 30 %, while Italy has 13%, Vietnam 7%, and the others less than 5% EU countries are still leading exporters particularly Italy ranking second exporter followed by Belgium 5th, Germany 6th, Spain 7th, Brazil 8th and France 9th. The export growth rate of China is 19%. Vietnam and India have an annual growth rate of 13 % and 18 % respectively and are far higher than that of Italy, Spain and Portugal (respectively 5%, 3% and 2%). The big competitors for the Agadir countries are China and Vietnam in the price sensitive segment. Italy in the high quality segment as its market share in global exports is high and made in Italy is highly appreciated by consumers. European Union Imports and Exports 2.2.1. Hides and Skins and Finished Leather European Union trade indicators in 2007 imports of hides, skins and finished leather
Annex II shows that: Italy is by far the biggest importer of semi processed leather followed by Germany Romania and Spain are also significant importers of semi finished leather.
European Union trade indicators in 2007 exports of hides, skins and finished leather
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Annex II shows that: The four major EU exporting countries export finished leather rather than hides and skins. Italy is the largest exporter in the world with a 16.4% share. Germany has a 4% world share. France and Spain are around 2%. All major exporting countries also trade intra EU with Italy being the most active. 2.2.2. Personal Leather Goods European Union trade indicators in 2007 imports of personal leather goods
Annex II indicates that the: EU imports represent 35 % of Global imports EU imports are increasing particularly Italy with a yearly import growth in value of 19 % between 20032007, while Spain achieved 16 % growth, France 14%, United Kingdom 13 % and Germany 10%. European Union trade indicators in 2007 exports of personal leather goods
Annex II shows that: EU exports represent 35 % of global exports the same as imports The leading EU exporters are Italy, France and Germany, representing 25 % of Global exports The leading EU exporters had an annual growth rate of 18 % for Italy and Germany, 14 % for France during 2003-2007.
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2.2.3. Leather Footwear European Union trade indicators in 2007 imports of leather footwear
Annex II shows that: Germany is the biggest importer of footwear in the EU27 France, Italy and UK have similar sized markets for imports. Imports come mostly from China ,12.1%, Viet Nam , and 7.1%, India 3.7% There is also a strong intra EU trade with the importing countries buying mostly from Italy, Netherlands and Belgium
European Union trade indicators in 2007 exports of leather footwear
Annex II indicates that: 2.3. Italy is the biggest exporter of footwear, with intra EU exports representing 15.3% of the EU market. Belgium and the Netherlands supply 13.7% of intra EU trade Germany exports 1.8% of high quality footwear to other EU countries Intra Agadir Trade 2.3.1. Hides and skins and leather Intra Agadir trade indicators in 2007 of hides, skins and finished leather
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Morocco is the biggest trader in leather raw materials intra Agadir Egypt is active in semi processed materials Tunisia has a relatively same level of activity as Egypt. Jordan has only a small trade in wet blue leather 2.3.2 Leather Goods
Agadir trade indicators in 2007 of leather goods There is only negligible trade between the Agadir countries in this category 2.3.3. Footwear Agadir trade indicators in 2007 of footwear
Tunisia has some activity in this area but in actuality the intra Agadir trade in footwear is very small at present. 2.3.4. Raw materials and inputs
The Agadir countries use many types of raw materials and inputs in their production processes. All 4 countries use the same things, some are directly imported, some are available locally and some are manufactured locally. The following charts represents the major inputs required for the various sub sectors of the industry and highlights the possible complementarities and co-operation opportunities available to the group.
MATERIAL AVAILABILITY IMPORT/LOCAL Export banned from Morocco, Tunisia, Egypt. Traded by Jordan Locally made. Export banned by Tunisia and Morocco COMPLIMENTARITIES Jordan has the advantage in this commodity and can trade inter Agadir
Raw hides and skins
All 4 countries
Semi processed leather, (wet blue).
All 4 countries
Can be traded intra Agadir by Egypt and Jordan
Finished leather for uppers and leather goods
Egypt has biggest capacity Tunisia has finished leather Morocco also but less, Jordan limited types
Locally made and imported from Europe and world
Finished leather can be traded between all 4 countries of local production. Is suitable for a number of products
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Locally made. Some imported for re- exports of goods Locally made Locally made Locally made Mostly imported from Far East and Europe. Stocked by local traders Mostly imported from Far East and Europe. Stocked by local traders Certain imported types locally available in market, other directly imported by factories Certain imported types locally available in market, other directly imported by factories Some locally made of indifferent quality Some standard shapes imported from Europe of good quality. Bespoke shapes have to be imported Certain imported types locally available in market, other directly imported by factories Locally made Locally made in Egypt but of poor quality and limited types suitable only for simple soles. Majority of moulds imported from Italy, Spain and Far East Locally made. Some up to date fashion items imported from Italy / Turkey Good quality products locally made with resin rubber in all 4 countries. Cow leather bend soles of excellent quality available from Tunisia and to some extent, Morocco
Finished leather for garments Lining leather Sole leather (bends) Stitched uppers Threads
Available in Egypt Tunisia and Morocco Egypt, Tunisia and Morocco from sheep and goat Egypt from buffalo No cow leather In all 4 countries In all 4 countries. In all 4 countries, needles for simple machines freely available, for sophisticated machines have to be imported from Europe From traders in all 4 countries From traders in all 4 countries
Can be traded intra Agadir Can be traded intra Agadir Only suitable for local markets not for export Can be traded intra Agadir Not much benefit inter Agadir Trade unless supplied by a powerful importer on behalf of the zone. Not much benefit inter Agadir Trade unless supplied by a powerful importer on behalf of the zone.
Needles
Toe puff and counter sheets Ancillary materials: Eyelets, laces, buckles, elastic, velcro, handles, locks, clasps, etc
No real advantage in Agadir trade unless supplied by a powerful importer on behalf of the zone No real advantage in Agadir trade unless supplied by a powerful importer / trader on behalf of the Agadir Group No real advantage in Agadir trade unless supplied by a powerful importer / trader on behalf of the Agadir Group No real advantage in Agadir trade unless supplied by a powerful importer / trader on behalf of the Agadir Group Modern plant with capacity to trade intra Agadir to quality levels demanded. Egypt moulds can be traded where suitable. Egypt should upgrade its technology. There are companies available who can do the upgrading necessary
Steel shanks
From traders in all 4 countries. Hand tacks available locally. Specialist nails(buttress heel nails, lasting machine tacks) must be imported Egypt
tacks and nails,
Rubber vulcanised sheets for soles
Unit sole moulds
Egypt In all 4 countries. Egypt has large capacity and variations of materials. Jordan much less, Tunisia and Morocco have smaller plants Available in all 4 countries
Unit soles injection moulded
Possible trade from Egypt to others
Unit soles built up
All soles can be traded inter Agadir.
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Insole and reinforcing boards for PLG Adhesives Lasts
Made in Egypt only Made in Egypt and some types in Tunisia and Morocco Made in Egypt, Tunisia and Morocco
Locally in Egypt, imported in other countries Local and better quality imported Local and better quality imported Local manufacture is possible. Specifications should be to EU norms.
Egypt could supply the region. Some upgrading necessary Manufacture needs to be upgraded before intra Agadir trade New plants in Egypt and Tunisia offer better quality products which can be traded intra Agadir Could be traded Inter Agadir depending on commercial environment.
Packaging, boxes, cartons, tissue paper
Available locally
The biggest item in terms of need and sales volume is finished leather. This should be developed for intra Agadir trade. Semi processed trade is only a stop gap. Bend leather for soles is of minor importance because of low volumes for intra Agadir trade Stitched uppers has potential depending on which country is the most productive and cost conscious. All shoe manufacturers need this item. Unit soles depend on moulds for manufacture. Most of these are produced in Italy. Egyptian manufacture need to be upgraded by Joint Venture investment. The Egyptian plants for the manufacture of sheet materials, insoles and soles could supply all countries. Lasts need to be properly engineered and graded and made from plastic not wood. An Agadir Trading House for materials should be studied as a commercial opportunity for a private investor, either as a new venture or in addition to the business of a current investor. 2.3.5. Hides and Skins
Hides and skins are the commodity at the beginning of the supply chain in the manufacture of leather products. H and S are traded in the same way as any other commodity and the trade tends to be opaque in nature and world wide. Every country with an animal population inevitably has hides and skins as a natural resource. If hides within one country but from different areas distinguish one from another, it is obvious that hides from different continents and different climates have significant differences. It is virtually impossible to list all the characteristics of each origin and thus a table that highlights the differences between origins is impossible to develop. However to give an example we can summarize and very generally compare a wet salted cattle hide from the US east coast with a wet salted hide from a bovine of the same age, let us say 2 years old, from Bangladesh.
United States Breed Farm/feedlot Insect/parasite protection Average weight Western Yes Yes 20 kgs No hump Thick hide Few scars
Bangladesh Zebu/Brahman No No 15 kgs Fine grain Not so good Yes Loose Unlikely or few 29 Hump Thin hide Many scars
Grain Coarse grain Split Good Flaying marks and holes No Fibre structure Brand marks Firm Likely
Machine flay
Hand flay
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Unfortunately there is no such thing as a clearly defined international standard. An international standard or norm is virtually impossible, because each region of origin has its own characteristics in terms of natural and manmade defects, and in terms of the characteristics of the hide or skin themselves. Therefore you can expect a certain standard only within a well defined area. Suppliers within a defined area can determine their own standard as well, but that personalised standard more or less reflects the regions standard, and is usually a refinement. The US National Hide Association published in 1979 a booklet Hides and Skins prepared by their Education Committee. This booklet is an excellent guide laying down the general basic rules for the production and preparation of cattle hides and calfskins in the United States. This guide can form the basis for all wet salted hides and skins all over the world if properly used with common sense and adapted to regional requirements. There is a general consensus on one basic rule: any defect presenting itself on a bovine hide within 10 cm from the outer edge of the hide is not considered a defect. Any defect further than 10 cm from the outer edge counts in full as a flaw Unido have developed in collaboration with FAO a very useful guideline for the selection of East African hides and skins. This came under the Africa Regional Leather Programme US/RAF88/100 and US/RAF/98/200. It deals mainly with dry hides and skins which are becoming less common, but nevertheless the guidelines if used as such and with consideration and adapted to each region, are an excellent selection basis for African origins. The following link leads you to these selection standards: UnidoH&S_Standards.pdf Previously the market was predominantly in Europe, currently the market is shifting to the Indian subcontinent and in particular on the Far East, with the Peoples Republic of China as the major market. Europe tend to buy and transform high quality raw materials, other markets concentrating on low and medium quality raw material.
Country/Continent Latin America Africa Kenya Near East Far East P.R. of China North America Europe Italy Spain Former USSR
Import 1988 68.600 11.300 200 29.800 554.000 197.600 41.000 1.019.600 382.700 59.900 1.300
Export 1988 18.700 38.400 1.400 20.300 102.500 76.700 765.200 698.800 19.300 14.600 78.700
Import 2005 91.000 3.500 200 43.300 1.125.900 805.400 88.400 811.100 347.200 39.700 64.100
Export 2005 47.600 55.400 4.500 21.100 150.300 102.800 744.700 829.100 61.400 59.800 115.200
(source FAO World Statistical Compendium for raw hides and skins 2005) From the tableabove shows the quantities of raw wet salted bovine hides and skins (calf) that have been imported and exported in a number of countries and continents. The difference between 1988 and 2005 both in imports and exports indicates the market trends. The trend will be that mass produced leathers of low and average quality in simple basic colours will be produced in countries like China, India, Pakistan, Egypt. Sophisticated high quality leathers specifically aimed at the high fashion market will be produced in Europe and particularly in Italy. Upholstery leathers will probably be produced mainly in South Africa and South America. Agadir Countries will emerge as competitors to the tanning industry in the Indian subcontinent, whereas the Sub Saharan tanning industry will probably continue to suffer from the unavailability of raw materials as these will continue to be exported to the Far East rather than being processed in the countries of origin.
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With the continued development of the Agadir tanning capacity particularly for finished leather, especially in Egypt, the tanning sub sector has a good opportunity not only to supply the zone but also to be a significant world player.
3. AGADIR GROUP ANALYSIS

3.1. Jordan 3.1.1. Industrial Setting and Institutional Framework Jordan is classified by the World Bank as a lower middle income country. The per capita GDP, as reported by the International Monetary Fund (IMF), was $2,533 for 2006. According to Jordans Department of Statistics, the unemployment rate in 2006 was 13% of the economically active population. The rate of inflation in 2006 was 6.3%; the currency has been stable with an exchange rate fixed to the U.S. dollar since 1995 at JD 0.708-0.710 to the dollar. In 2006, Jordan significantly reduced its debt to GDP ratio to 73.2% of GDP. The manufacturing sector in Jordan is mainly operated by the private sector. The commercial banks operating in Jordan are private and the foreign currency, exchanges and transportation markets are free. The Jordanian market is open and with the high share for the private sector. With regard to foreign investment, Jordan has a big competitive advantage in comparison with China and Eastern European countries and even Morocco and Tunisia. Jordan created an industrial modernization program (Jordan Upgrading and Modernisation Programme JUMP) which enabled four footwear manufacturers and the biggest tannery to join the qualifying program. However, only two shoe manufacturers decided to implement their upgrading plans. New investments in international transportation, customs facilitation, and information technologies (internet, egovernment) will contribute to improving communications between buyers and sellers and shortening delivery times. It is expected that confidence between importers and exporters will increase. But the exiguity of the port of Aqaba may preclude the fulfillment of the expected quick delivery time. Jordan concluded many trade agreements including one in particular of great importance to the Agadir Agreement. This is the Trade Agreement with the EU which enables Jordan to export products free of custom duties to Europe. These products must be produced in Jordan using domestic input material or EU input which is considered as Jordanian. The second agreement is the Free Trade Agreement with the United States which allows the entry of Jordanian exports to the US market free of customs duties also. 3.1.2. Nature of the Sector The leather products sector in Jordan which is mainly footwear, has suffered in recent years due in the main to the surge in imports from China, plus Europe and neighbouring countries. In spite of safeguard measures on imports from China being introduced; 2JD for synthetic shoes and 5JD for leather shoes, the market for local manufacturers has improved only marginally. Customs loopholes need to be addressed to ensure the same rules apply to all and ensure fairness in the market. The study done by the Euro Jordanian Action for the Development of Enterprise (EJADA), in 2005 on the footwear industry in Jordan lists the per capita consumption of shoes between 1.40 and 3.11 per year depending on the economic status of the consumer. With a current population estimated at 6 million plus this would give a base local market of 8.4 million to 18.7 million pairs of shoes per annum. Recent evidence suggests the market size is at the high end of the scale.
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The manufacture of personal leather goods (PLG) sub sector is a very minor player in the leather products industry. Most of the product offered in retail shops is imported and in many cases made from synthetic materials. There are no reliable statistics as to the number of workshops in the sub sector. There is quite a dynamic shoe components industry in Jordan supplying the conventional and Micro, Small and Medium Sized Enterprises (MSMEs). This side of the industry has contracted with the general decline in manufacturing. However survivors are doing a good job and make a quality product. Leather supply to the industry comes from the only tannery producing finished leather on an intermittent basis but this is of a limited product range. Other leathers are supplied by traders who source from neighbouring countries. Some companies import their leather directly for their own needs. It should be mentioned that the leather products manufacturing sector in Jordan suffers from a penal cash flow. Manufacturers can supply products to their customers and in return, as a means of payment, receive post dated cheques for up to 9 months in the future. Needless to say there is a high incidence of bounced cheques. The result of this system is manufacturers are strapped for cash and working capital consequently it inhibits their ability to take advantage of commercial opportunities as they arise. The Agadir agreement provides for a common market for goods and raw materials between the 4 countries which are traded without duty and taxes. Previously, imports of leather into Jordan were subject to 30% duty. This is now zero from Egypt, Tunisia and Morocco. (However it has to be said it is also zero from other countries particularly India). This is a big advantage to the local industry. Over 60% of the cost of a shoe is leather. Major components particularly soles, secondary raw materials and components can also be sourced duty free from the Agadir Countries. The Agadir Agreement will open new supply routes. Jordan has relatively small manufacturing units which can be turned to advantage. (Most Italian shoe companies employ less than 12 workers). By co-operation, products can be developed on a low cost operating base at competitive prices. Some inputs are needed on technology, design and factory management. Human resources need to be improved by training operators in more modern manufacturing techniques. Niche marketing is the key - making a product that does not compete directly with the Chinese. There is evidence that hand stitched moccasins, mens and ladies comfort shoes with a degree of hand stitching are shoes in demand. The Chinese do not like to make these types as the construction does not lend itself to mass production. Components, cut parts, stitched uppers, soles, etc can be sourced intra Agadir and the product manufactured in Jordan. They can be sold on the local market or exported. Jordan is also a transit hub for many products re-exported to the region. It has good close links to the Gulf States. It has a great potential to be the hub for Agadir manufacturers who can export their leather products to Jordan for reexport to Gulf markets. 3.1.3. Type and Size of Companies According to the Jordan Footwear and Leather Industries Association there are about 13 manufacturing companies in the mechanised sector. However they are operating at low capacities (about 30 50%). The newly formed association is in the process of conducting a survey on the ground of the manufacturing industry to establish the true size of the sector. At present it is known that the semi mechanised and MSMEs sectors comprise about 40 registered companies and 100s of smaller ones. The Companies Control Directorate of the Ministry of Industry and Trade (MIT)lists 11 companies in the tanning sector. Of these 2 companies are listed as processing leather to the wet blue stage, 5 are listed as hides and skins traders, 2 listed as leather garments producers, 1 manufactures dyestuffs and there is 1 tannery manufacturing finished leather.
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Some of the previous mechanised companies identified by EJADA and JUMP in 2005 are continuing to manufacture conventional shoes in a similar manner as before. However one company has moved out of the country and one large company temporally interrupted production. Certain companies began to recognise the extremely competitive nature of the local market for conventional shoes and diversified out of it into growth niche markets. There is now a company in Jordan successfully producing safety footwear to ISO approved standards and has the CE mark of the European Union, and one successfully producing medical comfort working footwear. These companies are set on a growth path and have increased their annual turnover in the past three years. The safety company is exporting to regional markets and the medical footwear company has plans to do likewise. These are the success stories of the industry and an example for others to follow. They have also been accepted by the CBI (Centre for the Promotion of Imports from developing countries, The Netherlands) in their 3 year export (from Jordan) promotion training programme. 3.1.4. Sector Types of Production and Characteristics Jordan starts at the beginning of the production value chain in that it collects and trades in raw hides and skins some for the local market and some for export. The only active tannery also processes these into semi finished products (wet blue) which are then exported. Further production is in the form of footwear for various segments notably dress/casual shoes for men and women, safety footwear, military and industrial boots and specialised medical shoes. There is little production in the way of handbags, belts wallets etc and virtually no leather garment manufacturing. Production values from the department of statistics, Jordan, for the following categories are given as: Production in Jordan by sector 2007
Source: Department of Statistics Jordan Trade Statistics: All the following charts use Comtrade Statistics Imports to Jordan 2007
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Exports from Jordan 2007
Re - exports from Jordan 2007
Imports from EU to Jordan 2007
Exports from Jordan to EU 2007
3.1.5. Institutions and Number of Workers In 2007, the Jordanian Leather and Shoes sector counted 137 enterprises employing a total number of workers of 1800. 3.1.6. Production Added Value In 2006 and 2007, the production value added for leather preparation and tanning was 19.1% & 29.3% respectively, while for travel and hand bags and other leather products it reached 43.3% & 43.2% respectively. On the other hand, the manufacturing of shoes value added was 37.2% & 38.1% in 2006 and 2007 respectively.
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3.1.7. Foreign Direct Investment (FDI)
Jordan is uniquely placed in the region and among the Agadir Countries being the hub for communications with the Gulf States, the surrounding countries of Iraq, Syria, Lebanon and Palestine. It should be noted that Jordan has also set up Qualified Industrial Zones (QIZs) for trade with USA particularly in the textile industry which have been very successful. Investors come from China, Pakistan, India and Turkey. The investment is around US $987 million in the QIZs. The QIZs helped to establish an export culture among entrepreneurs in Jordan. Jordan therefore has an advantage among the Agadir countries to act as a conduit for products made in the region and exported, assembled in Jordan and exported or manufactured as subcontractors and exported. Tunisia and Morocco and to some extent Egypt are not a strong as Jordan in servicing these markets. There is also a perceived willingness for entrepreneurs in the other 3 countries to work in co-operation with Jordan to develop these markets hence creating significant FDI in the country. Despite the difficulties in the local leather products market, Jordan is having some success in attracting foreign direct investment in the Leather Products Sector. The large tannery previously established in the country has continued to operate after its major customer suffered a decline in business. The tannery continues to produce finished leather, in a limited range, for the local market for conventional footwear plus the industrial segment. In order to utilise the facility and investment more effectively the tannery has contracted with Spanish Investors to operate the machinery and produce semi processed leather up to the wet blue stage. This is then exported to Europe. The investors pay a monthly rent to the company in return for the use of the machinery and supply their own technicians and raw materials. The system works well and could be the prelude to further significant foreign investment in the company. The other major investment in the tanning sector is the establishment of a large tannery in Maan. This investment was helped by benign Government regulations for the allocation of land and the future tax regime. The project is being implemented by an investor from Lebanon who previously operated a tannery in Beirut. One of the oldest tanneries in the region (established in 1808), it eventually became surrounded by the city due to urban sprawl which created problems with the environment. The security factor was another reason for deciding to relocate the business. The tannery is being built with an initial capacity of 6 million square feet of cow hides and 1.5 million square feet of goat and sheep skins. The production will start with semi processed, progress to crust and then to finished. The finished leather will be aimed at the quality end rather than cheaper materials and will have a capacity of 21,000 square feet per day. Markets are predominantly Europe, in particular Italy, where the company has good contacts from its previous operations. The sourcing of raw hides and skins is a world wide business and the company is also well versed in the supply chain management of this critical area of the tanning industry. Future plans are for the establishment of a shoe factory also aimed at export. This would create a vertically integrated company which will have a competitive advantage on the world markets, particularly to Europe. In the initial start up phase the company will invest US $ 7 million and employ 100 people. It is estimated that the tannery will be in operation by the 4th quarter of this year. Jordan therefore has successfully developed a good reputation in the Agadir countries as a place to operate from. This is significant. Business people need this confidence factor to induce them to invest their time, money and expertise. From this base, a strategy can be devised to encourage more FDI in the leather products sector.
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3.1.8. Cost of Production The basic costs of production for shoe manufacturing operations in Jordan are shown in the following table. These figures will also be typical for PLG manufacture. Unit U. S. $ Year 2007
Labour rates per month (factory operators) Labour rates per hour (factory operators) Electricity per KWH Natural Gas per m3 Construction cost per m2 Cost of land per m2 Transportation per km 210 to 520 (unskilled to skilled) 2.0 to 2.89 0.06 0.41 250 20 70 (from South to Amman) $500 per 20 container & $300 per truck (from Aqaba to Amman)
3.1.9. Field Visits Company Profiles Al Manara Target Originally supplier of components to local market Now manufactures for a niche market medical footwear to doctors, nurses, pharmacies etc. Uses and is developing brand name Artteko Production from 120 to 160 pairs per day Imports PU coated leather. Enrolled in CBI programme Developing Scandinavian markets for exports Manufacturer of double density PU sole leather upper safety boots. ISO and SATRA approved CE mark. Production 70,000 pairs per year Capacity 500 pairs per day Employs 35 people Entered into Centre for Promoting Imports to Netherland (CBI) programme for export opportunities to Europe Imports zuggrain buffalo leather from India Styling and design work done in Italy Uses robots in production Exports to Gulf States and supplies local market.
Arab Leather Manufacturing Co Bespoke made to order mens' dress shoes about 10 pairs per month Dress casual shoes 800 pairs per month Employees 13 Was active in the past with medical footwear particularly diabetic shoes. Now significantly declined. Interested in component purchase from Agadir countries to assemble in Jordan for onward sales.
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Al Mithaq
Component manufacturer of built up soles and insoles. Supplies local market Capacity 2,400 soles in 8 hours, 2,400 insoles in 8 hours Interested in importing resin rubber sheets from Egypt. Presently importing from Europe.
Jordan Tanning Company Large capacity for manufacture of industrial, military and uniform footwear. Is in the process of reforming operations Fully mechanised factory with PU injection moulding and vulcanising machinery At present 22 workers (were 150). Targeting 300 pairs uniform shoes and 800 military boots pairs per day Renting out tannery operations to Spanish investors Will import uppers from India and Egypt
Leather Industries Association JUMP Conducted diagnostic studies and upgrading plans for 4 footwear manufacturing companies and the largest tannery. Only 2 footwear companies started implementing their upgrading plans Funds marketing and promotion activities like participation in fairs and conducting market research Funded the establishment of export consortiums in other sectors. Tannery Albert New tannery being built in Ma'an Investment 7 million US$ Target 6 million square feet hides and 1.5 million square feet goat and sheep skins per year. Should begin operation 4th quarter 2009 Welcomes possibilities of co-operation with Agadir countries Need get to know you meetings with other countries industrialists Assistance with trade fairs Buyer seller meetings Study on training needs Associations to lobby Governments
The complete list of all registered companies can be found in the web site of the Companies Control Department according to the following link: www.ccd.gov.jo Then choose Companies Data Base, then under Company Inquiry select by Aims; where you put tanning, or manufacture of footwear or travel bags ...etc. However, the information in this site is not updated since it contains only the data of companies at the registry date which usually change when the company starts working. Another more reliable source would be the Leather and Shoes Manufacturing Association in Jordan where 46 companies are registered. The contact person is Mr. Talal Ghazawi; the head of the association, Mobile: 00962 795507955
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3.1.10. Strengths and Weaknesses of the Sector This analysis takes account of the main factors that impact on the industry. It highlights those areas that need to be addressed (positive and negative) for the industry to move forward with the aim of integration to take advantage of the opportunities offered by the Agadir Agreement. Sometimes it is believed by entrepreneurs that the current capabilities of the industry are inadequate when facing the future due to global forces over which they have no control. This reflects a certain lack of experience and confidence when dealing with expansion plans and the international market. The SWOT framework highlights the industry strengths, which are often taken for granted, which in reality are its competitive advantage. It also helps to identify the major weaknesses which can and should be eliminated The strengths (and weaknesses) analysis was focused on the main areas of activity in the sector namely marketing, manufacturing, human resources and finance. By analyzing these elements a road map can be drawn up which enables the industry to take action to exploit the strengths it has and to correct the weaknesses. This will lead to a clearer evaluation of the resources that are available (or which must be acquired) to ensure that actions can be carried out to enable the industry to take advantage of the Agadir opportunities. There is no doubt that the industry has a number of strengths available to it in the marketing and manufacturing areas offset by some weaknesses which can be relatively easily corrected. The human resources and financial areas come out as not being quite as strong. Lack of good factory floor supervision and a mixed picture of experience and entrepreneurial flair by managers show signs of weakness. The financial capital base of the industry has been eroded over time by the difficulties in operating in the local market. However there are opportunities available to the industry especially in co-operation with other enterprises in the Agadir countries who are looking beyond Europe for new markets. As it is well known, the industry relies on good quality leather to be successful. The development of the tanning industry in Jordan will help considerably in this endeavor.
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Details of the SWOT analysis therefore are as follows: SWOT ANALYSIS JORDAN
STRENGTHS
Party to Agadir agreement Free Trade Agreement (FTA) with Europe Proximity to Europe Able to communicate effectively Raw materials imported duty free Excess production capacity Small flexible factories Quality levels achieved Reasonable productivity Relatively low wages Currency pegged to US$ Access to working capital Trade Association Available labour
OPPORTUNITIES
Upgrade technology Hub for Gulf Region Niche marketing Trade links with Agadir partners Develop finished leather Jordan as a resource Develop transport links Develop programme for FDI/JV Training scheme industry wide
WEAKNESSES
3.2. Knowledge of overseas markets Product development Competitive pricing Alternative constructions Production management Cost control Shop floor supervision Lack of qualified technicians Labour training Management vision Capital needs Cash flow TUNISIA
THREATS
Unwillingness to change Established norms in global markets not accepted Finished leather Sales techniques Lack of capital Negative exchange rates Artificial barriers to Agadir trade
3.2.1. Industrial Setting and Institutional Framework Since 1987, Tunisia was and still involved in trade liberalization through the dismantling of non-tariff barrier to trade, investment licenses and price control and the freeing of the economy. Tunisia adheres to GATT and founder member of the WTO. Tunisia is now fully implementing the Free Trade Agreement with the EU according to which European manufactured products are imported free of customs duties and Tunisian products are exported to Europe free of duties. These products must be produced in Tunisia using domestic input materials or EU input which is considered as Tunisian. The above agreements have been the back bone of the Tunisian Export and Foreign Development Policies as well. Tunisia also signed several bilateral agreements with Turkey, Egypt, Morocco, Jordan, Iraq and Libya. Tunisia also signed the Arab Free Trade Agreement.
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Since the first implementation of the Tunisian Adjustment Program (TAP) the Government took serious steps toward the development of a stable and, definitely supportive environment for Small and Medium Sized Enterprises (SMEs) development. In 2007, Tunisia had 121 industrial zones distributed all over the country covering a surface of 3,807 hectares and offering several facilities. The 11th economic development plan (2007-2011) aimed at the achievement of 31 industrial zones covering 650 hectares to reach a total area of 4,500 hectares in 2011. The government created equally seven techno poles and seven cyber parks in a number of regions, each devoted to a given area of specialization. Macroeconomic stability, the openness of the economy, the key role played by the private sector and market forces (degree of competition), and the quality of the infrastructure are the corner stones for a suitable strategy of development of the Leather and Shoes Sector (LSS) in Tunisia. The most important comparative advantage of the Tunisian LSS is the supportive environment and the high quality of the supporting institutions which enable the sector to move from the manufacturing of mass consumer products to high quality and added value ones. The sector enjoys professional support from: The Technical Center for Leather and Shoes CNCC, which offers services to keep up with technological advances and studies, technical assistance, analysis and testing, styles, models and fashion design, training and international cooperation. The National Leather and Shoes Federation UTECA. The Vocational Training and Applied Techniques Centers in Leather and Shoes Sector (CSFTAC) which provide practical training for different specialties in the sector including qualified technicians in the industry, design, manufacturing techniques, shop floor management, stitching and sewing, and machine maintenance. The Center for Export Promotion (CEPEX) and Foreign Markets Penetration Programme (FAMEX) delivering assistance in export promotion activities, market research, and participation in trade fairs and missions. Until March 2009, twenty two Leather and Shoes companies benefited from FAMEX II. The Foreign Investment Promotion Agency (FIPA) developing FDI and delivering assistance for foreign investors The Industry Promotion Agency (IPA) The CNCC is the focal point for the implementation of the National Upgrading Programme which is covering technical assistance, policy support and institutional building: Developing strategies and upgrading plans and providing action plans to boost companies competitiveness Expertise and analysis of defects and research projects on leather products and processes. Assistance for the implementation and the organization of a design office within the companies. Trends analysis and assistance in fashion collection design and trends Organisation of training courses for specific purposes either outdoors or indoors for companies, including assisting them to set up and carry out training programs. Partnership with other foreign technical centers and other international organizations (EU, UNIDOetc.). Young graduates of Tunisian engineering schools and training centers are available to meet the growing need of skilled labor to boost innovation and develop new products and technologies. According to the Global Competitiveness Report 2008-2009, Tunisia was ranked 10th on the world in the availability of scientists and engineers quality, while Jordan, Italy, Egypt, Turkey and Morocco came 39th, 45th, 47th, 59th, and 68th respectively. According to the National Agency for Employment and Independent Work, Tunisias vocational training system included 135 public centers throughout the country, which provided training for more than 100,000 trainees in more than 336 specialties covering the full range of economic sectors.
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Tunisia has acquired an advanced position (quantitatively and qualitatively) in the area of staff training. In Tunisia, full training support (free of charge) is provided to enterprises with less than 100 workers. In addition to a subsidy of 50% of the training costs if is related to the introduction of new technology, and the training system is supported by the private sector through co-ordination and partnership. The private sector pays contributions of 1% of the total salaries of its employees and is offering the possibility to reimburse costs of training through fiscal deductions. 3.2.2. Nature of the Sector The leather products sector in Tunisia has enormous potential. Of the four Agadir countries it has by far the biggest exporting to the EU industry. The sector has a well developed footwear industry. The manufacturing of leather products is well established with companies ranging from small to intermediate technology factories to fully mechanised operations. Leather products range from personal leather goods, bags and briefcases, leather garments and footwear. The manufacture of shoes is the largest of the sub sectors by some accounts representing more than 70% of the industry total companies. In 1972, the industry benefited from the Government decision which allowed the foreign direct investments. Footwear factories in particular worked in making uppers as subcontractors to French and other foreign companies. All raw materials and inputs were imported at the beginning. In 1995, Industry qualifying programmes started and the development of the industry reached a stage to manufacture a complete pair of shoes (starting from year 2000). The largest sub sector is footwear production. This is split between mechanised and semi mechanised businesses. The sector is composed of totally foreign investments/companies, joint venture companies and Tunisian companies. The mechanised factories have capacities from 800 to 3000 pairs per day but many are operating at anything from 40 60% of this. Most of the inputs required to make a pair of shoes of any of the major types, dress, casual, ladies high heels, sandals and slippers are available from local market. However, better quality mechanised factories import their own basic raw materials. Sometimes their subcontractors ask for outsourcing their materials from Europe. The personal leather goods and garments sub sector has some excellent companies producing a quality product much of it for export to Europe. The nature of the sector therefore is one of transition from being 100% dependent on EU partners and directed towards export into a less degree of dependency and exporting to regional countries as well, supported by an enabling industrial environment. 3.2.3. Type and Size of Companies The Leather and Shoes Industries sector comprises 309 enterprises that employ 10 or more persons. Among these enterprises, 212 are producing entirely for export. Breakdown of enterprises with 10 or more employees by activity and regime
Activity Dressing and tanning of leather Shoes and shoe uppers Luggage and leather goods Leather clothing Total TE* 163 36 13 212 OTE* 11 60 14 12 97 Total 11 223 50 25 309
TE: Totally exporting; OTE: Other than totally exporting Source: Industry Promotion Agency -2008 Note: Some enterprises are engaged in several activities.
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The contribution of the sector in the number of companies of the manufacturing sector is as following:
2007 Manufacturing sectors Leather & Shoes sector Share

Source: Industry Promotion Agency 2008
*TE 2670 212 % 7.9
*OTE 3032 97 % 3.2
Total 5702 309 % 5.4
3.2.4. Sector Types of Production and Characteristics The production of the Leather and Shoes Industries sector was valued at 905 million US $ in 2007, versus 779 million US $ in 2003. The production growth during the period is as follows:
Unit: million US $ Production

Figures: at current price.
2003 779
2004 779
Source: MDIC
2005 783
2006 815
2007 905
The more enlightened footwear manufacturing companies tend to focus more on the market, export or local, rather than production. One producer has successfully developed a niche market for innovative safety footwear and is very successful on the export market. The company exports 100% of its production to France. Another shoe manufacturer of mens and ladies dress and casual shoes has successfully managed to produce his own styles and he uses rink technology also. Currently, he has his own stores in Tunisia (12) and Kuwait (3). He is also willing to export to Agadir countries and willing to discuss different scenarios of cooperation with Jordan in specific as being very close to the Iraqi market. Another producer of high quality personal leather goods; hand bags, belts, and wallets, is successful in exporting 50% of his production to France, Italy, Belgium, Netherlands and Germany. He can produce 500 bags and 1000 belts per week. He is interested in having leather and accessories (Buckles) from Egypt. He is also interested to sell his brands exclusively in Arab Countries, which presents a good opportunity for him through Agadir Agreement. Another shoe manufacturer of ladies shoes based on comfort relaxation products. He exports to France and produces in good quality and volume. He is willing to export to Jordan and the region. In the components industry, a good example is a sole, insole and heels manufacturer who produces in high quality and volume (1300 1500 pairs per day). He exports mainly to his subcontractors in Italy and France. However, he is currently in negotiations with the Algerian Army to produce 30,000 pairs of soles. He imports the leather for soles from Italy when the quality is of concern, and imports from Mexico for cheaper prices. His preferred minimum order is 2,000 2,500 pairs. There is a modern tannery outside Tunis with a capacity to produce 1 million square feet per month of cow hides and 1 million square feet per month of sheep and goats. It exports 80% of its production to the EU market (France, Italy, and Spain) and Turkey, Hong Kong, China. However, it imports its hides and skins from USA, Spain, UK, Algeria and sometimes wet blue from Egypt. It can deliver to any Agadir Country small order sizes within 3-4 weeks.
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Tunisia trade indicators - imports of hides and skins and leather in 2007
All Sources of Data are ITC calculations based on COMTRADE statistics. Italy and France exports mostly finished leather for their sub contracting operations Spain and Germany are similar but smaller Although not on the chart it should be noted that Egypt exports wet blue and crust (US$ 997,000) Morocco also exports to Tunisia (US$ 1,374,000) Tunisia trade indicators - exports of hides and skins and leather in 2007
Italy and Turkey are the largest importers of Tunisian leather Tunisia sells to its competitors; China and India Egypt imports finished leather Also not on chart, Jordan imports very small amount of finished leather (US$ 97,000)
Exports Exports from the Leather and Shoes Industries sector were valued at 616 million US $ in 2007, versus 416 million US $ in 2002. Average annual growth is around 8%. The exports from totally exporting enterprises represent 90% of sector exports. 85% of exports are from the shoes and shoe uppers products, followed by the leather goods and clothing sub-sectors (12%) and leather and hides (3 %). The contribution of the sector to the exportation of manufacturing sector is as follows:
In million USD Manufacturing sectors Leather and Shoes Contribution (share) 2007 11,211 616 5.5 %
Source: National Institute of Statistics (INS)
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3.2.5. Institutions and Number of Workers The Leather and Shoes Industries enterprises with 10 or more employees account for 30,214 sector jobs, of which 26,763 persons are employed by totally exporting enterprises. The contribution of the sector in the employment of total active population and that of the manufacturing sector is as follows:
Employment Active population Manufacturing sector Leather and Shoes Share of LS in active population Share of LS in manufacturing sector 2007 3 085 100 477 825 30 214 1% 6%
Source: Industry Promotion Agency - June 2008
3.2.6. Production Added Value Average added value for the sector is 368 million US $ in 2007.The contribution of added value in that of the manufacturing sector is of 11 % in 2007 The contribution of the sector in Gross Domestic Production is as follows:
In Million USD GDP Leather and Shoes Contribution (share) 2007 19529 368 2%
3.2.7. Foreign Direct Investment (FDI) Investment in the Leather and Shoes Industries sector was valued at 21.3 million US $ in 2007, versus 19.1 million US $ in 2002. The investment growth during the period 2002 - 2007 is as follows: $Unit:million US
2002 19.1
2003 19.1
2004 17.7
2005 18.4
2006 18.4
2007 21.3
Investment
Source: MDIC The sector counts 154 companies with foreign participation of which 109 are 100% foreign owned. The breakdown of the number of companies per nationality is as follows:
Source: Industry Promotion Agency - June 2008 3.2.8. Cost of Production The basic costs of production for shoe manufacturing operations in Tunisia are shown in the following table. These figures will also be typical for PLG manufacture.
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Unit U. S. $ Year 2007
Labour rates per month (factory operators) Labour rates per hour (factory operators) Electricity per KWH Diesel litre Heavy Fuel Oil - tonne Water cubic meter Construction cost per m2 Cost of land per m2 Transportation per km
3.2.9. Field Visits Company Profiles SOPROTIC SOPIC
250 1.39 0.1 0.56 215 0.1 0.6 depending on consumption volume 150 36 (inside Industrial Estates)1548 outside. $525 per 20 container to northern EU ports
Manufacturer of ladies' shoes based on comfort relaxation products Production capacity 2,000 to 2,500 pairs per day Production Employs 250 people Exports to France Willing to export to Jordan and the region
Manufacturer of innovative safety footwear Production capacity 1000 2500 pairs per day Employs 220 people+ 80 sub contractors when needed Exports 100% of its production to France
Tanneries Megisseries du Maghreb Modern tannery located in Grombalia outside Tunis Capacity: 1 million square feet per month of cow hides and 1 million square feet per month of sheep and goats Exports 80% of its production to mainly the EU market (France, Italy, and Spain) and Turkey, Hong Kong, and China Imports its hides and skins from USA, Spain, UK, Algeria and sometimes wet blue from Egypt Can deliver to any Agadir Country small order sizes within 3-4 weeks. SIMAP Manufacturer of high quality personal leather goods; hand bags, belts, and wallets Exports 50% of his production to France, Italy, Belgium, Netherlands and Germany Capacity: can produce 500 bags and 1000 belts per week Interested in having leather and accessories (Buckles) from Egypt Interested to sell his brands exclusively in Arab Countries, which presents a good opportunity for him through Agadir Agreement
Societe Chaussures - Jancel Manufacturer of ladies and Children shoes Started producing for the local market. Currently exports 80% of its production
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Capacity 500 pairs per day Employs 120 people; 100 in production Minimum order that he prefers is 500 pairs. However, can accept a pilot order of 300 pairs Delivery time: 4-6 weeks
STE COMMERCIALE IND DACCESSOIRE DE CHAUSSURES (SCIAC) Manufacture of footwear parts (soles, heels, insoles etc.). Produces in high quality and volume; 1300 1500 pairs per day Exports 70% of production; mainly to subcontractors in Italy and France At present 45 employees (35 in production). Imports the leather for soles from Italy when the quality is of concern, and imports from Mexico for cheaper prices Started negotiations with the Algerian Army to produce 30,000 pairs of soles Preferred minimum order is 2,000 2,500 pairs A shoes manufacturer from Egypt contacted him for replacing his Turkish source of soles and insoles. STE SEVIL Another shoe manufacturer of mens and ladies dress and casual shoes has successfully managed to produce his own styles and he uses rink technology also. Currently, he has his own stores in Tunisia (12) and Kuwait (3). He is also willing to export to Agadir countries and willing to discuss different scenarios of cooperation with Jordan in specific as being very close to the Iraqi market. Manufacture of men's and ladies dress and casual shoes Uses rink technology Developed a software that controls the complete supply chain (raw materials and inputs, manufacturing, and warehouse) Capacity: 1500 pairs per day. Currently produces 700 pairs per day Employs 150; 130 in production Successfully managed to produce his own styles Have his own stores in Tunisia (12) and Kuwait (3) Willing to export to Agadir countries and willing to discuss different scenarios of cooperation with Jordan in specific as being very close to the Iraqi market The National Leather and Shoes Federation UTECA Welcomes possibilities of co-operation with Agadir countries Need get to know you meetings with other countries industrialists Assistance with trade fairs Buyer seller meetings Provided historical background on the development of the sector Discussed the methodology and their expectations of the study Discussed the schedule of field visits The complete list of all sector companies can be found in the web site of the Industry Promotion Agency according to the following link: www.tunisindustry.net.tn/en/dbi.asp 3.2.10. SWOT Analysis This analysis takes account of the main factors that impact on the industry. It highlights those areas that need to be addressed (positive and negative) for the industry to move forward with the aim of integration to take advantage of the opportunities offered by the Agadir Agreement. The strengths (and weaknesses) analysis focuses on the main areas of activity in the sector namely marketing, manufacturing, human resources and finance. By analyzing these elements a road map can be drawn up which enables the industry to take action to exploit the
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strengths it has and to correct the weaknesses. This will lead to a clearer evaluation of the resources that are available (or which must be acquired) to ensure that actions can be carried out to enable the industry to take advantage of the Agadir opportunities. There is no doubt that the industry has large number of strengths available to it in the marketing and manufacturing areas offset by some weaknesses which can be relatively easily corrected. The human resources and financial areas come out as not being quite as strong. Lack of good factory floor supervision and a mixed picture of experience and entrepreneurial flair by managers show signs of weakness. However there are opportunities available to the industry especially in co-operation with other enterprises in the Agadir countries who are looking beyond Europe for new markets. Details of the SWOT analysis therefore are as follows: SWOT ANALYSIS TUNISIA
STRENGTHS
Party to Agadir agreement Free Trade Agreement (FTA) with Europe Proximity to Europe Knowledge of overseas markets Express cargo service to Europe Able to communicate effectively Raw materials imported duty free Excess production capacity Small flexible factories Quality levels achieved Reasonable productivity Relatively low wages Access to working capital Trade Associations Available labour
OPPORTUNITIES
Upgrade technology Niche marketing Trade links with Agadir partners Develop finished leather Tunisia as a resource Develop transport links
WEAKNESSES
3.3. Product development Competitive pricing Alternative constructions Production management Cost control Shop floor supervision Management vision Capital needs Cash flow Morocco
THREATS
Unwillingness to change Established norms in global markets not accepted Finished leather Sales techniques Lack of capital Negative exchange rates Artificial barriers to Agadir trade
3.3.1. Industrial Setting and Institutional Framework Morocco is preparing to become a major player in the world leather trade through a specific strategy of repositioning and re-launching, hinged on developing diversified, competitive, quality goods.
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In fact, the countrys great tradition in the art of leather work and the declared intention of re-launching what is considered by the Moroccan Government as a strategic sector, are the strong drivers behind a series of development projects aiming to get the maximum yield of this sector. The emergency plan of the Moroccan economy launched in 2006 took into consideration the strong potential for development of the leather and shoes sector linked to exports and made it top priority, and worthy of large investments aimed at updating of the production processes, personnel training, and promotion on international markets. The main actors are the Moroccan Federation of Leather Industries (FEDIC) and the Centre for Moroccan Promotion of Exports (CMPE) which are implementing a series of initiatives aimed at improving not only the production capacities of manufacturers, but also help develop creativity, upgrade quality, response, flexibility and service. The objective is to respond promptly to the new demands of markets and consumers. One of the prime objectives in the strategy of the CMPE and FEDIC to promote made in Morocco in International markets is the development of creative products with strong added value. Moroccos leather and shoes sector is also benefiting from substantial government support on different levels including modernization, training, and development through providing an adequate investment environment, encouraging the private sector to enrol in the leather and shoes manufacturing and production qualifying process in order to reach an integrated and sustainable development. Besides the presence of a professional and efficient organizations as well as executive administrations that provide efficient support. With support of the Ministry of Education and the Agency of the Professional Training and Work Promotion (OFPPT), the FEDIC implemented a well-organised action plan aimed at satisfying the needs of the companies working in the sector in terms of labour skills. The plan includes, among other things, the reactivation of the existing OFPPT centres and the Institute Superieur de Tannerie et de Transformation du Cuir (ISTTC) in Casablanca, the creation of a training institute in FAS, the development of an existing centre in Tangier, the training of 24 teams of experts for managing the production in ESITH, the organisation of apprenticeship courses for training production technicians, and opening of a training centre for stylists. The ISTTC has two branches in Casablanca; each having 520 students/trainees. According to the new industrial policy, the major reform lines focus on the three following areas: Change in the overall environment: this included improving the legislation, creating commercial courts, setting a law that governs and organizes entrepreneurships and companies, facilitates administrative and financial procedures, and creates employment records. Industry development system: upgrading industrial zones, and creating regional centres for investment. Upgrading leather and shoe production: encouraging the use of computers and innovative technologies. Moroccos membership in the World Trade Organization (WTO) contributed, besides liberalizing the economy in providing an adequate environment to attract foreign investments. For European investors, Morocco presents many advantages: geographical proximity, good manufacturing and leather processing tradition, skilled labour and political stability. Morocco also has simplified commercial and custom procedures and free bilateral and multilateral trade agreements with European Union, United States of America, Turkey, Tunisia, Egypt and Jordan plus Agadir which allows origin accumulation with the other three countries. 3.3.2. Nature of the Sector The leather products sector in Morocco has enormous potential which has never been fully realised. Of the four Agadir countries it has by far the oldest traditional industry. The sector has a well developed hides and skins collection service, there are many tanneries producing leather up to wet blue, crust and finished. The manufacturing of leather products is well established with companies ranging from simple workshops (artisan enterprises) to intermediate technology factories to fully mechanised operations.
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The leather and shoes sector is comprised of 358 enterprises producing different kinds of leather products ranging from personal leather goods, bags and briefcases, leather garments and footwear. The manufacture of shoes is largest of the sub sectors. Subcontracting is still predominant in Moroccan industry. However, market research done by FEDIC reveals the need to move from subcontracting to co-contracting in order to better meet the demands of a fully evolving market, and hence Moroccan producers need to adopt themselves to the new provisioning strategy of the retail outlets and distributors who are increasingly favour suppliers capable of offering global solutions that range from the purchasing of raw materials to the definition of the style, and the fine-tuning of the product techniques. On the other hand, there are already some Moroccan producers who have created their own brands for selling their products in the international market. The largest sub sector is footwear production. This is split between mechanised and semi or hand operated businesses. At present, Morocco exports about 20 million pairs of shoes yearly, most of these are made under contract for international brands. In 2007, Moroccan footwear exports reached a value of 276 million US$, showing a growth rate of 20% over the previous year. The majority of orders came from France, then Spain, Italy and Germany. Over the last ten years, local manufacturers have considerably improved and upgraded the quality of their products through training programmes and technical assistance by the Moroccan Centre for Leather Technology (CMTC), and by technological investments. These efforts were done to distance themselves from Asian competitors. The same can be said of the other two subsectors; those of leather garments and personal leather goods that together include over a hundred enterprises which export their high quality products all to the EU market. In this area also, there are numerous international brands that have opened production units or moved their manufacture to Morocco, such as Pierre Cardin and Louis Vuitton. In 2007, almost 400,000 articles between bags and accessories were exported for a value around 32 million US$. The biggest buyers were France, Spain and Switzerland. Exports of leather garments amounted to 26 million US$ and went mainly to Spain, France and the Netherlands. Another strategic subsector, focus of important modernisation projects, is the tanning industry which counts to 58 enterprises whose exports of leather reached a value of 26 million US$ in 2007, most of which were to the Portugal, Italy and France. With an objective to integrate the leather and shoes sector, the focus now is on creating industrial parks dedicated to leather in Casablanca (decided on the site), Fez (commencement) and Marrakesh (feasibility study) where the majority of tanneries will be grouped in modern and functional sites. 3.3.3. Type and Size of Companies The mechanised footwear factories have capacities from 800 to 3000 pairs per day but many are operating at anything from 30 60% of this. Most of the inputs required to make a pair of shoes of any of the major types, dress, casual, ladies high heels, sandals and slippers are available from local market. However, better quality mechanised factories import their own basic raw materials. Sometimes their subcontractors ask for outsourcing their materials from Europe. The personal leather goods and garments sub sector has some excellent companies producing a quality product much of it for export to Europe. Some of the leather used is sourced locally which is of excellent quality. The structure of the PLG sub sector is similar to footwear in that there are many small workshops producing goods by hand with a handful of professionally managed operations. The nature of the sector therefore is one of transition from being hampered by the industrial environment which made it difficult to progress to a situation in the near future where the industry will have the opportunity to modernise, at least as a manufacturing base.
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The more enlightened footwear manufacturing companies tend to focus more on the market, export or local, rather than production. One producer has successfully developed a niche market and a successful brand name for high end mens shoes made by the Good-Year Welted method (80% classic and 20% sport). This brand is very active in distribution, indeed he have two franchises operating in Brussels, one in Netherlands, two in Casablanca and Marrakesh and two in the Ivory Coast. The company exports 70% of its production to Germany, Belgium, Switzerland, Italy and Sweden. Another shoe manufacturer of ladies and babys shoes based on comfort relaxation products. He exports to the EU and US markets and produces in good quality and large volume (2000 pairs daily). A well established mens, womens and childrens shoe factory, produces middle to high quality shoes and exports to France, Spain and USA. His production could reach up to 3000 pairs daily. His products could be easily marketed in Jordan. Another enlightened manufacturer who produces leather goods and natural leather garments for men and women has started producing high quality fur garments in 2008. He produces under his own two brands; one for bags and another for leather garments. His production capacity is around 8,000 pieces of leather goods and 11,000 of leather garments per year. He exports 75% of his production to Spain, Italy, France, USA and the Middle East. Another producer of high quality personal leather goods; ladies hand bags, belts, and travel bags, is successful in exporting 98% of his production to France. He is also successful in using local leather (50%) in his products. He produces 3,000 pieces per month. However, his high production costs could be lowered if he shifts to be more mechanised. 3.3.4. Sector Types of Production and Characteristics The supply chain for the leather industry starts from the collection of raw hides and skins. The tanning of leather currently has some problems in the finished product in that the industry until recently has concentrated on processing up to the crust stage. There is a lack of technical knowledge and experience in continuing the process up to finished leather suitable for leather product manufacturing for export markets. The manufacture of finished products is dominated by footwear although Morocco has a reputation for personal leather goods manufacture. The various sub - sectors continue to show healthy growth in manufacturing and exporting. Export: Before 2001/2002, the exports were mainly to Europe (70%) and Libyan (25-30%) markets. However, after the release of UN embargo on Libya, the Moroccan exports started facing some problems. In its efforts to improve the cooperation between indigenous manufacturers, the Moroccan Exporters Association (ASMEX) with assistance of UNIDO launched an Export Consortium Project aiming at supporting the enterprises to export as a group under one Consortia. The funding started in 2006 and the funding for each Consortia can reach US$ 82,715 divided over 3 years; in the first year US$ 11,816 are allocated for the establishment of the Consortia and the remaining US$ 70,899 are divided equally over the three years on promotional activities with a subsidy share up to 70%, 60%, and 50% for each respective year.
Exported products Shoes Leathers and skins 17,794,196 6.1% Spain - Portugal - China Leather goods 35,519,652 12.17% France - Portugal - Spain Leather clothes 21,618,111 7.41% Spain - France Netherlands
Value of exported products US$ 216,703,635 % of total sector exports Main customers 74.29% France - Spain Germany
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Imports of leather products are mostly in the form of finished leather because of the lack of good quality material available from local tanneries. The second highest sub sector is footwear mostly from China and higher quality products from Italy. The import situation is represented by the following:
Imported Product Value in US$ % of total sector imports Exporting countries Shoes 30,288,102 21.1% China - Italy Leathers and skins 107,127,203 74.59% Spain France - Italy Crust leather 6,191,818 4.31% Spain - France
Here-below are the main customers of the Moroccan leather industry classed per sector branch for the year 2006. For the crust leather and leather, exported values are so low to be taken into consideration. Shoes
Country FRANCE SPAIN GERMANY ITALY UNITED STATES OTHERS Value (US$) 79,041,224 75,172,063 33,127,598 16,690,150 3,090,801 10,507,578
Leather garments
Country SPAIN FRANCE NETHERLANDS ITALY GREAT BRITAIN UNITED STATES OTHERS Value (US$) 10,059,109 4,027,486 3,639,463 1,483,432 953,271 936,905 610,801
Small leather goods, bags and travel goods

COUNTRY FRANCE PORTUGAL SPAIN SWITZERLAND )U.E.B.L (ECONOMIC UNION OF BELGIUM AND LEXUMBOURG ITALY GREAT BRITAIN NETHERLANDS OTHERS $Value (US( 12,589,611 9,263,516 6,640,549 2,496,736 1,566,858 1,001,700 440,741 307,925 1,363,761
3.3.5. Institutions and Number of Workers The companies operating in the leather products manufacturing sector are estimated by FEDIC (Moroccan Federation of Leather Industries) as follows
Number of firms Personnel of turnover of the leather sector % Shoes Tanneries 234 58 153 14 1662 71,02% 15,63% Leather goods 45 1569 7,34% Leather clothes 21 823 6,01% Total 358 207 18 100%
There are 358 production units in Morocco employing 18,200 people.
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3.3.6. Production Added Value According to FEDIC the added value in the various sectors in US$ is as follows:
Shoes Added value (US$) 82,903,750 Tanneries 13,124,617 Leather goods 8,114,744 Leather garments 4,392,436 Total 108,535,428
3.3.7. Foreign Direct Investment From the Ministry of Industry investment in the leather manufacturing sector in 2005 was 11.8 million US$ and in 2006 it declined to 10.2 million US$. 3.3.8. Cost of Production The basic costs of production for shoe manufacturing operations in Morocco are shown in the following table. These figures will also be typical for PLG manufacture. Unit U. S. $ Year 2007
Labour rates per month (factory operators) Labour rates per hour (factory operators) Electricity per KWH Water cubic meter Construction cost per m2 Cost of land per m2 Transportation - Cost of 90 cubic meter loaded truck for export from Casablanca to Valencia (Spain) - Cost 90 cubic meter loaded truck for import from Valencia to Casablanca
3.3.9. Field Visits Company Profiles BENSON SHOES
300 1.67 0.13 0.23 to 0.99depending on consumption 200 42 3220 2100
Manufacturer of highend men's shoes characterised by Good-Year construction Produces 80% classic shoes and 20% sport Started producing a womens' line with a masculine style. It collaborates with a Spanish designer Production 160 / 170 pairs per day Employs 70 people Very active in distribution; have two franchises operating in Brussels, one in Netherlands, two in Casablanca and Marrakesh and two in the Ivory Coast Exports to France 70% of its production to Germany, Belgium, Switzerland, Italy and Sweden. Imports leather from France and leather soles from Belgium Succeeded to make shoes in Italy under his brand name
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Sells 15% less than Spanish and Portuguese companies An Egyptian shoe manufacturer showed interest to contact him to discuss possible cooperation UNIVERS CUIR Manufacturer of PLG; mainly for stationary and gifts Newly established factory; only 2 years Small production volume Promotes its products through the internet
MACHA Another shoe manufacturer of ladies and babys shoes based on comfort relaxation products. He exports to the EU and US markets and produces in good quality and large volume (2000 pairs daily). Manufacturer of ladies' and baby's shoes based on comfort relaxation products Exports the EU and US markets Capacity: can produce 2400 pairs per day, actual is 2000 pairs daily Employs 150 people Not happy with previous experiences with Jordan and Tunisia
COROC and FREEWAY Manufacturer of leather goods and natural leather garments for men and women. Leather goods include hand and travel bags, travel boxes, stationary gifts and small items of PLG Started producing high quality fur garments in 2008 produces under own brands; COROC for bags and FREEWAY for leather garments Capacity: around 8,000 pieces of leather goods and 11,000 pieces of leather garments per year Employs 90 people Exports to Spain, Italy, France, USA and the Middle East (90% from FREEWAY products and 70% of COROC products) SELECT DIFUSSION Manufacture of men's, women's and children's shoes Produces middle to high quality shoes Exports to France, Spain and USA Capacity: 3000 pairs per day. Currently produces 2000 including making uppers in external factories At present 170 employees (150 in production) Produces under own brands; ATTICO for children and LOLITA REPUBLIK foe women
TANNERIES MOHAMMEDIA Large, Modern tannery located outside Casablanca Exports crust and finished leather only Imported its hides and skins from KSA and Algeria (now not possible), Libya, and Iraq Its ex-factory prices range from US$ 2.1 2.8 per square foot The company currently operating at 1/3 of its capacity Some problems in the product quality were noticed
MARTAL Manufacture of high quality personal leather goods; ladies' hand bags, belts, and travel bags
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Exports 98% of total production to France only Uses local leather in 50% of the production and imports the rest from France, Italy, and Hong Kong (2% only) depending on client's request Capacity: 3000 pieces per month Employs 136 people; 130 in production The high production costs could be lowered if can shift to be more mechanised The Moroccan Federation of Leather Industries (FEDIC) Provided historical background on the development of the sector Welcomed possibilities of co-operation with Agadir countries Need get to know you meetings with other countries industrialists Assistance with trade fairs The complete list of the sector companies can be found in the portal of the Ministry of Industry and Trade and Modern Technologies by following the link shown below: http://www.mcinet.gov.ma/mciweb/mciweb/qpq.jsp Then choose Secteur dactivit industrie du cuir et de la chaussure Where lists of 343 companies appear, and by clicking on a company name you get more details. The information is available in French only. 3.3.10. SWOT Analysis This analysis takes account of the main factors that impact on the industry. It highlights those areas that need to be addressed (positive and negative) for the industry to move forward with the aim of integration to take advantage of the opportunities offered by the Agadir Agreement. The strengths (and weaknesses), opportunities and threats analysis focuses on the main areas of activity in the sector namely marketing, manufacturing, human resources and finance. By analyzing these elements a road map can be drawn up which enables the industry to take action to exploit the strengths it has and to correct the weaknesses. This will lead to a clearer evaluation of the resources that are available (or which must be acquired) to ensure that actions can be carried out to enable the industry to take advantage of the Agadir opportunities.
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SWOT ANALYSIS MOROCCO
STRENGTHS
Party to Agadir agreement Proximity to Europe Local availability of leather Express cargo services to Europe Government Agencies support Excess production capacity Small flexible factories Availability of labour Trade Association
OPPORTUNITIES
New leather cities Upgrade technology (CAD/CAM) Marketing plan with Government Agencies Niche marketing Trade links with Agadir partners Develop finished leather Advertise Morocco as a resource Develop transport links with EU Training scheme industry wide
WEAKNESSES
Product development Competitive pricing Niche marketing Alternative constructions Production management Cost control CAD systems Shop floor supervision
THREATS
Leather cities take longer to develop Unwillingness to change Established norms in global markets not accepted Finished leather not up to standard Sales techniques lacking Lack of capital Negative exchange rates Artificial barriers to Agadir trade
3.4.
Egypt 3.4.1. Industrial Setting and Institutional Framework
The Government of Egypt has focussed on the leather products industry in all its sub sectors as a priority in the economic development of the Country. Many of the worlds developed leather industries either have had or continue to have Government support in their development e.g. China, India, Vietnam, Brazil, Italy and to some extent EU with its anti dumping legislation with China. The Egyptian industry therefore has a good opportunity to emerge into a world player. The timing is apposite in that the current lower level of commerce in the sector gives time for plans to be implemented. The plan to re-locate the tanneries to the new leather city at Rubeiky in Badr City is an excellent plan. It will provide for a new environmentally friendly situation covering the whole supply chain. It will also include a modern technology centre, design centre, vocational training school and testing facilities. The whole operation should be implemented within 5 years. The footwear and personal leather goods manufacturing sub sectors are replicating the same plan for their side of the industry. The new facility will be in 10th of Ramadan City not far from the tannery cluster. These two developments alone will provide an integrated industry with a short, flexible supply chain which will be necessary for the years to come. The industrial setting for the industry is better now than it has ever been.
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The industry is also supported by many institutional agencies all with helpful programmes. The Leather Chamber is now very active in its support for the industry and it in turn can call on the help of Government Ministries and subsidiaries of them for help in training to export promotion. 3.4.2. Nature of the Sector The leather products sector in Egypt has enormous potential which has never been fully realised. Of the four Agadir countries it has by far the biggest industry. The sector has a well developed hides and skins collection service, there are many tanneries producing leather up to wet blue, crust and finished. The manufacturing of leather products is well established with companies ranging from simple workshops (artisan enterprises) to intermediate technology factories to fully mechanised operations. Leather products range from personal leather goods, bags and briefcases, leather garments and footwear. The manufacture of shoes is the largest of the sub sectors by some accounts representing 85% of the industry total activity. Today the industry has a number of restraints in the various sub sectors. There is ample supply of cow, buffalo, sheep and goat hides and skins in the country. However the primary raw material required namely finished leather seems not to be freely available in the country. There are many tanneries particularly in old Cairo but they operate in very difficult conditions, 70% of their production being wet blue, an easily exported product. Little finished leather is manufactured. It is difficult for the tanneries to improve their situation because of the environment they are in. They are not allowed to move their operations to green field sites because of environmental concerns. The one tannery that has been able to set up outside Cairo is an example of what is possible if the conditions are right. This tannery is run on ultra modern lines, is clean, environmentally friendly and very successful. However at present this type of move is not available to the other enterprises. However there are advanced plans to build a new Leather City outside Cairo, custom built for the tanning industry which will incorporate a central effluent control facility. The investment will be in the order of U.S. $ 8 million. The new facility when completed will be able to house up to 550 tanneries employing around 25,000 workers finishing about 300 million square feet of leather per annum. Many of these will obviously be quite small but will serve as sub contractors for the larger companies. This project will provide the much needed stimulus for the tanners and enable them to operate their facilities in a modern and efficient manner. The consequence of this will be more and better finished leather which will pull through the rest of the leather products industry and provide a much needed stimulus to exports. The first tanneries to move to the new facility are expected in the 4th quarter of 2009. The largest sub sector is footwear production. This is split between mechanised and semi or hand operated businesses. The majority of footwear produced in Egypt is by MSMEs. This sector produces (up to 95%) of total output of around 75 million pairs per year. This is done in relatively small workshops producing anything from 5 to 50 pairs per day. Quality levels are indifferent and manufacturing techniques are not far above that of a shoe repairer. Having said this, the finished product looks quite acceptable but has poor wearing properties. The mechanised factories have capacities from 800 to 3000 pairs per day but many are operating at anything from 30 50% of this. They have been operating at low levels of capacity from some years which has made it difficult to invest in the latest technological improvements. Most of the inputs required to make a pair of shoes of any of the major types, dress, casual, ladies high heels, sandals and slippers are available from merchants in Cairo. The quality of the inputs is relatively low in order to keep costs down which, reflects the lack of purchasing power of the mass market. Better quality mechanised factories import their own basic raw materials. The personal leather goods and garments sub sector has some excellent companies producing a quality product much of it for export to Europe or through duty free shops. Much of the leather used is sourced locally and is of excellent quality. It proves the point that good leather can be obtained from local tanneries if the tanner and manufacturer
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work together in developing the required specifications and pay a fair price for so doing. The structure of the PLG sub sector is similar to footwear in that there are many small workshops producing goods by hand with a handful of professionally managed operations. The nature of the sector therefore is one of transition from being hampered by the industrial environment which made it difficult to progress to a situation in the near future where the industry will have the opportunity to modernise, at least as a manufacturing base. 3.4.3. Type and Size of Companies The footwear sub sector of the leather industry in Egypt comprises over 3300 units with a production of around 75 million pairs and a capacity base of 120 million pairs per annum.
Current Manufacturing Capacity Annual Production Export Capacity Export Markets No of Export Oriented Factories No of Medium to Small Factories Production Units employing less than 10 workers
Million Pairs per year 120 Million Pairs 75 Million Pairs 50 Ex- East Block Countries and Russia , Euro Countries , Arab and African Countries Factories 60 Factories 200 production units 3000
Source: Chamber of Leather Industry The export oriented factories tend to be fully mechanised. The medium to small factories are semi mechanised up to the point of lasting with some finishing machines. The small production units by and large are hand operations with some simple sewing machines and sole presses. The more enlightened footwear manufacturing companies tend to focus more on the market, export or local, rather than production. One producer has successfully developed a niche market and a successful brand name for innovative childrens footwear and is very successful on the local market. The company exports 50% of its production to Northern Europe (a less crowded market than middle Europe). It also has opened opportunities in Jordan for export there and re export to other regional markets. Another shoe manufacturer of mens dress and casual shoes has exploited the fact that the local market tends to lag behind that of Europe. It contracts with an Italian manufacturer to purchase all its manufacturing equipment (lasts, patterns, and cutting dies) from the previous season. This means they are the first on the local market with new designs and have a product that is made to Italian specifications. They are also aiming to exploit this strategy intra Agadir. Another company, an ex Bally licensee, is producing top quality all leather mens dress shoes (leather uppers, lining and insole) with local quality leather. They are now in contact with a sole supplier in Tunisia to source their soles there rather than from the present supplier form Turkey. A well established mens shoe factory, traditionally producing middle of the road dress shoes has implemented a new construction with a high degree of hand work which does not compete directly with the Chinese. This shoe is in demand in Europe for the grey market. This is a successful strategy for entering into the larger EU27 markets.
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There are approximately 300 tanneries located in Old Cairo near the city centre producing mostly wet blue cow and buffalo hides and similarly sheep and goat skins for export and some finished leather for the local market. There is one modern tannery outside Cairo with a capacity to produce 6,000 pieces per day of cow and calf leather, approximately 120,000 ft2. The tanning sector is as follows: Total Production: 149 Million square feet Finished Leather for Uppers per annum
Type Cow Hides Buffalo Camel Calf Sheep Goat Total

Source: Chamber of Leather Industry
Square Feet 75499740 39652000 9810800 10207104 13941400 310776 149421820
Percentage 50.53% 26.54% 6.57% 6.83% 9.33% 0.21% 100%
Number of Tanneries: 300 Total Labour Force: 15000 Export Markets: Spain, Italy, Cyprus, Greece, Libya, China, Saudi Arabia, UAE In leather goods there are over 1500 production enterprises. About 50 companies supply the quality market locally and for export mostly to Europe and the Gulf States. It is worth noting that a successful leather garment manufacturer has upgraded its production facility by developing in house costing software and has invested in a state of the art CAD system. This successfully controls the costs, styles and fit of the finished product making them competitive on the world market. A very good example of a successfully managed company is one making small leather products of the highest quality from local leather and selling them in the duty free shop market, one of the most demanding in the world but one of the most profitable. Because of its quality and fanatical attention to detail the company exports to the high end Gulf market and into the EU15 markets.
No of Export Oriented Factories Small factories or production units Export Products
25 Factories 1500 WalletsPursesAttach and Business Bags Gifts, Souvenirs and Advertising items of genuine leather Ladies Bags ,Casual and Classic Belts, Men ,Ladies and Children Leather Garments according to latest fashion trends. Home and Car Upholstery Germany and other EU Countries, Arab and African Countries, USA and Canada, Russia
Leather Goods
Export Markets
Source: Chamber of Leather Industry
The other enterprises are small units making lower quality products on offer to the local market.
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3.4.4. Sector Types of Production and Characteristics
The supply chain for the leather industry starts from the collection of raw hides and skins. Much of this is done by private slaughter rather than mechanised abattoirs. Manual flaying of the hides and skins besides using traditional inventory techniques and transportation means create defects on the flesh side producing lower quality materials. Some estimates put this problem at 30% of the total collections, representing a serious loss to the industry. However the remaining 70% of hides and skins are of good quality. The hides and skins business is a commodity trading business and tends to be global in its nature with prices fluctuating in a similar manner to say coffee or tea. Occasionally it is better to import and vice versa depending on market conditions. Egypt is no exception to this methodology consequently sometimes, when expedient, it imports raw hides and skins. From the ITC Comtrade data base 2007; trade map analysis Spain and Bosnia represent over 90% of Egypts imports of this commodity. Exports are relatively minor as they are discouraged by Government policy. However small amounts have been exported to Italy which representing 70% + of the total, and to a major competitor; India which represents almost 20% of the total. Egypt trade indicators - imports of hides and skins and leather in 2007
Spain mostly exports raw hides and skins to Egypt Italy exports mostly finished leather Bosnia trades in raw hides and skins Lebanon, Tunisia and Syria are all exporting finished leather to Egypt.
Egypt trade indicators - exports of hides and skins and leather in 2007
Spain imports semi processed and some finished leather mostly from 1 tannery in Egypt Italy imports semi processed leather Portugal is similar to Italy China and India import semi processed leather also Turkey is a smaller market for semi processed leather
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Egypt trade indicators - imports of leather goods in 2007
Imports of leather goods are dominated by China at over 70% of the total. Imports from other countries are minor. Egypt trade indicators - exports of leather goods in 2007
Exports of leather goods mostly take place to Italy and Belgium; 21% and 26% of total exports respectively. Egypt trade indicators - imports of footwear 2007
Imports of shoes into Egypt, not surprisingly, are dominated by China at over 76% of the total. This is followed by Italy with about 12% and Brazil with 1.8%. Other trading partners are 1% or less. Egypt trade indicators - exports of footwear in 2007
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The export of shoes is dominated by one market Italy. This market is mostly supplied by one exporting footwear company in Egypt. Italy represents over 60% of shoe exports. France is the next biggest market with a 9% share, followed by Saudi Arabia with 4.5%. Agadir Countries are exported to in a minor way. Jordan takes 2.4% of the total, followed by Tunisia with 0.1%. Morocco is negligible. 3.4.5. Institutions and Number of Workers From the Chamber of Leather published information there are approximately 300 tanneries of one sort or another in Old Cairo employing 15,000 workers. (There is 1 large tannery outside this environment employing approximately 600 workers). The footwear sub sector is located mostly in Cairo and the surrounding cities of 6th of October and 10th of Ramadan. There is a relatively strong presence in Alexandria. In these locations there are 60 mechanised or largely mechanised factories. Employment levels in this sector are from 4,800 to 7,200 workers. Again from Chamber information, there are about 200 smaller workshops in the Country each employing 5 30 workers. There are 3,000 MSMEs which employ 5 15 workers. The IMC study (IMC/PS-38) done on the footwear and leather industry in Egypt in 2006 agrees with the formal sector outline above but lists the small and micro workshops as being in the order of 19,000 27,000 units providing jobs for 42,000 to 60,000 people. (This would include the various workshops producing components and ancillary parts). The Chamber lists the leather goods sector as comprising 50 factories and 1500 small production units whereas the IMC study suggests 23 factories and between 500 1,900 workshops employing 5 workers or less. Total workers in the sub sector could be in the order of 6,000 workers. The leather garments sub sector is represented by 9 companies employing from 20 60 workers on average, for an estimated total of 420 workers. Small units number around 100 and employ about 5 people each for a total of 500 workers. This is derived from the Chamber and the IMC study. RECAPITULATION
SECTOR TANNERIES Old Cairo Modern Tanneries FOOTWEAR Mechanised Semi mechanised Small units LEATHER GOODS Mechanised Small Units LEATHER GARMENTS Mechanised Small units TOTAL PRODUCTION UNITS 300 1 60 200 3,000 27,000 23 50 500 1900 9 100 4,139 29,620 TOTAL EMPLOYED WORKERS 15,000 600 4,800 7,200 1,000 6,000 30,000 60,000 1,265 6,000 1,750 6,650 180 540 500 55,095 102,490
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3.4.6. Production Added Value According to the IMC study done in 2006, the production value added for footwear was 30%, while for travel and hand bags it was 35%. In small leather goods it reached 65%. On the other hand, the manufacturing of leather garments value added was 20%. 3.4.7. Foreign Direct Investment Stemming from broad based institutional and structural reforms implemented by the Government, the Egyptian economy is continuing on its strong growth path for the third consecutive year; bringing in the confidence of local and international investors. The Egyptian economy achieved real growth of 7.2% (market prices) during the course of the first semester of 2007/08 (7.5% at cost level), and is expected to witness a similar growth pattern for the entire year, slightly higher than the 7.1% achieved in FY 2006/07, but up from 4.1% just half a decade ago in 2003/04. (Source Ministry of Finance). Recent indicators assure that such growth is gaining momentum as well as sustainability. As sources of economic growth are becoming more diversified - with the manufacturing sector leading the current growth wave, productivity and per capita income are increasing. With the increased confidence in Egypts economic sustainability, annual net FDI inflows reached US$ 11.1 billion in FY 2006/07 (8.5% of GDP) up from US$ 6.1 billion a year before. Greenfield investment represents more than 46 percent of net FDI inflows witnessed in FY 2006/07. It is noteworthy that net FDI inflows during the period July-March 2007/2008 increased to record US$ 11.3 billion up from US$ 9 billion during the same period last year, with net Greenfield investments (oil exclusive) increasing by some 40% during the same period. As far as the leather industry is concerned there have been in recent years some investment and some current projects. The large footwear company in Ismailia in the free trade zone has been a success story for Egypt exporting 100% of its production. Current plans are to increase capacity for export and start a new operation for the domestic market. There is an independent investor from Turkey who is currently assessing the possibility of starting a new modern last making facility in Egypt. There are other opportunities in the leather sector, particularly components to upgrade the current product line either by Joint Venture (JV) or by FDI. 3.4.8. Cost of Production The basic costs of production for shoe manufacturing operations in Egypt are given in the following table. These figures will also be typical for PLG manufacture. Unit U. S. $ Year 2007
Labour rates per month (factory operators) Labour rates per hour (factory operators) Electricity per KWH Natural Gas per cubic meter Diesel per litre Water per cubic meter Construction cost per square meter Cost of land per square meter Transportation 100 to 400 0.55 to 2.2 0.048 0.04 0.15 0.09 150 18 $450 per 20 container (from Alexandria to Europe)
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3.4.9. Field Visits Company Profiles El Shark Tannery Manufactures cow, buffalo and baby buffalo leather Wet blue, crust and finished Export oriented; exports about 90% of production Produces approximately 7- 8,000 square feet per month Exports wet blue and crust to Italy, Spain and Portugal Has exported to Agadir countries (Tunisia) Has 60 - 65 workers in production
Baramki Group Large company producing vulcanised rubber products. Produces 20 - 25 tonnes rubber sheets per week for soling Large product range of many different effects Exports to Africa, Italy and Tunisia Is in talks for possible JV with company in Tunisia
Bruno Shoe Factory Manufacturer of mens' dress shoes for local market Largely mechanised installation Capacity 300 400 pairs per day Actual production 150 200 pairs per day
Ell Gonih Tannery Manufacturer of semi processed leather Export oriented; exports 80% to Europe Exports consist of 80% wet blue and 20% crust Remaining production goes to local market Capacity is 600,000 square feet per month 50% crust, 50% wet blue Current capacity utilisation is 40 45% of nominal capacity Has exported to Tunisia Planning on installing finishing plant as next phase of expansion
Chamber of the Leather Industry and the Leather Export Council New leather city can be open to FDI especially Tunisia Interested to have information about Tunisian Footwear and Moroccan Leather and Footwear New vocational training centre set up in Cairo Discussed methodology of project and gave views Promoting Agadir Leather Products via International Marketing Company Interested in intra Agadir chamber meetings Establishment of a data base for the industry intra Agadir
Egyptian - Italian Company Manufacturer of mens' dress/casual shoes and Gulf sandals Capacity 1,200 pairs per day. Actual 50% of this Employs 130 workers
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Makes hand stitched Clarks type shoes Also McKay stitch Both constructions a good niche market Farag Leather Products Manufacturer of high quality ladies bags 100% for export; Belgium, Italy, and France Output is variable from 100 to 500 pieces per day Employs on average 120 workers Has plan to start complimentary shoe manufacturing company producing 500 pairs per day of Timberland type boots 100% for export to Italy Nassr Free Zone City .
Armando Shoe Factory Manufacturer of high quality mens' dress shoes. Ex Bally licensee Produces 100 pairs per day Semi mechanised plant Employs 20 people Wants to contact Benson Shoe in Casablanca to discuss possible cooperation Has contacted SCIAC Company in Tunisia for built up leather unit soles.
Piel Color Tannery Large ultra modern tannery outside Cairo (allegedly number 6 in the world for size) Operates in Free Trade Zone Produces 6,000 pieces per day cow and calf leather from wet blue, crust and finished 100% export oriented; mostly to Spain
Leather International Large shoe factory operating in Free Trade Zone at Ismailia 100% export mostly to Italy, also Germany and France Manufactures 3,000 pairs per day of mens' and ladies casual cement lasted shoes Employs 980 people He has his own internal training section / workshop Imports most leather and soles from Italy Expansion plans for new company outside of free trade zone producing 50% for local market and 50% for export at 1,500 pairs per day of sport footwear, employing 550 people
Shoepedic Specialist manufacturer of high quality childrens' shoes and sandals Production 800 1000 pairs per day of shoes Employs 110 workers 50% production for export and 50% for local market Exports to Germany, Scandinavia, Benelux Has own retail shops in Cairo Exported shoes to Jordan, 3000 pairs yearly and is willing to export more through other agents Styling, design and pattern work done by two associated Italian Studios.
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Alfa Leather Company
Manufacturer of high quality mens' personal leather goods, briefcases, and promotional items Export oriented to Benelux, Italy, Germany and UK Uses local leather where possible Components / accessories from Italy and China Production variable but he achieved 120,000 pieces per 3 months under special order. Employs from 60 to 120 workers as needed.
Match for Leather Products Manufacturer of ladies unique bags and watch straps Export oriented to UK and Canada Also makes for tourist markets in Egypt Capacity about 2,000 bags per month Employs 17 35 women in a village outside Cairo Buys local leather
Egypt Shoes Semi mechanised factory for mens' sandals and dress shoes Capacity 400 pairs of sandals or 120 pairs of shoes per day. Currently, operating at about 50% of this Employs 13 people Export oriented to Saudi Arabia, Kenya, and Yemen Exports represent 30% of production Has alternative larger mechanised production facility outside Cairo on Alexandria road not at present in operation.
Three Angels Genuine Leather Manufacturer of very high quality personal leather goods Wallets, briefcases, ladies bags and promotional items Exports through duty free sales in Cairo and Kuwait Exports also to EU direct Capacity 7,000 8,000 pieces per month Employs 50 60 people
Industrial Modernisation Centre (IMC) Discussed broad principals of report New leather cities progress Recruitment of foreign experts to assist industry Interested to have Intra Agadir database of consultants and experts, also twinning initiatives with similar centres in Agadir Countries Benchmarking Development of finished leather
Elegant Fashion Manufacturer of mens' and ladies' leather garments Modern mechanised factory Utilises CAD Sophisticated costing system by computer in house developed
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Sells mostly in local market Was between seasons at time of visit Very interested in international marketing company as IPO (initial public offering) Top Group Geem Manufacturer of mens' casual shoes and sandals Employs 45 workers Uses local leather Exports to Syria, Jordan, Iraq, South Africa, Kuwait, KSA, Zambia, and Kenya His prices are accepted by the local market (120 250 E). 25% less for Wholesaler's price Most problems are in Marketing, lack of skilled labour, employee training centres / schools, and inconsistency of leather quality and inputs Produces mens' and women's classic and casual shoes Capacity 6,000 pairs per month, actual production 4,000 Employs 65 workers Has 6 shops where he sells his products and imported ones also Exports only 10% mainly to Saudi Arabia and Yemen Uses only local leather Buys previous European season styles and tooling from an associate in Italy Is one of the first on the local market with new fashions Has trouble free technical problems in manufacture because of Italian shoe engineering Is market leader in fashion on local market
Riviera Group Large manufacturer of shoe components Manufacturer of cellulose insole boards and injection moulded unit soles Sole in Polyurethane, Thermoplastic Rubber and Poly Vinyl Chloride Also produces shank boards and adhesives Produces 4,700 tonnes per annum cellulose boards (3.6 million sheets), 1,900 tonnes shank boards (635,000 sheets) Sole production capacity 3,000 to 5,000 pairs per day Employs 200 workers Is currently installing new plant for leather board producing 3,000 tonnes per year. Now has excess capacity and is planning to export, particularly to Agadir countries.
The complete list of all registered companies can be found by contacting the Head of the Leather Export Council of Egypt on the following address: 3.4.10. SWOT Analysis This analysis takes account of the main factors that impact on the industry. It highlights those areas that need to be addressed (positive and negative) for the industry to move forward with the aim of integration to take advantage of the opportunities offered by the Agadir Agreement. The strengths (and weaknesses), opportunities and threats analysis focuses on the main areas of activity in the sector namely marketing, manufacturing, human resources and finance. By analyzing these elements a road map can be
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drawn up which enables the industry to take action to exploit the strengths it has and to correct the weaknesses. This will lead to a clearer evaluation of the resources that are available (or which must be acquired) to ensure that actions can be carried out to enable the industry to take advantage of the Agadir opportunities. SWOT ANALYSIS EGYPT
STRENGTHS
Party to Agadir agreement Proximity to Europe Local availability of leather Express cargo services to Europe Government Agencies support Excess production capacity Small flexible factories Availability of labour Currency pegged to US$ Trade Association Cost reduction programmes
OPPORTUNITIES
New leather cities Upgrade technology (CAD/CAM) Marketing plan with Government Agencies Niche marketing International marketing company Trade links with Agadir partners Develop finished leather Advertise Egypt as a resource Develop transport links with EU Develop programme for FDI/JV in component supply Training scheme industry wide
WEAKNESSES
Knowledge of overseas markets Product development Competitive pricing Niche marketing Alternative constructions Production management Cost control CAD systems Shop floor supervision
THREATS
Leather cities take longer to develop Unwillingness to change Established norms in global markets not accepted Finished leather not up to standard Sales techniques lacking Lack of capital Negative exchange rates Artificial barriers to Agadir trade
3.5.
Group Impact Factors

3.5.1. Productivity
In order to make a comparison and to indicate the competitiveness of the Agadir countries the following productivity chart was compiled. The figures refer to the footwear manufacturing industries in the various countries. These figures were taken from various sources and in some cases extrapolated to give a fair estimate of the situation in the different countries. All the figures come from industry sources.
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PRODUCTIVITY
Country France Spain European Average Italy Tunisia India Morocco Egypt Viet Nam Jordan Best practice highly automated plant
Number of Pairs per Worker per Day (8 hours) 18.1 17.7 13.8 13.0 10.6 7.8 5.9 5.0 4.1 n/a 26 28
European countries are the most productive because of their better organisation and use of technology Tunisia ranks well due to the development of its industry with European technical inputs over time Viet Nam shows a low productivity level but remains competitive because of its low labour rates. 3.5.2. Industry Organisation (Italian Method) Much has been said of the Italian model for the production of leather products, particularly footwear. The Italian system revolves round the co-operation of small companies working together in partnership. The majority of Italian shoe companys employ less than 12 people. There are between 6,000 and 9,000 companies in the sector. The success of the Italian industry is due to this clustering process where companies share out the various stages of production to different small workshops. Namely one company would produce uppers, another do the lasting and another do the finishing. The shoes would then be marketed by a cooperative representing the small producers. The major market in Italy is still independent retailers who take small quantities rather than mass marketers. The industry in Italy also benefits from a very vibrant, innovative components manufacturing and tanning industry which serves the producers and is in close proximity to their plants. Most of the shoe machines are developed in Italy together with new technical developments year on year. There also is the inbuilt Italian flair for fashion and styling which is a cultural phenomenon. The Italian industry is successful therefore because its structure is built around three things: Clustering Component supply and tanneries Design Italy is the driver of fashion, styling and innovation. It leads the world in this aspect of production and has done for many years. It gives the industry a competitive advantage and provides value to its customers. This co-operative method of manufacturing and marketing works well in Italy. However it relies on the total trust and support of each member of the cluster. It has been tried in other countries but has not been successfully replicated outside of Italy. 3.5.3. Benchmarking There are many benefits of benchmarking. Commonly benchmarking is done by individual companies against their peers. In this case we are taking a more general approach and are benchmarking certain countries with the Agadir Group. This will give a guide to performance levels as they pertain today country by country compared with the Group.
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For the Agadir group it was decided to benchmark their performance with the following countries Turkey Vietnam India Italy In order to get a better understanding of present performance and to get a picture as to the performance levels of the Agadir Countries versus the benchmarked countries, the following chart was produced. The information is empirical in nature and reflects the opinions of the consultants. Three broad areas of comparison were used with sub headings for each: Marketing Technical aspects of Leather Products Manufacturing Human Resources For each category being benchmarked a score was given to each country (from 1 10): 1 represented very poor and 10 represented excellent, anything in between represented an improvement from 1.
INDICATOR Measurement Category Marketing Product Development Price Vs. quality Exhibitions Image as a resource Logistics (proximity to market, efficiency) Technical Production facilities Technical innovation Leather availability Ancillary raw materials availability Human Resources Training facilities Availability of labour Best Practice Indicators Continuous access to fashion forward information in real time Allows or exceeds normal retail margins, high specification through whole product European International, regular attendance over many years Comfort factor, reliability, implicit trust 3 5 days door to door delivery. Drop shipments All mechanised where possible. CAD Continuously investing in new techniques CAM, robots, automation Local, all varieties, high quality finishing, laboratory tested Unit soles, insole and sole sheets, reinforcing, adhesives Available from shop floor to degree level Abundant and disciplined Output per operator to international norms Lowest possible Trained, workshop organisation, cost control Available, active, generous terms Agadir 6 6 5 6 8 4 4 7 3 8 6 4 7 4 7 COUNTRY Turkey 6 6 5 4 6 5 5 7 7 5 6 6 5 5 6 Viet Nam 5 8 5 6 2 5 5 4 7 5 8 7 8 7 8 India 5 7 6 4 2 5 4 5 6 7 8 6 8 6 8 Italy 9 7 9 7 9 8 8 9 9 6 5 8 4 8 6
Productivity Labour rates Shop floor management Government support

Export promotion agencies
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Industry chamber Research and Development agencies Foreign Investment Promotion Agencies Lack of Bureaucracy TOTAL SCORE RANK
Managed by professionals committed to industry betterment Exist, hyper active, links to international peers and academia Exist, support local industry by FDI Regulation kept to a minimum, open market philosophy
7 7 7 6 112 2
6 5 5 5 105 5
5 5 5 6 111 4
8 7 6 4 112 2
7 8 5 7 139 1
The above table in chart form is as follows:
The table summarises all the bencsummarises all the Benchmarks whmarks where the following ere the following observations are made: It is hardly surprising that Italy comes out the top country in this comparison. It is the world leader in many aspects of the leather products industry and is in fact the benchmark that other countries should strive for. The Agadir Group comes out well in the comparison in that it is better than Turkey and is equal to Viet Nam and India. However this can be a bit misleading in that the object for the Agadir Group should be to outperform these two countries who are major competitors. From this benchmark study, Marketing should be improved by the Group to exploit its comparative advantage of closeness to the EU markets. This means that the Group needs to increase its efforts in product development and exhibitions participation, in addition to improving its quality and competitive prices. Its technical capabilities are in danger of lagging behind recent developments. Here there should be emphasis and research done on how to improve the capabilities of the production processes. As mentioned the future need will be for flexible production done quickly. This has to include the option of automation. The Agadir countries should continue its efforts in finishing its leather with high quality. However, the Group should do extensive efforts to ensure the availability of Ancillary raw materials. The Agadir Countries come out neutral in Human Resources. However weaknesses show up in labour productivity levels and shop floor management. This makes more burdens on each country of Agadir Group to pay more attention to its labour discipline and productivity. Fortunately, all countries started vocational training reform programs. Government support for the Agadir Group is good which should encourage enlightened entrepreneurs with
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vision to invest in their companies and so benefit the region as a whole. However, the Governments in the 4 countries are requested to keep this momentum of their support especially during the current global financial crises. The ranking of the countries benchmarked against each other is as follows:
Agadir countries should consider the following: Italy is the world leader in the leather products industry particularly footwear. The main reasons it is the world leader is: Original ideas and styling Innovative components supply industry Any type of finished leather available Manufacturing expertise Marketing expertise
Italy is the number one exporter of medium to high and high quality products. Its disadvantage is the high labour costs in spite of high productivity plus the general cost of manufacturing in Europe. Viet Nam is a smaller version of China but is beginning to change its strategy to try and become a flexible producer. However its distance from the major markets for leather products (EU27 and USA) gives it an inherent disadvantage. India is beginning to emerge as a world player. It is developing its supply lines to become more efficient and attracting FDI in component supply. At present it does not have the design expertise required for Europe and USA. It has a good supply of leather of certain types up to 1.4 mm thickness. In the case of Turkey Tunisia Morocco and Egypt perform quite well with the exception of component supply. Here Turkey has the advantage. Tunisia and Morocco, being the two more developed industries in the Agadir Group because of their established sub contracting roles to European marketers, have a marketing advantage which should be exploited in the future for product development. They gain the fashion knowledge from their partners. This coupled with flexible production units and their proximity to Europe gives them an advantage over Viet Nam, India (and China). However both Morocco and Tunisia are in danger of surrendering their competitive advantages because of the greater demand in the future for finished leather to be available locally to cope with the new flexible production environment. They also need to develop their component supply industry and implement new shoe engineering techniques in production and constructions, to reduce costs. Tunisia and Morocco have invested in training and research institutes for their industry. In this they are ahead
China does not have great expertise in styling or design. It imports leather. Its marketing is based mainly on low selling prices. The manufacturing philosophy is to employ cheap labour to solve production problems or increase output. It does howe ever have an efficient component supply industry. Exporting high volumes cheaply is an unsustainable strategy for the future where quick manufacturing times are required for smaller orders with short delivery times. China is far away from the major markets.
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of Viet Nam and India. However they now need re-evaluate the schemes available in the two countries in the light of the forthcoming trends in the manufacturing environment. There is a special need for shop floor supervisors in Tunisia and Morocco. This problem needs to be addressed because India could easily catch up in training and research. Egypt has the perceived advantage of an ample supply of leather to support the manufacturing industry in the country and potentially the region. It had the advantage over Viet Nam and to an extent Turkey. (Also China). However India continues to upgrade its tanning industry. Egypt has the new tannery city under development (as has India). It will be a race as to who achieves significant commercial advantage first. Egypt has the potential to develop into a low cost producer if it concentrates on developing its manufacturing expertise. Ample supply of labour is available. New manufacturing techniques have to be devised to keep up with developments in Viet Nam and India who are more production oriented. India and Viet Nam have higher productivity making them competitive in the world market. Egypt also has to exploit its closeness to Europe more. The leather products industry in Jordan is the weakest of the 4 Agadir Countries. They lag behind all of the benchmarked countries in nearly all aspects. They do however have a marketing advantage in that it can be a hub for distribution of products to the region. 3.5.4. The Turkish Model Sector overview and performance The Turkish leather sector, which has a history going back 500 years, is an important player in the global leather industry. The Turkish leather industry which occupies a prominent place in the Turkish economy has been developing by combining new technology and its historical background. The industry has a share of 1% of the countrys GDP, 2.3% of total industrial production and 1.5% of registered manufacturing employment. At present, there are five organised leather industry zones in Turkey. In addition, eight organised leather industry zones are under construction. The sector produces according to international standards and is becoming more sensitive to health and the environment about 90 % of the production is based on health and environmental standards. Until the 1970s and 1980s the industry was comprised mostly of small workshops located in apartment buildings in the old part of Istanbul, Ankara etc. These have now been moved to the leather industry zones. The leather products industry is one of Turkeys leading export sectors. The export figure of the leather sector for 2008 was about US $ 1.3 billion. This figure is actually higher if the touristic trade and so called bag trade are taken into consideration. Export to EU countries accounts for 40% of the total leather, PLG and footwear export. The main markets are: Russia 32% Germany 11% France 6% USA 5% The major export product groups for the leather products industry are: Saddlery and garments 38% Fur and fur coats 33% Footwear 21% Hides and skins and leather 8%
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The Turkish leather industry has taken an important position in the global leather and leather products industry. Turkey claims it is third in the worlds export of leather and leather products in terms of quantity. It is also ranked among the top 10 fur exporting countries. It is also ranked 3rd in Europe after Italy and Spain in terms of production capacity. Of the 13 planned Leather Industrial Organized Zones to operate in Turkey, they are located mostly in the Marmara and Aegean regions. There are more than 3,000 producer companies dealing with exports throughout Turkey. Turkey has tended to specialise in leather garments. It produces about 1.2% of the worlds leather clothing. It is among the worlds major producers of fur coats. A majority of the industrys raw materials are imported. These are converted into high value products many of which are exported. In order to consolidate its present position Government is prioritizing marketing, research and development, design and educating the workforce. Turkey is now marketing itself as a major resource for leather products. In addition to domestic fairs, national participation has been organized to international fairs in an effort to promote an image of ingenuity and reliability as a producing nation. The primary advantages that the Turkish industry has are very similar to the Agadir Group: Close to the main markets EU and Russia Short Short manufacturing Short delivery times (proximity to Europe) Qualified labour resources Complies with EU regulations Innovation Modern working conditions and practices.
The export/import performance of Turkey in the important sub sectors is as follows: U. S $
Comtrade
CATEGORY 41 Leather H & S Export Import 42 P. L. G. Export Import 64 Footwear Export Import
2006 102,611,612 566,317,622 360,531,353 365,134,818 237,069,400 569,928,759
2007 120,162,021 609,641,649 409,486,069 470,841,505 316,739,641 672,917,487
2008 121,070,629 518,293,169 451,604,093 537,422,859 344,889,810 514,969,515
In 2008 Turkey traded with the Agadir zone as follows: U. S $

CATEGORY Egypt 41 Leather H & S Export 110,274 2008 Morocco 71,513 Tunisia 12,853 Jordan 151,662
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1,667,846 292,841 146,899 414,487 3,021,287 3,285,878 229,370 218,683 282,836 749,675 0 211,600 804 1,061,568 1,352
Comtrade
Import 42 P. L. G. Export Import 64 Footwear Export Import
5,212,814 2,389,022 127,583 1,118,247 92,976
3.5.5. The Vietnamese Model Sector overview and performance Vietnam has 450 leather and footwear enterprises employing 600,000 workers. Of these about 180 are mechanised modern plants the rest are small workshop oriented enterprises. According to the General Statistics Office of Vietnam, the country expected to achieve US$2 billion in export revenue from leather and footwear products in the first half of 2009, or some 8.7% lower than that in the same period last year. There is a target for export revenue of US$5 billion for 2009, 10% more than last year. According to the statistics from Vietnam Leather and Footwear Association (LEFASO), shoe export value slowed 10% to 1.3 billion U.S. dollars in the first four months over the same period of last year, particularly exports to Britain, Japan and EU countries. Considering the weak demand in international markets and the shrinkage in shoe exports, Vietnamese shoemakers are revising the production and export program according to the actual situation. The top priority will be given to technical innovation, new product designs, and personnel training, so as to improve the quality of footwear offered. Many domestic leather and footwear companies face fierce competition from imported footwear, particularly from China. The domestic leather and footwear enterprises have a market share of 30% of the domestic market compared to 70% in previous years. The structure of the industry is as follows:
Exports Capacity Footwear Leather Bags Labour force
4.767 billion US$ 750 million pairs 130 million square feet 88 million pieces 610,000 people 6.2 billion US$ 3 103 9 21 47 3 153 14 10 6 3
Estimated turnover 2010 Type of Companies State owned Limited company Joint venture 100% foreign owned Stock companies Others Sub Sectors Shoes Tanning Components Bags, PLG, luggage Repairs
LEFASO
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However, the country has to import 60% of materials from China, Taiwan, Thailand and Korea. The countrys footwear enterprises were weak in establishing stable supply chains, building connections between leather and footwear companies and maintaining relationships with domestic material suppliers. The countrys biggest centre to supply raw materials and accessories to the footwear, leather goods and garment sectors was built in May 2009 which will help ease the over-reliance of local manufacturers on imported materials. The first phase of the centre will become a world-class hub for local and international suppliers. The centre will include a wholesale market covering 11,000 square meters and likely accommodating 650 stalls, a section of offices and showrooms covering 4,500 square meters, and a bonded warehouse of 18,000 square meters able to store up to 20,000 tons of goods. The centre will also provide supporting services including banking and customs, and trade promotion activities. It is expected to house hundreds of local and foreign suppliers of leather products, footwear and textile-garment materials. In spite of the difficulties brought on by the economic crisis, Vietnam is still active in attracting co-operation with foreign companies. Nine leather and footwear enterprises from Switzerland, the U.K. and Chile have expressed wish to join hands with Vietnamese partners in the field according to Ho Chi Minh Citys Leather and Footwear Association. Also two retail companies from the U.K. are seeking Vietnamese suppliers of leather bags and suitcases. Six Chilean importers seeking suppliers of childrens footwear, leather gloves and slippers and one from Switzerland is seeking a supplier of ladies leather shoes. The primary advantages that the Viet Nam industry has are: Low cost base Chinese and Taiwan Investors Qualified labour resources Export oriented Innovation Modern working conditions and practices. The export/import performance of Viet Nam in the important sub sectors is as follows:5 U. S $
CATEGORY 41 Leather H & S Export Import 42 P. L. G. Export Import 64 Footwear Export Import 2005 51,539,811 734,331,890 366,566,660 15,813,806 3,078,615,645 278,298,541 2006 73,400,979 776,711,904 376,694,194 17,951,110 3,654,749,526 230,793,63 2007 173,284,128 933,705,507 483,003,816 29,096,258 4,076,198,601 203,976,568
In 2007 Viet Nam traded with the Agadir zone as follows:

CATEGORY Leather H & S 41 Export Import .P. L. G 42 Export Import Egypt 0 431,276 80,220 0 Morocco 0 0 33,794 0 2007 Tunisia 0 3,570 3,017 0 Jordan 0 0 2,825 3,798
5 Figures for 2008 are not yet available from Comtrade

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Footwear 64 Export Import
646,727 0
390,318 0
110,166 0
16,956 0
3.5.6. Identification of opportunities of diagonal accumulation of origin promoting cooperation among Agadir countries: The Agadir Agreement, which came into force in March 2007, is a free trade agreement between four Arab countries; Tunisia, Jordan, Morocco and Egypt. The Agreement allows exemption of import customs duties amongst its members and the EU complying with the Pan-EUROMED Rules of Origin that allow for diagonal accumulation of origin amongst its member countries and EU countries for sufficiently worked or processed products The newly introduced concept of the Pan-Euro-Med accumulation system provided an untapped potential for diagonal accumulation between the European and the Mediterranean partners. However, this system prerequisites harmonization of rules of origin as per the Euro-Med rules, as well as signing a Free Trade Agreement between concerned countries. The recent Agadir initiative falls under this umbrella thus enlarging the sourcing possibilities between the four Agadir countries (Jordan, Egypt, Tunisia and Morocco) for accumulation of origin for exports to the EU Diagonal accumulation operates between more than two countries provided that they have signed Free Trade Agreements containing identical rules of origin and a provision for accumulation between them. Diagonal accumulation is the system operation in the Pan-European Zone. Similar to bilateral accumulation, only originating products or materials can benefit from diagonal accumulation. For the purposes of Article2 of the Pan Euro-Med Accumulation regulations, products which are not wholly obtained shall be considered to be sufficiently worked or processed when the conditions set out in the list in Annex II are fulfilled. Non-originating materials which according to the conditions set out in the list in Annex II, shall not be used in the manufacture of a product may nevertheless be used, provided that: (a) their total value dose not exceed 10% of the ex-works price of the product; (b) any of the percentages given in the list for the maximum value of non-originating materials are not exceeded by virtue of this paragraph. The Annex II lists stipulate for footwear, leather and leather goods the following:
HS heading (1)
Description of Product (2)
Working or processing, carried out on non-originating materials, which confers originating status (3) Manufacture from materials of any heading, except from assemblies of uppers sole components of heading 6406 (4)
Ex Chapter 64
Footwear, gaiters and the like; parts of such articles; for
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6406
Manufacture from materials of any heading, except that of the product
According to the above table any footwear product gets the originating status in using any non-originating materials in the manufacture of the product except assemblies of uppers and sole components. Accordingly any footwear product or uppers manufactured in Tunisia, Morocco, Jordan or Egypt will get the origin status whatever the origin of the leather or parts of footwear used for the manufacturing of the product except assemblies of uppers and sole components. As there are no significant exporters of assemblies of uppers and sole components in Agadir countries, the diagonal accumulation of origin will rarely? apply for footwear products and parts of footwear.
HS heading Description of Product (1) (2)
Working or processing, carried out on non-originating materials, which confers originating status (3) (4)
Ex Chapter Raw hides and skins (other than Manufacture from materials of any 41 fur skins) and leather, except for heading, except that of the product Ex 4102 Raw skins of sheep lambs, without wool on Removal of wool from sheep or lamb skins, with wool on
4104 to 4106
Tanned or crust hides and skins Re tanning of tanned leather or without wool or hair on, whether Manufacture from materials of any or not split, but not further heading, except that of the product prepared Leather further prepared after tanning or crusting, including Manufacture from materials of any parchment-dressed leather, heading , except headings 4104 to without wool or hair on, whether 4113 or not split, other than leather of heading 4114 Manufacture from materials of headings 4104 to 4106, 4107, 4112 or 4113, provided that their total value does not exceed 50% of the ex-works price of the product
4107,4112 and 4113
Ex 4114
Patent leather and patent laminated leather, metallised leather
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According to the above table leather further prepared after tanning or crusting of headings 4107, 4112 and 4113 should not be manufactured from non-originating semi-finished leather to get the originating status. In reverse, leather further prepared of headings 4107, 4112 and 4113 manufactured in Tunisia or Morocco from semi-Egyptian finished leather will get the originating status through diagonal accumulation of origin. Accordingly, the promotion of the Agadir agreement among tanning factories in Agadir countries will increase their sourcing from Egypt of wet blue leather to be further processed and exported free of customs duties to the EU through diagonal accumulation of origin 3.5.7. Success Stories Currently, there are relatively few completed success stories. There are, however, a fair number of projects in their early stages which hopefully will be a total success by the end of this study. Besides, there are a series of other important events which can be considered success stories in that they contribute to strengthening the enabling environment for intra-Agadir integration. Accordingly, success stories are divided into these two groups: 3.5.7.1 Success stories that help create an investment-friendly enabling environment for intraAgadir integration Sourcing raw leather from Jordan to Egypt under Agadir Agreement. Establishing a new tannery in Jordan with Arab investment ($7 million). The new trend by some producers in Agadir countries to develop new competitive products in demand in the European market (safety footwear, medical comfort footwear, children's footwear), which is an example of the ability of Agadir producers to practice niche marketing. Exporting stylish comfort children's footwear from Egypt to Jordan, with the possibility of expanding this product in the Jordanian market- niche marketing. A strong tendency to build industrial cities specialized in leather industries in both Egypt and Morocco. The first of which is expected to be up and running soon in Egypt. The success of a men's shoe factory in developing innovative high-quality products under its own brand name, marketing them in its stores in Casablanca and Marrakech, as well as marketing them in franchises operating in Brussels, Netherlands and the Ivory Coast. The possibility of establishing a shoe lasts factory in Egypt with foreign investment, noting that there are currently factories in Egypt, Tunisia and Morocco, but are insufficient in terms of type and volume of production. A Tunisian leather products factory is interested in sourcing hides and skins from Egypt. Starting Tunisian-Jordanian talks to market men's and women's footwear in Jordan. The success of a footwear manufacturer in developing products of its own designs and opening stores under its name in Tunisia and Kuwait. 3.5.7.2 Success stories and ongoing (preliminary) projects Submitting a formal request to the National Center for Leather and Shoes (CNCC) in Tunisia to help Jordan Footwear and Leather Industries Association in establishing a similar center in Jordan and providing counseling to promote the leather and footwear sector in Jordan, especially in the areas of training and design. Starting talks to establish a shoe factory in Egypt with the participation of Tunisia, Jordan and Egypt. It is planned that the factory starts selling its products in Egyptian and Jordanian markets, then expands later to export outside Agadir countries. The possibility to supply Tunisia and Jordan with sole and insole boards, which are currently manufactured in Egypt- samples were exchanged during the field survey.
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A sample of Egyptian leather used to manufacture safety shoes was delivered to a Jordanian factory. An Egyptian men's shoe factory is interested in acquiring heels, soles and insoles from Tunisia- Negociation has started between the manufacturers. An Egyptian men's shoe factory is interested in cooperating with a Moroccan factory which produces highquality Good Year welted men's dress shoes.
4. Conclusions
4.1. SWOT ANALYSIS SUMMURY
Egypt Number of enterprises (1) Leather export Leather import L Prod export L Prod import Footwear export Footwear import Trade balance Labor Productivity Wage/hour KW/Hour Main advantages 4139 92826 10531 5297 65176 21069 126968 -83483 55095 5 1.1 0.048 Production costs Competitive towards China Jordan 137 8692 624 3220 17861 4225 41876 -44224 1800 NA 2.7 0.06 Proximity to Gulf countries Importance of niche market oriented production Morocco 1500 25509 106204 61685 40167 348641 95312 253328.5 15000 5.9 1.67 0.13 Flexibility and short term delivery 24th footwear supplier of the World Export of high quality footwear produced in low quantities adapting to the fast changing of fashion Possible benefits from Egyptian wet blue leather to achieve accumulation of origins at export to the EU Tunisia 450 28247 285545 94,346 27,222 608039 141,624 276241 40000 10.6 1.39 0.1 Flexibility and short term delivery 30th footwear supplier of the World Export of high quality footwear produced in low quantities adapting to the fast changing of fashion Possible benefits from Egyptian wet blue leather to achieve accumulation of origins at export to the EU
Importance of the local market
Availability of raw skin and leather
Availability of raw skin and leather
Challenges
To shift from a local market oriented production to an export oriented one Subcontracting Design and marketing Vocational training
To face dumping practices coming from imports
Availability of quality leather and accessories
Availability of quality leather and accessories
Subcontracting Design and marketing Vocational training
Subcontracting Design and marketing Achieving high quality
Subcontracting Design and marketing Achieving high quality
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Achieving high Productivity similar than that of Italy leather footwear Leather bags Achieving high Productivity similar than that of Italy leather footwear Leather bags
Productivity Specializations Wet blue leather Footwear for Agadir local market
Productivity similar than that of Italy Raw hides Safety and medical shoes
(1) Companies employing more than 10 workers in Morocco and Tunisia (2) Imports and Exports and Trade Balance are in thousands of USD, year 2008 (3) Statistics Source are ITC trade Map for Egypt, Tunisia, and Jordan and Moroccan Office des changes for Morocco 4.2. Draft Findings (Recommendations):
v The EU27 market is the biggest in the world. It is difficult to penetrate but not impossible. As mentioned above opportunities now are better than they have been for some time notwithstanding the current financial crisis which may play reasonably well for Agadir countries.One of the fall outs of the crisis is to manage the supply chain more efficiently. The current climate of short lead times and small orders means that the closer the resource to the market which has a flexible production unit is a recipe for success. China, Vietnam, Indonesia, India are a long way away. Agadir Countries have an inbuilt advantage in this respect. v According, to the international market analysis, the targets for Agadir countries are Germany, France, Italy, UK, Belgium, Spain and Netherlands, for the following main reasons: Agadir exports to EU countries are free of customs duties Germany, France, Italy, UK, Belgium, Spain and Netherlands are responsible of 34 % of the Global demand. Their demand is higher than that of USA (23%) Their demand is very active with a yearly increase from 8 to 20 % v In some of the EU15 countries (UK, France, Benelux, Spain, Portugal, Greece), the footwear market is polarising into lower quality/price and higher quality/price sectors, whereas in the new EU member states (Czech Republic, Poland, Hungary) a mid-range quality/price sector seems to be developing v At same time the EU footwear market in the near future will be influenced by the demand for healthy and comfortable footwear, especially for the growing number of older people, because of the ageing population. v There will be a continued shift from formal to casual footwear, especially in the EU15 countries. The demand for formal footwear in the new EU member states with a rising middle class and more women at work will also increase. v The past few years has seen the continuing growth of discount footwear retailers, but to some extent, especially in the younger more fashionable market segment this has resulted in the wider availability of footwear in other types of outlets, particularly clothing retailers. v Opportunities for exporters from Agadir countries: Opportunities exist in the premium part of the market, particularly in the supply of good quality leather footwear in small series to differentiate Agadir supply from that of Vietnam and China who are very competitive in the mass consumer segment. Here it is important to demonstrate design capabilities and sensitivity to the fashion demands of the EU market place.
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There is still a demand for fashion footwear continues to grow, but design capabilities and sensitivity to the changing fashion needs of the market is required to be able to show a point of difference especially The enlarged EU market will not provide in the short more opportunities to Agadir countries. Eastern EU markets are less driven by fashion. It is difficult to export to Eastern EU countries as their imports are limited and still big footwear producers and not yet interested in delocalisation As the EU footwear industry looks for ways to cut its costs, there will be opportunities created by forming working partnerships. The best form of partnership is likely to be with an EU company with a similar outlook to Agadir's entrepreneurs' and one that operates in a niche market, e.g. children footwear, sandals, health footwear, outsized shoes and orthopaedic footwear.
in the rapidly growing grey market.
4.3.
Cooperation Possibilities:
v Tunisia and Morocco could benefit from the Agadir Agreement and the Arab Free trade Agreement to effectively source their leather from Egypt. Saudi Arabia and Syria. v By the accumulation of the rules of origin in order to increase exports towards Europe (bilateral accumulation of the rules of origin) - Tunisia and Morocco imports of the semi-finished leather are very high. The promotion of the Agadir agreement among tanning factories in Agadir countries will increase their sourcing from Egypt of wet blue leather to be further processed and exported free of taxes to the EU through diagonal cumulation of origin. v Tunisia, Morocco and Jordan can outsource the sheets for Soles and Insoles from Egypt. v Egypt can outsource leather unit soles Shoes and Insoles from Tunisia and finished shoes from Morocco. v Jordan and Egypt could attract more Pan Agadir Direct Investments (PADI) due to proximity to Iraq and other Gulf states. v The Agadir 4 countries have around 130 million people which mean a powerful market of about 300 million pairs of shoes annually from different quality and price levels. Currently, none of the 4 countries is self dependent on meeting its market needs. The cooperation could take different forms from trade to industrial cooperation (subcontracting, assembling, joint ventures, training on manufacturing and designs...). v Improving the components industry in Egypt will benefit both Egypt and Agadir countries to lower cost of imported components such as sheets, soles, insoles, adhesives, lasts, zippersetc. v Jordan and Egypt are already working on niche markets for footwear products such as safety shoes, health and comfort shoes, and stylish and healthy childrens shoes. This is another area of cooperation between both countries. v Establish a shareholding company to distribute all Agadir leather and shoes products in the region, and initially the EU. This company will be empowered to open franchises, set and outsource its designs and fashions, give subcontracts to different suppliers from Agadir countries based on price and quality not quotas. It is assumed to have a chief executive officer (CEO) outside from the owners who knows how to market and promote its products effectively. The manufacturers may be shareholders but the management would be independent.
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4.4.
Agadir Strategic Plan: Before setting the strategic objectives and recommendations which will be presented in the second report (Strategy and Work Plan), it is possible to draw broad lines of the possible cooperation development policies between the 4 countries inside the Agadir zone. It is common to build decisions based on past analysis and conclusions dealing respectively with the following: - The situation and strengths and weaknesses of the four countries. - Demand structure and market forecast. - International competition. There will be four levels of cooperation for the proposed strategy dealing with the following: - Trade exchanges between <Agadir countries> Intra trade - Industrial and commercial investments - Competitive cooperation - Going international Towards Globalization 1. Trade exchanges between Agadir countries Intra Trade Development Programme This will take into consideration all approved recommendations regarding the cooperation possibilities and accumulation of rules of origin discussed earlier in this report. 2. Industrial and trade partnership: This may take different forms in trade or industrial partnerships as discussed above in the findings and recommendations. However the most predicted scenarios would be as follows: Identification of opportunities to create new industrial projects in the Agadir member states individually or collectively based on the analysis of the regional imports from the E.U of Leather and Shoes. Identification of new industrial projects where integration and complementarities in the Leather and Shoes sector in the Agadir countries is possible, and henceforth, promoting exports of these projects in the E.U market. This part of the strategy will provide some ideas regarding attracting more foreign direct investments (FDI) and/or pan Agadir direct investments (PADI). 3. Technical Assistance Development Program - Technical Cooperation: professional, technological, and informational, trains...; The third subject of the Strategy is to develop the competitiveness of the Leather and Shoes sector in Agadir zone This is aimed at focusing on comparative advantages and remedying weaknesses through common actions with fixed objectives set by the group. This will offer the sector the best possible environment to face the double challenge of international competition and the changing demand on local and global markets. For the purpose of achieving this, the action plan must address the following priorities, as much as it is politically possible, to add skills to generate added value:. I- Human resources development The Human Resources Development plan to be proposed aims, especially in the industrial field, at enabling
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the transition from sub contracting operations to co - contracting and the final producer. This requires addressing the following issues: - Ensuring the upgrading of skills of operators to a level where they can be productive enough to enter the EU markets
- Training or improving the factory floor technicians and supervisors capacities - Training or improving the designers capabilities - Training in achieving higher levels of financial management The companies marketing capabilities in the four countries turned out to be very weak in general and the need for modern skills is urgently required. This will require great efforts to employ and train, marketing and export managers. In order to encourage training efforts, the action plan will propose the following; - Link the high training institutions in the four countries so as to open the door of permanent dialogue about educational programs or curriculum - Organize events and study tours among the Agadir countries on training of trainers - Give recommendations to current reform programs of the vocational training projects in some of the 4 countries based on successful results in the other countries. - Establish Agadir Footwear Institute for Middle and Senior management training II- DESIGN RESEARCH & DEVELOPMENT Mastering of new information and communication technologies is a strategic issue for the Leather and Shoes sector in the four countries. These techniques are very necessary for improving international competition of the sector. Innovation, having a visionary management, industrial organization, logistics, communications CAD/CAM managing product life cycle, enterprise resource planning, computer assisted production management systems, agent relations management, are subjects that need to be mastered. PLEASE ADD SOME INPUTS REGARDING DESIGN DESIGN The leather products industry tends to be driven by design and innovation. The centre for this is undoubtedly in Italy. It is necessary therefore for the Agadir countries to have access to this information in real time. Linkages have to be established with fashion and design centers in Italy on a pan Agadir basis through the various chambers. This will give the manufacturing companies a competitive advantage and present to their clients a key customer value. In addition, recommendations will be submitted to improve the quality and innovation of the production in the Agadir zone. This includes improving R&D activities while relying on the technical centers in the region to establish cooperation and collaboration and create economies of scale as well as sensitizing to initiate stronger partnership with European labs, technical centers, engineering schools and universities. III CREATION OF A DATA BASE ON EXPORT AND SOURCING OPPORTUNITIES: 4. Export Development Program - Encouraging a common export plan
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The objectives of the Program are: To consolidate the positions in traditional markets and to reach out to new markets, in order to stabilize first the current market share of the four countries and then to increase it significantly. This export plan entails market research, communication, export promotion policy and organisation. To search for opportunities to establish industrial and commercial associations within the Agadir agreement in the Leather and Shoes industry in order to promote export and competition. To reach new markets inside proposed EU targets (UK, Portugal, Belgium and Holland) and outside Europe, such as Gulf states, and other MENA countries.
For each country of Agadir, export is considered the main driver for growth. This is for many reasons Among them, preferential agreements, the existence of raw materials, geographic proximity, the implementation of a complementary development environment and the cost factors. The proposed program will take consideration of specific needs and differences of the four countries; examples are:
- The privilege front position of Morocco and Tunisia in the EU market
- The exclusive front position of Jordan in the Iraqi and Gulf States markets
- The quasi front position of Egypt in the MENA markets. Accordingly the export development action plan will: Conduct a feasibility study for possible FDI or JV for the establishment of a new business producing soles/ moulds/lasts/adhesives. All items that are weak points in the supply chain of the leather products industry in all four countries. Establish a data base of experts, resources and common contacts for all companies in the region. Conduct a fitting survey: In order to give Agadir countries a competitive advantage in the regional markets of over 300 million people conduct a last survey to design a properly fitting last for the footwear consumers. This series of lasts would then be superior to anything from China or from Europe leading to a more acceptable and marketable product. Improve international transportation among Agadir countries: In order for intra Agadir trade to develop seamlessly transportation links have to be improved. Participation in International Fairs As a necessary extension to global marketing efforts Agadir companies must attend European international fairs to gain exposure, experience and eventually secure orders. In order to be effective attendance at selected fairs has to be over a minimum of 3 years (twice per year). A more effective approach is over 5 years. By their very nature attendance at overseas fairs is an expensive operation for any company let alone one that is just starting on the international market. In fact the only way for this form (of effective) marketing to proceed is by support from Government and Trade agencies. The Agadir Countries have this support from their own individual countries. However a more integrated approach would be more effective in combining resources to have an Agadir Group presence at selected shows.
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Attendance at a show should not be a turn up and show basis. Market research should be done before participating in the selected show. If not already done, the show should be visited before showing to get a feel for it. There should be a plan with clear implementable objectives for attendance and a clear plan for follow up after the show. Obviously a budget should be allocated. Of the international shows that are available to the Agadir Countries the following have merit. Expo Riva Schuh, Riva del Garda, Italy, January and June each year. Shoes and some complementary bags Meet in Africa Cairo, Egypt, February All leather products Linea Pelle + Simac Tanning Tech, Bologna Italy, April, October International Exhibition Of leathers, accessories, components and synthetic products and models for footwear, leather goods, leatherwear and furnishing. In October the show is joined with Simac an international exhibition of machines and technologies for footwear, leather goods and tanning industry. GDS Dusseldorf, Germany September
Biggest international shoe show in the world MIPEL Milan Italy May and September International Showcase for leather goods. Twice a year, in a prestigious setting - the city of Milan, one of the fashion capitals in the world - the best creations in leather , fabric and alternative materials, for all seasons of the year, are presented. The aim is to highlight and promote the image of leather goods produced all around the world and, in particular, Italian-made goods. The exhibitors meet their most important counterparts, dealers and the media, and can also take part in special events, conferences and round tables in a pleasant, elegant environment. MICAM Milan, Italy May September International footwear fair MIDEC Paris, France, April September
International footwear fair Salon de la maroquinerie. Paris France February,September
International leather goods fair The following show should be visited if possible for market research purposes (not for exhibiting) APLF Hong Kong April Fashion Access - Handbags, Travelware, Footwear, Leather Garments and Fashion Accessories is a comprehensive event that covers a wide range of lifestyle fashion.
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AGADIR TRADE FAIRS Morocco, Tunisia and Egypt all have their own leather fairs with an international focus. Under the spirit of the Agadir Agreement in order for the fairs to be more effective in the international market, particularly Europe, they should be subsumed into one larger unit under the Agadir umbrella. This new Agadir Fair should then alternate year on year in the four countries.
5. DEVELOPMENT OF STRATEGY
5.1. Introduction The study has highlighted the challenges facing the sector in the quest to uplift the performance of the industry in the 4 countries so that it will be prepared for the business environment that will exist going forward. The strategy therefore has to address the need to achieve the stated goals of the study so that the industry will be in a strong position to react to world competition. These goals are: Increase exports to Europe Enhance regional trade Industry co-operation and integration in the 4 countries Attract Foreign Direct Investment
Strategy and its subsequent action plan therefore need to be articulated for the above goals. The strategic plan suggests a way forward that the Agadir group should be taking. It gives the direction but cannot foretell exactly how the current business environment will evolve in the future. The commercial environment at the moment is unprecedented in modern times. The analyses presented in the first phase report reviewed: The EU demand structure, the global competitive situation and the position of Agadir countries in this regard. The situation, performances, strengths and weaknesses and challenges of the leather and shoes sector in each of the four countries signatories of the Agadir Agreement; This analysis showed that trade exchanges for Leather and Shoes and cross-investments between the four countries are very weak and below the aspirations of the Governments of the four countries. Although complementarities accumulating strengths, competencies, and resources of the four countries are very promising of improved global competitiveness of the zone vis--vis international competition. Sectors entrepreneurs are not fully informed on Leather and Shoes market and manufacturing capacities in the zone neither aware on cooperation opportunities offered by the implementation of the Agadir Agreement. This analysis showed also, competitive advantages of Agadir zones as well as challenges. These are summarized below: Tunisia and Morocco have the following competitive advantages: Are a well established exporters of footwear, leather goods and some semi finished leather to the EU Have a marketing advantage which should be exploited in the future for product development.
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They gain the fashion knowledge from their EU partners. This coupled with flexible production units and their proximity to Europe gives them an advantage over Viet Nam, India, and China Endowed with a business environment conducive to export development Have invested in training and research institutes for their industry Ample supply of qualified labor Egypt has the following competitive advantages: An ample supply of leather to support the manufacturing industry in the country and potentially the region enabling flexible production environment Egypt surplus of wet blue and crust leather could be imported by Tunisian and Moroccan tanneries within the preferential origin accumulation in order to increase their competitiveness and gain new market shares for export. The potential to develop into a low cost producer if it concentrates on developing its manufacturing expertise Ample supply of labor Jordan has the following competitive advantages Smaller flexible shoe manufacturing units which have specialised in niche products. Has good trade links with countries of the region more so than the other members of the Agadir zone. Has a marketing advantage in that it can be a hub for distribution of products and sourcing of leather to and from the region. Agadir countries are facing the following challenges: Morocco and Tunisia are in danger of surrendering their competitive advantages because of the greater demand in the future for finished leather to be available locally to cope with the new flexible production environment. They need to develop their component supply industry and implement new shoe engineering techniques in production and constructions, to reduce costs. There is a special need for shop floor supervisors in all four countries. This problem needs to be addressed because India could easily catch up in training and research. There is a need to upgrade their tanning industry to continue their efforts in finishing their leather with high quality. There is a need to upgrade export capabilities of domestic market oriented companies There is a need to widen their value chain in exporting finished products and enhancing their marketing and design capabilities The need to improve the capabilities of the production process to include the option of automation. 5.2. Formulating a Generic Strategy for the Group
From the SWOT analysis and the findings and conclusions, an analysis of the business environment can be done which will point the way to deciding the critical elements of the strategic plan. The plan must be SMART i.e.: Specific to the industry Measurable in the sense that tangible results can be quantified Achievable in the sense that the planned results are possible Relevant in the sense that they are recognised as meaningful by the entrepreneurs of the industry Time specific - projecting ahead up to 3 5 years.
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Because of the current business climate the plan needs to be viewed dynamically and strategic innovation has to be practiced to modify the plan, its objectives and actions as and when new issues occur in the operational area of the Agadir Group. Using the business analysis tool of STEEP, this analysis will revolve around:Social cultural factors human resources available in the 4 countries Technology the extent to which this is used, underused and updated Economic environment the state of the target Agadir markets Ecological factors especially pertaining to the tannery sector. Political / Legal or Regulatory assistance available to the industry in the 4 countries. This will reveal the core competences of the Agadir industry showing the competitive advantages and the key industry success factors as follows:
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From the Business Environment and Industrial Setting which was presented in phase 1 of the report for each country, the results of the STEEP Analysis is shown below: Social Environment The following factors were identified that were likely to have an effect on companies of Agadir countries: Cultural values towards employment impact on the business, i.e., frequent absence resulting in high employee turnover and absence of workers low appreciation of leather products by citizens of Agadir countries - poor leather culture Good male workers are hard to motivate for this type of work, whereas women tend to quit work after marriage Poor attitudes towards work. Workers appear to be less productive Inadequate specialized labour training Governments of Agadir countries have vocational training reform programs which will benefit all manufacturing sectors Governments of Agadir countries should improve the current vocational training schemes and programs to develop a stronger business culture to facilitate economic growth. Technological Environment The following factors weve identified as likely to have an effect on the business: New equipment is available on the international market for the production of medium high quality leather products and components. Some incentive schemes are available for the purchase of new capital equipment. Most of these schemes focus on capital extensive investments and locally produced machinery. Trend to establish specialised Leather Cities. Short short manufacturing is a necessity by all EU sub or co-contractors Excess production capacity Small flexible factories Quality levels achieved Reasonable productivity Need to improve finished leather Sufficient supply of leather and components. However, quality of locally produced components needs to be improved. Business owners in the 4 countries should recognize the importance of technological improvements to their production process, and in particular in relation to modern technology and manufacturing techniques. Also, improvement of artisan production techniques is needed. They should gear themselves to technological challenges of their businesses. Economic Environment The following factors were identified as likely to have an effect on the business: Economic slowdown and Global financial crises The free trade agreement between the 4 countries and the EU provides good potential to improve the industry in the 4 countries High investment costs With the current financial crises, access to finance will be harder Nearly Stable local currency in the 4 countries Levels of disposable income were shrinking as more people were losing jobs. Business owners need continuously to review the economic environment to strategize on any new purchases to be made at the right time. Their current target market (EU) is adversely affected by the current financial crisis which provides opportunity to Agadir countries over other competitors if can meet new trends in technology and manufacturing techniques. Ecological Environment The following factors were identified as likely to have an effect on the businesses: The REACH programme will be implemented soon or later which might affect the tanning industry Employee safety and occupational health is priority to EU Recyclable packaging is also a priority for the EU Voluntary eco label for leather products sold in EU Governments of Agadir countries are imposing more environment control measures specially on tanning industry. Business owners need to follow changes in EU and Government regulations to preserve the environment for longterm sustainability of the industry. This will enhance the image of their products in the EU market. Political/Legal Environment The following factors were identified as likely to have an effect on the business: Relative political stability Respect and protection of individuals property rights under the constitution. Changes in tax laws, which make submission of tax returns a cumbersome exercise. Rival producers need to instigate legal action over content labelling details Anti-dumping measures against Chinese products should be considered by the 4 countries as a unity Strong enabling environment via Governments and associations support Business Owners need to benefit from the current enabling environment and Governmental support to capitalize on their current market shares and expand it.
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A distillation of the foregoing analysis produces the following business environment and structure of the Agadir Group:
However, what is still missing now is the overall strategic direction of the businesses in Agadir Zone to achieve the study stated growth goals. The overall strategic direction is the broad overarching approach the business adopts in order to build on its distinctive competencies / strategic advantages, so as to make those into sustainable competitive advantages. Hence, there is a need for an overall strategy that gives the strategic thrust for successful competition, increase in market share and business growth. Essentially, Companies working in Agadir Zone have two basic choices. The first relates to the product. In relation to the product, a company can decide to offer a standard product or a product that is different to what competitors offer, that is, a differentiated product. The second choice relates to the market. A company can decide to offer a product to the entire market or to a segment of the market, i.e., a particular customer group. If one combines these two options that gives the following four generic strategies:
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A low cost strategy an enterprise adopts to achieve the low(est) cost in production by striving to be an overall lowcost provider of a product / service that appeals to a broad range of customers. Businesses should realize that the strategic target is low cost relative to competitors, not absolute low cost. A differentiation strategy: an enterprise offers a product that is different or perceived to be different by the customer from a standard product available on the market. It implies adding value to the product. It seeks to differentiate the companys product offering from rivals in ways that will appeal to a broad range of buyers. These become attractive when buyers needs and preferences are too diverse to be fully satisfied by a standard product. Focused or market niche strategy based on lower cost: an enterprise adopts to offer products to a narrow buyer segment and out-competing rivals on the basis of lower cost. Focused or market niche strategy based on differentiation: an entrepreneur adapts to offering niche members a product customized to their tastes and requirements. Stuck in the middle! The above four strategies indicate that one would have to choose one of them. Many companies have tried to combine some of the above strategies. Porter called this being stuck in the middle. The logic behind following one generic strategy is that a strategy aimed at achieving cost leadership precludes the capital investment required for a differentiation strategy. Porter argues that the middle of the road is not possible and leads to below-average performance. There is, however, evidence to suggest that firms combining a low cost and differentiation strategy can be successful. Honda, for example, operated on a low cost (and low price) strategy for substantial time, but gradually differentiated its products successfully. Volvo operated for a long time on the basis of a differentiation strategy (high quality specific features at a premium price), but gradually introduced a low cost strategy with more straightforward cars produced at low cost.
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Nevertheless, being clear about ones generic strategy is important as it provides the basis for the way a business positions itself in the market. The Strategy The Agadir cooperation strategy for the leather and footwear sector is to promote regional integration that sum the competitive advantages of each of the four countries signatories of the Agadir Agreement to meet sectors challenges of competitiveness towards low cost Asian countries and responsiveness to the new globalization requirements. The cooperation strategy is also to market the Agadir zone as a zone of excellence for EU footwear sourcing and FDI location. Therefore, it is highly recommended that Agadir countries need to follow a Differentiation Strategy and encourage their companies to develop niche products. The action plan therefore revolves around three major aspects of strategy: Production Marketing Investment
6. ACTION PLAN
6.1. Aspect 1 - Production In practical terms the Agadir Group companies should take the opportunity under this project to organise themselves so that they are in a position to be able to manufacture the various products required for interAgadir Trade to a level of efficiency, quality and competitiveness that satisfies the B2B and consumer markets in the various countries. Establishing themselves in the pan Agadir market will also strengthen the offer the companies can make to the EU markets. 6.1.1. Leather i. Integration and Supply Opportunities Egypt is the power house in the Agadir region for the production of leather. It has the largest production capacity of the 4 countries. However most of the leather produced by the Egyptian tanning sub sector is semi finished (either wet blue or crust with some pickled skins). Recently however there has been a marked swing to going to the next stage and producing finished leather. Tunisia and Morocco have traditionally relied on imports of finished leather from European sub contracting partners to convert into leather products. Presently tanneries in Tunisia and Morocco are being encouraged by Government to produce good quality finished leather for export or local production rather than concentrating on semi finished products. This is a good strategy and will help the leather goods manufacturing sub sectors to improve their efficiency of supply by having a local supplier of finished leather rather than relying on imports. Taking into account the availability of quality semi-finished leather in Egypt the intra-trade development should focus on developing a process of vertical integration which strengthens the supply chain which can then react efficiently to the new short short supply requirements. Jordan is a small player in leather manufacture with 1 tannery in operation which can produce leather through to finished. The opportunity for intra Agadir trade therefore lies with the production of finished leather. The development of finished leather needs to be accelerated as much as possible and trade will help satisfy this objective. The ability to manufacture finished leather to satisfy market needs is a key performance indicator for the development of the Agadir
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tanning industry. It will also go a long way in import substitution in the sub or co contracting sphere giving increases in volume to the industry which is currently operating below capacity. The first phase analysis established that finished leather made in Tunisia or Morocco from Egyptian semi processed leather will get the originating status through diagonal accumulation of origin. Thus, the promotion of the Agadir agreement among tanning factories in Agadir countries will increase their sourcing from Egypt of wet blue leather to be further processed into finished. (This could also be exported free of customs duties to the EU through diagonal accumulation of origin.) Taking into account the high availability of leather in Egypt, this diagonal accumulation would impact substantially in the development of the intra-trade among Agadir countries. In order to achieve integration and find supply opportunities the following actions should be carried out:
Action
Meeting of Tanners Associations to decide areas of co-operation, integration and supply requirements Market research to determine types of finished leather required in each country especially for import substitution. Fact finding tour by potential exporters
Responsibility
Tanners Associations
Resources
Export Promotion Agencies in 4 countries Country associations, in co-operation with Export Promotion Agencies to plan, cofinance with individual companies, and organize a study tour for each of the four countries to the others. Companies to be pre-selected as to suitability and commitment Contact machinery manufacturers Contact chemical suppliers Contact machinery manufacturers Contact chemical suppliers
Tanners associations Export Promotion Agencies The Tanners
Decide what types that can be produced with current technology by evaluation of current manufacturing plants Decide which types in demand that cannot be produced but could be with new technology by evaluation of current manufacturing plant Decide on most appropriate market segments (which type of leather to be used in each subsector of the leather and shoes sector) : Cow Shoes Sheep PLG Goat Garment
The Tanners
The Tanners
The Tanners
Company management in house strategic thinking
ii. Cost Competitiveness The trend in the tanning industry in the Agadir Countries to develop the capability to produce finished leather needs to be managed carefully to maintain its position as a competitive manufacturer. The industry has achieved this in the field of semi processed leather. Egypt particularly starts from a low overhead base which will help in competitiveness in finished leather. It also has good access to water, which is a major problem in Jordan. The competitiveness of the industry revolves around the normal management concerns of overheads and labour rates and in the case of leather, the basic raw material (raw hides and skins). There is also a significant cost in chemicals,
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most of which are imported.
Purchasing raw hides and skins locally is obviously preferable to importation. It has been inferred by the industry that the collection of raw hides and skins is not as efficient as it might be and that there is a wastage factor in all countries. The physical structure of tanneries in the zone varies from country to country. Egypt has difficult operating conditions in Old Cairo, Tunisia has modern structures, Morocco has a combination of both and Jordans one operating tannery is relatively modern. The proposed moves to Tanning Cities by the Governments of Egypt and Morocco will help in this problem by reducing costs. It will also encourage the tanners to invest in up to date machinery which will also have an impact in reducing costs. In order to maintain cost competitiveness, the following actions should be carried out:
Action
Each Country to commission a study on hides and skins collection with an emphasis on reducing waste Create an international data base on sourcing, suppliers, and prices of the major chemicals required in tanning Take advantage of the new leather cities as an opportunity to re-organise production processes to reduce costs Hold an Agadir Group seminar on the latest tanning techniques with a view to reducing costs
Responsibility
Resources
Central Government support ATU support Central Government support ATU support Business development agencies offering preferential inducements for capital investment Invitations to international chemical and machinery companies to attend the seminar
The Tanning Companies Tanners Associations The Tanning Companies
iii. Quality Improvement The quality of leather depends to a large extent on the quality of the hides and skins collected. At this primary source there needs to be controlled slaughtering and flaying techniques to avoid defects which could then be transferred into finished leather. Also raw hides and skins have to be stabilized as soon as possible after slaughter preferably by wet salting. The control and improvement in this sub sector will have a major positive impact on down stream operations. The quality of finished leather is commonly classified by grades from I (the top) to V (the lowest) and prices reflect this. A key performance indicator here would be to have this system implemented in the Agadir zone. It would produce transparence in trade which in the short to medium term would benefit all players. In order to improve quality, the following actions should be carried out:
Action
In conjunction with the study above further work should study slaughtering and preservation techniques with the object of upgrading the raw material. Introduce an Agadir wide classification system for finished leather
Responsibility
Resources
Central Government support
Central Government support ATU support
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Tanners Associations The Tanning Companies
In conjunction with the Agadir group seminar above further work should study the latest finishing techniques
Government support agencies and Tanners
iv.
Productivity Improvement
The tanning industry is relatively labour intensive. One important measure of productivity is the number of pieces processed per month with a given number direct labour; pieces per man per month. In the global market place tanners need to keep this ratio as high as possible. It is difficult to get accurate figures as to what is the actual performance in the Agadir tanning industry due to the present difficult operating conditions. Empirical evidence obtained from visits to tanneries suggests that productivity is near the following Tannery Pieces per Man per Month A 40 B 99 C 119 D 229 E 280 F 800 *Robiki 1000 * This is the new leather city being established outside Cairo. The executive plan is calling for the above productivity level. The key performance indicator for tanning productivity would be to get within 90% of this figure. The impact of increasing productivity to this level would be huge by reducing costs and possibly prices enormously. Agadir tanners need to develop a productivity improvement scheme to ensure they are performing as well as if not better than the rest of the world. In order to improve productivity, the following actions should be carried out:
Action
Feasibility studies on man versus machine for productivity gains Benchmarking productivity best practices in Spain, Italy, India and Turkey Implement a productivity improvement drive
Responsibility
The Tanning Companies The Tanning Companies The Tanning Companies
Resources
In house management Government support agencies and Tanning companies Government support agencies and Tanning companies
v. Training Tanning is essentially a chemical process. Therefore there is a continuous need for technical personnel to be kept abreast of the latest developments in the chemistry. Shop floor supervisors need to be aware of the latest techniques developed in manufacturing. Laboratory personnel also have to be aware of new chemicals and how they should be used. Research and development personnel are critical in using their knowledge to develop new manufacturing techniques, new products and improvements to existing products, in order to give the company a competitive advantage. Enhancement of the knowledge of these people is not a luxury but is essential for the well being and success of the companies.
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However, the 4 countries are encouraged first to benefit from any experiences found in any country. Morocco and Tunisia were the beginners to establish specialized training centers for Tanning and Footwear manufacturing. In order to implement training, the following actions should be carried out:
Action
Assist any country from Agadir Zone who is interested to establish specialized training center in the Leather and shoes industry. Shop floor supervisors, laboratory technicians and research and development personnel should attend the proposed seminar above Selected and appropriate personnel to attend the Linea Pelle leather show in Italy to study the latest developments on display. Develop up to date specialized training program in the tanning industry benefiting from what will be presented by the international chemical and machinery companies during the seminar and the leather show above
Responsibility
Individual Leather and shoes associations
Resources
Government support agencies Any country form the 4 countries who have advanced experience in this field Government support agencies ATU Individual country development agencies ATU Government support agencies ATU
The Tanning Companies
The Tanning Companies Tanning associations and Tanning companies of the 4 countries
6.1.2. Footwear i. Integration and Supply Opportunities As has been shown in the body of the report the level of trade in footwear leather products and leather sub sectors is relatively minor. An intra-trade development plan is needed targeting to reach an intra-Agadir minimum trade value of 50 million euros in 2011. This target is reachable due especially to the leather availability in Egypt and the interesting export potentialities of footwear in each of the four countries. Taking into account the availability of quality semi-finished leather in Egypt the intra-trade development should focus on developing a process of vertical integration allowing reinforcing the performances of the supply chain for an optimized response to the short circuit short requirements. The first phase report identified the potentialities of footwear in each of the four countries that could build on a industrial and trade partnership. These potentialities are: Established Agadir exporters mostly from Tunisia and Morocco have demonstrated an increasing capability to respond to the short circuit short requirements in shifting the production process from mass production to small series and exporting high quality products that can satisfy the requirements of the high revenue consumers segment of the Agadir zone. Egypt, thanks to low production costs, has demonstrated its competitiveness in Agadir local market to replace increased Agadir footwear imports from China. Tunisia, Morocco and Jordan can outsource the sheets for Soles and Insoles from Egypt. Egypt can outsource leather unit soles from Tunisia and finished shoes from Morocco. Jordan could benefit from their its proximity to and existing distribution channel in Gulf countries and Iraq to re-export footwear and leather products to these countries.
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There are many constructions and types of footwear in all the major segments available somewhere in the 4 countries. This is one of their strengths. Niche markets offer good opportunities for those companies prepared to invest in them in terms of product development. Among the most marketable products for niche markets are: Industrial / safety footwear Medical / orthopaedic shoes St. Crispin construction McKay stitched moccasins Ladies ballerinas Goodyear welted Mec val side wall stitch A market research for each of the above mentioned project needs to be carried out by interested companies. This research should concentrate on the marketing mix: The type of footwear to be sold Price points at factory, wholesale and retail level Distribution methods Promotion techniques The market research is crucial for success in establishing inter Agadir country trade. Companies must work with their export promotion agencies, their associations to plan a meaningful study tour. From the results of the market research companies can plan a strategy with objectives, actions and an implementing budget. A key performance indicator for this exercise will be the extent to which inter Agadir integration and supply will replace imports especially from the Far East. This will have a major positive impact on the economies of the 4 countries. Targets should be set say by reducing imports by 15% in three years. In order to achieve integration and find supply opportunities the following actions should be carried out:
Action
Responsibility
Resources
Country associations, in co-operation with export promotion agency to plan and cofinance with individual companies to organize a study tour for each of the four countries to the others. Companies to be pre-selected as to suitability and commitment Brain storming sessions with Associations Using information obtained from study tour Export promotion agencies
Research the market in all four countries, Fact finding tour by potential exporters
Country associations Individual manufacturing companies Companies with inputs from Associations
Decide target market by country and analyse results of tour Reasoned decision from experiences from fact finding tour, decide type of product to be manufactured Set targets for import substitution
Companies Associations Companies Government Ministries
ii. Cost Competitiveness The markets current trend towards the development and rapid evolution of fashion products and the manufacturing of small series, requires more capital to finance raw materials, the investment in technological equipment CAD/CAM
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and automatic cutting etc. The investment in computer aided manufacturing and design will reduce costs as less labor will be needed to do any given task. Sourcing of basic raw materials from Egypt in the form of insoles and unit soles should also reduce costs by replacing International imports. Shoe production in the zone is quite competitive in cost. However this is no cause for complacency. Costs can be reduced further by new production techniques which will impact positively on the industry. A key performance indicator would be to get as close as possible, say 75 85%, of Far East costs in like for like products. There is also a need to develop a trade facilitation program to improve port logistics and transport. This is an important factor to encourage cooperation between member countries in the area of logistics to reduce shipping costs. Hold an Agadir conference grouping Agadir supporting institutions to initiate and agree on a cooperation program with related co-financing system In order to maintain cost competitiveness, the following actions should be carried out:
Action
Study current production techniques with a view to reengineering them Consider alternative labour and material saving constructions Visit SIMAC show in Italy for research on latest machinery and equipment available Research suppliers of raw materials and components in Agadir countries with a view to reduce import substitution and lower costs Agadir Group meeting to formulate policy on logistics and export finance for cost competitiveness
Responsibility
Companies
Resources
In house management Association experts In house management Association experts Export promotion agencies Business development agencies Associations Association experts Companies own management ATU Export Development Banks Export promotion agencies Business development agencies
Companies Associations Companies Associations Companies Associations Companies
iii. Quality Improvement The manufacturers in the Agadir zone produce footwear according to their chosen market segments. The result is they make shoes to a quality standard that is demanded by that particular segment. Generally the workmanship of the finished product is at acceptable levels. Quality levels are determined largely by the components used types of leather, different soling materials (from PVC to PU to built up leather) and ancillaries (insoles, counter, toepuff, lining etc). In spite of the best efforts of the manufacturers there is a quality image problem that needs to be addressed. It is strongly recommended to build and promote a strong image for the Agadir Footwear Sector focused on the
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idea that the sector has a positive competitiveness, an attractive resource of complementarities and a manufacturer of quality products. This image will be built from the success stories and developed within a media plan integrating especially a press information campaign inside and outside Agadir. To support the above mentioned campaign and in order to give Agadir countries a competitive advantage in the regional markets of over 300 million people it is needed to conduct a last survey. The objective is to design a properly fitting last for the footwear consumers. This series of lasts would then be superior to anything from China or from Europe leading to a higher quality and more marketable product. Inside Agadir we could use the media in the four countries, the websites of Agadir supporting institutions, and the suggested Agadir news letter and Agadir Portal. (See under marketing). Outside we could use the services of Shoe Intelligence that is a (subscription based) regularly information bulletin on the shoe industry in the EU (http://www.shoeintelligence.com) Although an awareness campaign targeting the Agadir consumers, highlighting the quality of Agadir products compared to Chinese products,and the virtue of leather and its availability in quantity and quality in the Agadir zone, the awareness campaign should target equally the introduction of the culture of consuming leather among Agadir consumers. There should be a certification process as well as the enforcement an anti- counterfeiting regulations preventing any breach of the country of origin quality certification. In terms of quality enhancement success will be judged by the degree consumers buy local rather than the equivalent imported product. This will be the key performance indicator. Local manufacturers should also eliminate the practice of plagiarising international brands. In order to improve quality, the following actions should be carried out:
Action
Media campaign Introducing the leather culture
Responsibility
Associations Companies Associations Companies
Resources
ATU Export promotion agencies ATU Export promotion agencies
iv. Productivity Improvement As was mentioned in the body of the report, productivity as measured by the number of pairs produced per operator in 8 hours varies between the 4 countries. Tunisia has the highest productivity with 10.6 pairs, Morocco with 5.9 pairs and Egypt with 5 pairs. Jordan figures were not available. Industry best practice in a highly automated plant is between 26 and 28 pairs. The European average is 13.8 pairs. A key performance indicator for the industry would be at least to get to the European average and then plan to go beyond this. Apart from the skill and diligence of operators, shop floor organisation in a shoe factory has an important part to play in productivity enhancement. The following factors impact on productivity: Factory layout (rink systems etc) Attachments to machines (thread cutting, needle positioning etc)
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Automatic machines Robots Time and motion study CAD Constructions used.
The Agadir Group companies have a good opportunity to increase productivity as they start from a relatively low base. Productivity gains are very much down to management to provide an environment where operators can improve their performance. It should be recognised that even small producers (500 pairs per day) can benefit from the investment in automated machinery. The aim should be to embrace lean manufacturing practices. In order to improve productivity, the following actions should be carried out:
Action
Critically assess current manufacturing practices Re-design and re-engineer operational areas Conduct feasibility study into automated and semi automated machinery and equipment Attend the SIMAC international footwear and leather goods machinery show Analyse and consider new, less labour intensive constructions Set productivity targets
Responsibility
Company Management
Resources
Experts from Associations In house experts ATU international experts Experts from Associations In house experts ATU international experts Experts from Associations In house experts ATU international experts ATU Business development agencies Associations In house In house
Company Management
Company Management Associations Management Company Management Company Management
v. Training Tunisia and Morocco have invested in training and research institutes and Egypt and Jordan are developing theirs. Training schemes need to be brought into line with the needs of a modern industry which has changed in recent years. (Short short, lean manufacturing). Training should be aimed primarily at closing room operators (stitchers) and shop floor supervisors. In a shoe manufacturing environment these are the critical people. Sewing machine operators can have a big impact, if trained and organised well, on productivity and cost reduction. They should be able to operate the machines at optimum speeds up to 2,000 stitches per minute. This is a key performance indicator. Another key performance indicator in training is the retention of labour i.e. low turnover, especially at the operator level. Shop floor supervisors need professional training (not just promoting the best operators). To be effective they must understand:
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Loading of operators Cost control Time and motion study Shoe engineering and technology
Pattern cutters need to be trained on pantograph and CAD systems. There is also a need for management to be trained in the aspects of marketing and selling techniques. In order to implement training, the following actions should be carried out:
Action
Review training courses available from institutions for relevance and quality needs of the modern industry Adjust where necessary Assess the quality of instructors Benchmark the attainment levels of trainees to European levels Hold seminars on marketing and selling for management
Responsibility
Ministries Associations Ministries Associations Ministries Associations Ministries Associations Associations
Resources
The institutions Corresponding training institutes in Europe The institutions The institutions The institutions Corresponding training institutes in Europe ATU International consultancies
6.1.3. Personal Leather Goods i. Integration and Supply Opportunities Personal leather goods are a bit more difficult to trade in between the Agadir countries. These products tend to be viewed more of a luxury item rather than a necessity (like a pair of shoes). Items made in the 4 countries tend to be of medium- high to high quality. The target markets for the products manufactured therefore will reflect those consumers in the higher income brackets. There are limited opportunities for integration and supply opportunities in the intra Agadir market. There is little that can be added in value to the current product lines which give them a key customer value in the markets of the four countries which are not already satisfied by local manufacturers. In order to verify the above assumptions market research needs to be carried out in a similar way to footwear as well as the activities to be carried out for the achievement of the market research and its implementation by companies. In order to achieve integration and find supply opportunities the following actions should be carried out:
Action
Responsibility
Country associations Individual manufacturing companies
Country associations, in co-operation with export promotion agency to plan and cofinance with individual companies to organize a study tour for each of the four countries to the others. Companies to be pre-selected as to suitability and commitment
Resources
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ii. Cost Competitiveness The two main factors that impact competitiveness in manufacturing personal leather goods are direct labour costs and price and utilisation of leather. Minimum labour rates are set by Government and vary from country to country in the zone. Companies pay what they need to attract and retain skilled staff. Labour rates paid by zone companies are as follows (2007): Country Egypt Jordan Tunisia Morocco U.S.$ per Hour U.S.$ per Month 0.55 - 2.20 100 - 400 2.00 - 2.89 210 - 520 1.39 250 1.67 300
These rates are competitive on their own and provides a good base for manufacturing companies to control costs The quality of leather required for PLG tends to be relatively high due to the market segments served and can sometimes impact on the competitiveness of the industry due to its higher cost. It is essential therefore that proper, accurate and keen costing allowances are adopted to keep the costs down. Allowances are most accurate when derived from CAD systems. In order to maintain cost competitiveness, the following actions should be carried out:
Action
Study current production techniques with a view to reengineering them with time and motion studies Visit linea pelle show in Italy for research on latest machinery and equipment available Investigate the use of CAD especially for ladies bags production
Responsibility
Companies Associations Companies Associations Companies
Resources
In house management Association experts Export promotion agencies Business development agencies Associations Business development agencies Associations
iii.
Quality Improvement
The quality levels of PLG produced in the Agadir zone are excellent. Good quality leather is used and workmanship, which is craft based rather than operating machinery, is also of a high standard. The need is to maintain these standards. In order to improve quality, the following actions should be carried out:
Action
Maintain standards and strive for further improvement
Responsibility
Management
Resources
In house
iv. Productivity Improvement Many of the operations done in the making of leather goods are done by hand. The exceptions being stitching and some machine cutting operations. As technology improves there are more small machines developed to replace hand operations doing them quicker and more accurately.
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Production methods need to be continually assessed comparing the results of batch working versus production line working. The application of fair incentive schemes can also lead to productivity gains. As a key performance indicator targets should be set for productivity gains to achieve a competitive advantage in an industry where cost are similar in all four countries. In order to improve productivity, the following actions should be carried out:
Action
Critically assess current manufacturing practices by time and motion study Conduct feasibility study into automated and semi automated machinery and equipment Attend the SIMAC international footwear and leather goods machinery show Set productivity targets
Responsibility
Company Management
Resources
Experts from Associations In house experts ATU international experts Experts from Associations In house experts ATU international experts ATU Business development agencies Associations In house
Company Management Associations Management Company Management
v. Training Training should be aimed at stitchers and pattern makers. These are two critical areas in PLG manufacturing. Good performance here has a large impact on reducing costs by increasing productivity. Sewing machine operators can have a big impact, if trained and organised well, on productivity and cost reduction. They should be able to operate the machines at optimum speeds up to 2,000 stitches per minute. This is a key performance indicator. Pattern cutters operating CAD systems can produce patters that use the minimum amount of leather and also engineer them so that they fit together without problems in manufacturing operations. Shop floor supervisors need a good knowledge of time and motion study in order to organise work flow for the best possible outcome. In order to implement training, the following actions should be carried out:
Action
Review training courses available from institutions for relevance and quality needs of the modern industry in stitching operations Train pattern cutters in CAD operation Invest in and train up supervisors in time and motion study
Responsibility
Ministries Associations Company management Company management
Resources
The institutions Corresponding training institutes in Europe Associations Machinery suppliers Associations Independent consultants
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6.2. Aspect 2 - Marketing
Behind every good marketing plan there is an equally good or better production facility. By implementing the action plan described above under production, the Agadir Group companies will be in a position to implement the actions for a successful strategic marketing plan which will have a positive impact on the economies of the 4 countries. The emphasis for the plan is on the Agadir Market to enhance regional trade followed by opportunities to increase exports to Europe. 6.2.1. Leather i. Product Development Presently most of the export of leather to the EU is wet blue primarily from Egypt. There is insignificant trade in raw hides and skins. Tunisia and Morocco are being encouraged by their Governments to export finished leather rather than semi processed as in the past. Egypt has a desire also to enter into the finished leather market. The future strategy therefore would be to gradually move into leather finishing. However the leather products manufacturing business in EU continues to decline year on year with more and more manufacturers turning themselves into importers or closing down completely. This means in effect the market for finished leather in the EU is in decline. However there still are traders and tanners who trade internationally as re-exporters and still provide a market for exports. The biggest potential for finished leather is through providing finished leather to local leather products manufacturers who in turn export their products. This would provide the biggest benefit to the Agadir Group. The finishing of leather is more of an art than science. Therefore to produce good quality finished leather requires some experience and technicians can learn the techniques either by trial and error or from experienced leather finishing technicians. In the case of the Agadir zone the process of acquiring knowledge needs to be speeded up. Types of products that should be developed by the technicians are the following:
PRODUCT
Full Grain Corrected Grain Aniline Dry Milled Nubuk Industrial / military
BUFFALO
BUFF CALF
COW
CALF

Responsibility
Companies Companies

Resources
Company management Machinery suppliers Chemical suppliers Company management
In order to implement product development the following actions should be carried out:
Action
Analyse the machinery and equipment available for finishing Assess the technical knowledge of technicians
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Train technicians to the required standard Field international consultants on finishing for 12 months over a 3 year period. Seminar see under quality improvement Visit European chemical suppliers for information on finishing techniques. Combine with visit to Linea Pelle Sponsor study tours to EU finishing tanneries and chemical suppliers for technicians
Companies Training institutions Associations
ATU Business development agencies
Companies Companies
ATU Business development agencies ATU Business development agencies International agencies
ii. Promotion
Having made the strategic decision to develop finished leather and that this leather becomes a reality, this information needs to be disseminated in the Agadir zone to the leather product manufacturers. The main message for promotion is that finished leather is now available from tanners in the zone and that they are open for business with the emphasis on import substitution, better service and keener prices than that which can be found outside the zone. The static tools for promotion are: A leather manufacture data base for the zone The production of a Company DVD complimented by a company brochure Attendance at inter Agadir footwear and leather shows Representation on the proposed Agadir portal (see under footwear). The active tools for promotion are Appointment of Agents in all 4 countries Management travel to potential clients in all 4 countries The key performance indicators for finished leather should be the measurement of increased trade. At present this is at a low base. A target should be set to increase the trade by a certain percentage say by 30 % over three years. As far as Europe is concerned this should be only a stepping stone to promote finished leather to the larger shoe producing areas in the world namely the Far East. Promotion should be aimed at European tanners and export agents particularly in Italy and Spain who are active in Far East markets as well as domestically. The Linea Pelle show in Italy is a good forum for this. Actions required for promotion are as follows:
Action
Set up of AgadirLeather Database Design of a Brochure and DVD on the Agadir zone Leather (& Footwear) sector Agadir leather pavilion in local leather shows in 4 countries Creation of Agadir Leather (and Footwear) Portal Seek out sales agents in the 4 countries
Responsibility
The Associations The Companies The Associations The Companies The Associations The Companies The Associations The Companies The Companies
Resources
Export Promotion Agencies ATU Export Promotion Agencies ATU Export Promotion Agencies ATU Export Promotion Agencies ATU In house
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Management sales missions to all 4 countries Agadir selling pavilion aimed at EU and beyond at the Linea Pelle show.
The Companies The Companies The Associations
In House ATU Export promotion agencies ATU Export promotion agencies
iii. Distribution The advent of short short manufacturing in the client companies of the tanners puts more emphasis on the tanners ability to deliver finished leather quickly. Buffer stocks of the most popular types of crust should be kept ready for immediate finishing on demand. Even buffer stocks of certain finished leather can be kept for immediate supply. The acceptance of smaller orders of colours by type of leather should be welcomed say 1,500 ft2. However Tanners should maintain the principal of made to order rather than holding stocks. Distribution therefore for finished leather should concentrate on developing the ability for quick delivery for the short short era. The above also applies to the European markets of Italy and Spain. Actions required for distribution are as follows:
Action
Arrange finishing section in tannery to react to rapid deliveries
Responsibility
The Companies
Resources
In house
6.2.2. Footwear i. Product Development Initially there are certain things an exporter should be aware of when considering selling into both the Agadir market and EU markets. Although these regulations refer mostly to the EU companies would be well advised to apply them also to the regional market. These are: Labelling. There has to be a label attached to the shoe showing the composition of its component parts Environmental issues, REACH, Azo dyes etc referred to earlier in this report Regulations on materials used from endangered species (CITES) Recyclable packaging materials Anti dumping regulations The marketing efforts of the Agdir Countries will be aimed primarily to the region and after a period of assimilation and a better economic climate, to Europe. To avoid duplication of effort, product development work for shoes should combine what is needed in regional markets for the short term and what is needed in Europe in the medium term. It is fair to say that most ideas for product development are initiated in Europe. The markets in all four countries reflect the styles, trends and designs coming from Europe. Product development therefore should be international in approach and not just pan Agadir. The international aspect of product development should concentrate on the 2 larger markets of the EU namely UK and Germany followed by Benelux as a secondary target. An understanding of the various markets needs and wants
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has to be acquired before sensible product development is started. To recap the markets are: Egypt Morocco Tunisia Jordan Arab Region UK Germany Benelux
The combined product development effort therefore should progress by logical steps by implementing the following actions. STEP 1
Action
Responsibility
Export promotion agencies Country associations Individual manufacturing companies Country associations, in co-operation with export promotion agency to plan and cofinance with individual companies to organize a tour Companies to be preselected as to suitability and commitment
Resources
Country associations, in co-operation with export promotion agency to plan and cofinance with individual companies to organize a study tour for each of the four countries to the others. Companies to be pre-selected as to suitability and commitment ATU Export promotion agencies Country associations Individual manufacturing companies
Research the market in all four Agadir countries. Fact finding tour by potential exporters. Special attention in Jordan for re-exporting opportunities
Study tour and market survey to UK, Germany and Belgium
The raw materials, machinery and equipment necessary to develop products have to be easily available in order to accommodate short short manufacturing. One source of this information is the Linea Pelle + SIMAC show held in Italy. This is an International Exhibition of leathers, accessories, components and synthetic products and models for footwear and leather goods. In October the show is joined with Simac an international exhibition of machines and technologies for footwear, leather goods and tanning industry. Weak points in the supply chain of the leather products industry in all four countries are soles / moulds / lasts / adhesives. Conduct a feasibility study for the establishment of a new business producing. STEP 2
Action
Visit Linea Pelle show Study for the establishment of a new business producing soles / moulds / lasts / adhesives in an Agadir country
Responsibility
Associations Companies Trade associations
Resources
Export promotion agencies ATU ATU
Apart from existing shoe types which companies should be continuously updating consideration should be given
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to developing newer offerings for the various markets. Supply opportunities were found in Agadir markets (see above) which are complimentary to EU markets. Niche marketing which is a key strategy reveals certain market characteristics. The British market represents a good potential market for the Agadir zone footwear exporters due to the importance of their imports, their cultural interactions particularly with Egypt and Jordan, and the high potential exports from Tunisia and Morocco not exploited yet. The UK footwear imports have one of the highest share out of the total EU imports; as well and due to the high production costs, the market has undergone large changes that led to outsourcing, and forced many importers to source from close suppliers such as Morocco, Tunisia and Eastern Europe. The UK market is also benign in that it is well used to imports and is not fighting to save a local, dieing, manufacturing industry in the way Italy, Spain and to some extent France are. The market is wide it has many segments from low quality to the highest quality brand names. The German market is more restricted in its purchasing methods compared to UK. It tends to be more up market in quality from medium quality +. However the recent influx of immigrants from Eastern Europe has created a market for cheaper lower quality shoes and leather products. Tunisia and Morocco have good contacts with Italy, France and Spain mostly through sub contracting. This business should be continued in the normal way. At this time in order not to dilute the effort required to set up new export markets, concentration should be on the Agadir market and after consolidation here, the two large EU markets - UK as the primary target and Germany as the secondary should be addressed. Segmentation of the UK market is exceptionally wide. Reasonable, simple, leather footwear can be bought at retail level for as little as $16. At the top end of the market welted footwear sells for over $400 per pair. The market in terms of volume and ease of penetration is the so called grey market people in the age group 45+ years with the core target being the 55 75 years segment. There is also an active market in childrens footwear of medium to medium - high quality. Industrial and safety footwear at the medium quality and less technical specification selling to self employed construction workers is another active market. At the high end of the market goodyear welted mens footwear is also in demand and has been for many years. There is also a market for orthopaedic type shoes particularly for women who have to be on their feet all day for work eg nurses, retail assistants, cleaners etc. Germany has the largest population in Europe with approximately 85 million people. It fluctuates with the UK in terms of market volume for shoes sold for the number one slot. This reflects the economic conditions in the two countries. Segmentation in the German market tends to be narrower than UK. German consumers demand at least medium up to high quality footwear. Men buy about 50% of shoes sold and women 31%, 19%, is childrens footwear. Of the total conventional (i.e. non sport) shoes sold 41% have leather uppers and non leather soles. There also is a significant grey market in Germany similar to the UK which requires sensible, comfort casual shoes, for men and women. Brands like Seibel, Reiker, Gabor, Ara and Sioux are popular. There is also a significant market for so called health footwear with brand names like Birkenstok, Bama, Dr Scholl and Ganter. The safety, industrial footwear market tends to be determined by technical products which strictly conform the EU standards (and particularly the German DIN standards). There is not a market (as there is in the UK) for industrial footwear of less technical specifications. Childrens footwear tend to be of a good quality standard with brand names like Elefanten, Ricosta and Salamander popular.
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The products therefore for the German market are very similar to the UK with the difference of higher quality levels and less styling. The market tends to be more conservative in its outlook. The market for footwear in the Netherlands, Belgium and Luxemburg tend to be linked together because individually they are relatively small markets. The import market (i.e. the market for Agadir exporters) is dominated by traders who supply locally and re-export to the rest of Europe and beyond. The market tends to be at the low to medium end which Agadir manufacturers can easily cope with. The traders also buy from Italy for re export and local supply so there is a distinct possibility that Agadir producers may already servicing the Benelux market through third parties. They look for keen prices for volume business. An agent based in Germany could easily service the Benelux market as well as Germany on behalf of Agadir companies. For the Agadir Group, at present this is a peripheral market and most marketing efforts should be concentrated on UK and Germany. Types of products that should be developed are the following:
PRODUCT
Hand stitched, flexible, comfort fitting moccasins, McKay stitched soles Mens casual shoes , comfort, padded leather uppers, soft soles, comfort fitting lasts St Crispin construction hand stitched soles Womens with same specs as mens Ladies comfort ballerinas Soft, flexible,comfort,strobel constructions Childrens medium quality leather shoes and sandals Industrial boots and shoes Mens Goodyear welted shoes Work oriented, stress relieving, comfort footwear for ladies Stitch out construction Mec Val side wall stitched
AGADIR UK
GERMANY
BENELUX
()
() ()
() = Can be marketed but with difficulty STEP3
Action
Research and design a shoeline for Agadir, UK and German markets. Product development function
Responsibility
Fashion forward information from Associations, Possible co-financing for services of international design studio
Resources
Utilise local and/or international designers Companies Associations Export promotion agencies
The key performance indicator of market penetration should be tracked. With new shoelines developed by enlightened, unique product development, increases in inter Agadir exports will be achieved. Presently inter Agadir exports are at a low level. An aggressive target should be set country by country for increased trade over a 3 year period up by say 30%.
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ii. Promotion As with product development promotion should be directed towards the Agadir zone as the priority market and followed by the EU markets of UK, Germany and Benelux. It has been mentioned that there should be an awareness campaign particularly to Agadir consumers on the availability of quality leather products from Agadir leather product manufacturing companies. This is also part of promotion and compliments this aspect. One reason for the small volume of inter Agadir trade is the lack of circulation of pertinent information between the entrepreneurs of the four countries. The creation of an Agadir database available on line on an Agadir portal and accessible to the business community will alleviate this weakness and will contribute to boost trade among Agadir countries. A search engine will give access to information starting from criteria such as: Country: Egypt, Jordan, Morocco, Tunisia Company names and trade names Brand Activities/products: tanning, leather footwear, component, leather goods manufacturer, importer-wholesaler, footwear distributor Functions: subcontracting, co-contracting, own label etc Turnover Special equipment Design capabilities Lead times To compliment the above the design of a brochure and DVD on the Agadir zone footwear (and other the other sub sectors) is necessary. This should be done in Arabic and English This brochure and the DVD will be systematically used during the sectors trade events (conferences, seminars, shows.) and ATU promotion activities . It will also be widely disseminated by Agadir supporting institutions and trade and investment representatives which can take part in the promotion of the Agadir zone abroad as well as to the zones companies who will use it for their individual promotion. As a spin off from the brochure and DVD the creation of a virtual Agadir exhibition would be a helpful marketing tool. This would be a B2B electronically matching system through the creation of an Agadir virtual exhibition web site where Agadir manufacturers and traders could present their product collection with related data technical sheet for each exhibit as well as commercial conditions. As an umbrella electronic promotional aid, a new Agadir Footwear (and Leather) Portal should be set up. This will not only promote the Agdir companies to the local Agadir markets but also help in promotion to Europe. This Portal which would be designed by the associations with guidance from the ATU This portal will aim to: Disseminate valuable information on the leather and footwear sector in the four countries. Market the zone internationally and among the Agadir zone in presenting the opportunities offered by the Agadir Agreement and the success stories. Develop export and FDI with European Union and among Agadir countries by publicising Agadir companies and encouraging the exchange of information.
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Consequently, the site will: Provide current and pertinent information on the sector in the four countries (factors costs and the sectors features in the four countries) Facilitate the online access to other professional and public sites published in the Agadir zone and internationally, through hypertexts links Provide hyperlinks with web-site and portals of ATU, EU commission and sector technical centres, business associations and supporting institutions To present information on the Agadir agreement, EU-Agadir countries agreements trade and quality regulation (origin, customs, standards, labeling, etc) of the four countries as well as their export and investment policies( incentives, trade shows, training, laboratory and design capabilities, etc.) Provide hyper links with specialized international web sites providing technology watch and sector news Host the sectors newsletter that will be published monthly and will relate to four countries Leather & Footwear news. It will provide pertinent information on change in regulations, on organized and planned sector exhibitions, company information, markets and distribution, international news, FDI, consultant and professional views, etc The newsletter would hold a discussion forum and would be available in English and Arabic. Integrate a detailed directory of the four countries Leather & Footwear sector with a multi-criteria search engine Establish hyper links and or host web-sites of individual companies offering intratrade and supporting services among Agadir countries Allow to Agadir companies and EU clients the access to Agadir data base after entering password and complete information about the online visitors identity. This information will be integrated in the data bases of clients and suppliers. Allow to Agadir companies and EU clients the access on-line to trade and subcontracting opportunities. The site will be manage one of the 4 country associations by appointing an IT manager who must have good knowledge of the sector but also of web design techniques. The marketing of portal world wide and the establishment of links with international leather and footwear portals is a prerequisite for the outreaching of substantial outcomes. Apart from these published and electronic methods of promotion there need to be human interaction to establish business and trading agreements. One of the better ways of doing this is by shows where companies can show their products and meet potential clients. The development of supporting services in the Agadir zone To achieve this co ordinate the participation of Agadir Leather and footwear companies in the Tunisia, Egypt and Morocco national Leather and Footwear Shows. Morocco, Tunisia and Egypt all have their own leather fairs with an international focus. Under the spirit of the Agadir Agreement in order for the fairs to be more effective in the international market, particularly Europe, they should be subsumed in the long run into one larger unit under the Agadir umbrella. However, in the short run it is needed to build on existing fairs. It will consist of the organizing Agadir stands gathering companies from countries others than those from the organizing country. In this respect, ATU in cooperation with Agadir Leather & Footwear Organisation and Agadir export promotion centres, may contribute in carrying out the following: Organise Agadir stand including companies from Jordan, Egypt and Tunisia in
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Morocco Leather Show Maroc Cuir- Salon International Du CuirDate: Oct. 8-10, 09, Web site: http://www.marocuir.ma/ Organise Agadir pavilion including companies from Jordan, Egypt and Morocco in a Tunisian Leather Show PROMO Cuir organized in Tunisia on May 2010. Also organize an Agadir Leather stand in Meet in Africa Cairo, Egypt, February 2010 For Jordan, currently there are no international fairs. However, the Jordanian Leather Industries Association is planning to organize in cooperation with JUMP on July 2-4, 09 the first Jordanian specialized fair in leather and Footwear products. It will be local and invitations were sent to representatives from all the Arab countries to attend. It aims at raising the awareness of the customers about Jordanian leather industries. Within the organization of this event, a seminar could be devoted to Agadir co operation. Next year, the Association will establish the Jordanian Leather Industries Fair. This will be directed towards Arabic participation with an Agadir leather stand. To facilitate the participation of Agadir companies, preferential conditions should be granted to them and promotional activities should be carried out by the individual country associations. To ensure successful results, ATU in cooperation with supporting institutions should conduct the following: A proper awareness campaign targeting sector representatives and leaders to attract Agadir zone companies to participate in the Show. Prior exchange between Agadir participants of company profiles Organize a buyer seller meeting to support commercial contact A seminar on Agadir cooperation to discuss the facilitation of Agadir intra-trade. Promotion, which is a form of advertising, needs to be judged as to how effective it is in producing the desired results from making what can be substantial financial investments. Key performance indicators should be established for the promotion plan and the impact they will have on the economies of the zone. One simple way is to set expected (achievable) targets by expecting an increase in exports of footwear by a given percent say 5% in year 1, 10% in year 2, and so on. These achieved targets in market penetration will have a hugely positive impact on local economies. Actions required for inter Agadir promotion are as follows:
Action
Set up of AgadirLeather & Footwear Database Design of a Brochure and DVD on the Agadir zone Footwear(& Leather) sector Creation of a virtual Agadir exhibition Creation of Agadir Leather and Footwear Portal Set up a monthly Agadir Newsletter Agadir pavilion in local leather shows in 4 countries Set performance targets
Responsibility
The Associations The Companies The Associations The Companies The Associations The Companies The Associations The Companies The Associations The Companies The Associations The Companies The Associations The Companies
Resources
Export Promotion Agencies ATU Export Promotion Agencies ATU Export Promotion Agencies ATU Export Promotion Agencies ATU Export Promotion Agencies ATU Export Promotion Agencies ATU Export Promotion Agencies ATU
In the medium term promotion should also be carried out to aid penetration of the targeted EU markets. The first phase report recommended the need for Agadir countries to focus on UK, France, Italy, Spain, Germany
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and Benelux (Belgium, Holland). Most of Agadir exports are now focusing on Italy, France and Spain. The study emphasized the need to diversify the export markets to include other European markets such as UK, Germany and Belgium To achieve these goals, the strategy and action plan highlighted the need for a promotional and awareness campaign in the European markets to promote the Agadir zone exports. In this respect, it is suggested to organize a road some EU targeted countries as well as to co-participate in European International exhibitions. There are two shoe shows in the UK which are not particularly useful for exporters. British buyers tend to travel to overseas shoe shows particularly, the GDS (Germany) and Riva del Garda (Italy). However the proven promotion tool of a local road show has been successful in the UK particularly in the textiles sector. It has the advantage of having face to face meetings with interested buyers rather than being one of thousands of exhibitors in an international show. Attendance at international shows is expensive and to be effective exporters need to show their products twice per year for at least three years. A road show is more cost effective. The road show is considered an innovative way in export promotion and has proved to be very successful for many exporting countries such as Turkey, China, and Viet Nam. The road show involves taking a number of companies to the targeted market, to exhibit their products and potentials. One-to-one meetings with major importers and buyers are also conducted. It differs from the specialized trade shows by the following: It attracts better media attention It reflects a positive image about the Agadir zone footwear industry for the major buyers and importers in the UK market. It offers an opportunity for the participation of many enterprises with different products. For the road show to achieve its maximum effect the road show timing should coincide with the sourcing schedule of the importers and the buyers as well as the timing of Footwear exhibitions in Europe. The road show design should focus primarily on selecting the right type and number of participating companies, selection criteria for choosing companies should be in place prior to the show. However, the number of companies exhibiting each product category should be (3-5) to allow a choice variety and increase professional visitors interests. The place for the road show should be selected with great care in order to make sure to attract the right buyers. Usually, it should take place in a large hall in one of the large hotels or specialized showrooms. Prior to the commencement of the road show, a number of preparatory steps should take place as follows: A detailed study on the UK market regarding its potential, consumer tastes, in addition to targeted importers and investors should take place. Practical recommendations on how to make the show a success and how to do business with the importers in the UK market should also be given. The outcome of the study should be disseminated to the relevant stakeholders in the sector. A proper awareness campaign should be conducted to attract Agadir zone companies to participate in the road show. The applications should be screened and the companies selected according to a pre-defined criteria to guarantee the good presentation of the Agadir zone footwear sector. For the road show to be successful, great attention should be given to the designs of the exhibited products, Agadir zone companies should be supported with technical expertise from the UK market to develop their products according to the designs and fashion trends required in the this market. Field visits should be conducted to the main stores in the UK market to investigate prices and quality of competing products.
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A very thorough promotional campaign should be prepared and implemented to guarantee the proper attendance of the road show and the quality of attendees, the campaign is intended to include the following activities: Invite specialized reporters from the UK market three months prior to the show to visit some enterprises within the sector to write articles about its strengths and achievements. However, this activity aims at preparing the buyers and sellers to encourage them to visit the show and do business with the Agadir zone enterprises Conduct a rigorous media campaign in the specialized magazines in the sector using advertisements and promotional articles. Send invitations on three stages targeting the largest number of distributors, importers and distributors within the UK market. Follow up through direct contact or by phone with distributors and importers to encourage them to visit the Show. A press conference should be arranged with presentations by sector representatives, testimonials from investors and major foreign buyers through which the Agadir zone economic achievements and Investment Climate are presented. It is anticipated that a senior international expert is needed for 2 months period in six months duration and four Agadir consultants for one month each to assist ATU and the sector representatives of each Agadir member country to prepare the road show and to follow up on its results. The international expert and the Agadir experts will accomplish the following activities: Conduct a market study for the UK market to identify the export potential, consumer tastes, in addition to targeted importers and investors. Conduct seminars to present the findings of the study and their impact on the road show preparations to the different stakeholders in the footwear sector. Conduct an awareness campaign for the footwear sector on the benefits of the road show to attract Agadir zone companies to participate in the road show. Define selection criteria to be utilized to screen companies applications and guarantee the good presentation of the Agadir zone footwear sector. Conduct field visits to stores in the UK market to investigate prices and quality of competing products. Advise the participating companies on the best price ranges and designs and fashions. However, the consultant should be able to identify a designer from the UK market that can help the Agadir zone companies to develop the designs of their products according to the tastes of the UK consumers. Work with the Agadir zone companies to prepare their products and samples for the road show. Work closely with sector representatives and ATU to implement the promotional campaign associated with the road show and advice on the promotional activities with the highest impact. Moreover, the associated promotional campaign is suggested to be the responsibility of sector representatives that can coordinate all the promotional efforts in order to attract the right audiences for the road show activities. Germany hosts the largest and most significant shoe show in the world the GDS in Dsseldorf. (gds-online.com). It is held twice per year in March and September. Budding exporters to the German market need to exhibit at this show 2 times yearly for at least three years to be effective. At the show priority should be given to finding a suitable sales agent in Germany. The study tour to UK, as part of the build up to the road show, should also include Germany on its itinerary. The footwear manufacturers interested in export to Germany should join the study tour as observers for market research
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purposes. Companies need to develop their own brochures and flyers and advertise their intentions in one or more of the trade press in Germany. Schukurier Shoez Schumarkt It is anticipated that a senior international expert is needed for 1 month period in six months duration and four Agadir consultants for 15 days each to assist ATU and the sector representatives of each Agadir member country to prepare the Agadir participation in GDS The international expert and the Agadir experts will accomplish the following activities: Conduct an awareness campaign for the footwear sector on the benefits of the GDS show to attract Agadir zone companies to participate in the trade fair. Define selection criteria to be utilized to screen companies applications and guarantee the good presentation of the Agadir zone footwear sector. Advise the participating companies on the best price ranges and designs and fashions. Work with the Agadir zone companies to prepare their products and samples for this show. Work closely with sector representatives and ATU to implement the promotional campaign associated with the trade show and advice on the promotional activities with the highest impact. During the event the Consultant should assist ATU and Agadir supporting institutions to organize promotional operations : An open door event where invited, Agadir Ministers of Trade, representatives of German Government in charge of international cooperation, German leather and footwear associations, representatives of retailers, German footwear importers, representatives of German footwear supporting services (designers, ) and representatives of media. A press conference should also be held during this promotional event. Organisation during the event of B2B meetings between potential partners International Trading companies as well as with chambers of commerce, representatives of professional organizations, technical centers and training and fashion institutes. These meetings should lead to the signing of trade agreements, partnership agreements and cooperation agreements relating to for example vocational training, the transfer of laboratories or production activities towards the Agadir zone Belgium represents a special case as it is also the seat of the European Union. The strategy and action plan highlighted the need for a promotional and awareness campaign in the European markets to attract investments and joint ventures as well as promote the Agadir zone exports. In this respect, it is suggested to organize a road show and FDI mission in Brussels, Belgium This road show and FDI mission will target the export development to the Belgium market as well EU footwear association and financing institutions. The Belgium market represents a good potential market for the Agadir zone footwear exporters due to the importance of their imports, the position of Belgium as an important re-exporter to the EU and the similarities of the Belgium consumer behavior to the French and German market with which Tunisia and Morocco have an export experience. The presence of EU supporting institutions in Brussels will offer also an important opportunity to promote FDI and raise EU financing support to the Agadir footwear sector.
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To develop exports to Europe Agadir companies would be well advised to attend selected European international fairs twice a year over a minimum of 3 years. By their very nature attendance at overseas fairs is an expensive operation for any company let alone as well as for National Government support. However a more integrated approach would be more effective in combining resources to have an Agadir Group presence at selected shows. Attendance at a show should be anticipated by a plan with clear implemental objectives and an allocated budget which will be financed according the co-financing system of the Agadir cooperation action plan. Of the international shows that are available to the Agadir Countries the following have merit. Expo Riva Schuh, Riva del Garda, Italy, January and June each year: This show is dedicated to Shoes and some complementary bags Linea Pelle + Simac Tanning Tech, Bologna Italy, April, October International Exhibition of leathers, accessories, components and synthetic products and models for footwear, leather goods, leatherwear and furnishing. In October the show is joined with Simac an international exhibition of machines and technologies for footwear, leather goods and tanning industry. MIPEL, Milan Italy, May and September. International Showcase for leather goods. Twice a year, in a prestigious setting - the city of Milan, one of the fashion capitals in the world - the best creations in leather, fabric and alternative materials, for all seasons of the year, are presented. The aim is to highlight and promote the image of leather goods produced all around the world and, in particular, Italian-made goods. The exhibitors meet their most important counterparts, dealers and the media, and can also take part in special events, conferences and round tables in a pleasant, elegant environment. During these events it is recommended to perform the following: An Agadir partnership event should be systematically organized during these shows. It will consist of connecting commercial/industrial partners who would have been identified A promotional campaign should be performed developing the image of the Agadir Leather and shoes sector within the European Business Community and informing international clients and potential partners on the sector, and particularly on the participating companies. Each operation should have to be preceded by a briefing concerning show participants features and relevant recommendations for potential participants Actions required for Agadir promotion in EU are as follows:
Action
Organize a road show to the UK Attend the GDS shoe show Organize a Footwear Road Show & FDI and Finance raising mission in Brussels Belgium Organize the participation of Agadir Leather and footwear companies in International Exhibitions
Responsibility
Associations Companies Associations Companies Associations Companies Associations Companies
Resources
Export Promotion Agencies ATU Export Promotion Agencies ATU Export Promotion Agencies ATU Export Promotion Agencies ATU
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iii. Distribution The project is concerned with distribution methods intra Agadir and distribution methods in Europe. Intra Agadir distribution has various methods open to the companies. It is up to individual companies to decide which method or methods they feel comfortable with for implementation. Partnership Developing a relationship with a complimentary manufacturer in another country and using their existing base for distribution. The reciprocal relationship can mean manufacturing and distributing each others products in their respective local market or directly importing finished products for distribution. Vertical Marketing Seeking out a wholesaler in the respective export market and using the wholesaler to distribute the product. Agency Sales Seeking out a sales agent who solicits orders for importation and distribution from a variety of customers from retail chains, wholesalers, large retailers, Government Agencies, industrial companies, service industry (hotels, hospitals etc). Works on a sole agency basis with the manufacturer. Franchising If a company has a brand. Set up franchise retail shops or shops within a shop. Catalogue Stores Set up small warehouses with a sales counter in front. Print catalogues or flyers with the footwear on offer. Keep stock of shoes in the warehouse and on display at the counter. Sell shoes to members of the public in minimum quantities only say 1 carton at wholesale prices. These customers then become de facto mini wholesalers. Distribution Company Carry out a feasibility study for establishing a shareholding company to distribute all Agadir leather and shoes products in the region, This company will be empowered to open franchises, set and outsource its designs and fashions, give subcontracts to different suppliers from Agadir countries based on price and quality not quotas. It is assumed to have a chief executive officer (CEO) outside from the owners who knows how to market and promote its products effectively. The manufacturers may be shareholders but the management would be independent. Actions required for inter Agadir distribution are as follows:
Action
Evaluate method of distribution that company feels comfortable with Under the fact finding tour evaluate the options for distribution in the field Feasibility study for establishing a distribution chain
Responsibility
Company Management Company Management Companies Associations
Resources
In house Export promotion Agencies Country Associations ATU Export promotion Agencies Country Associations ATU
For distribution in Europe there are multiple choices available to exporters to the UK. It has a wide variety of importers and few buying groups which means there are many more customers available.
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The biggest sellers of footwear are the chain stores which represent 43% of all sales. Example of importers are:
Independent retailers can be found from the Independent Footwear Retailers Association and further information from the British Footwear Association. (Both have web sites). Phoenix and Bolton Bros are two companies which specialise in orthopaedic footwear. There are only about 20 footwear manufacturers left in the UK mostly involved with Goodyear welted construction so little opportunity for sub contracting except for specialist Goodyear welted companies in the Agadir region. Selling prices at the retail level are what guides the selling price from the exporting factories. Generally the retailer requires a margin of profit on the selling price of a minimum of 45%. This would be for a recognised branded product. Unbranded products or minor brands would require a margin of 50%. The higher the margin the retailer can make the higher the chances of an export order. In this mix there is a wholesaler or distributor who provides the footwear to the shops. This company requires a minimum of 30% margin on the CIF price of the shoes. (The wholesaler and or distributor can sometimes be the same company as the retailer, none the less the margin is still required). Starting with the research done at retail level for selling prices for similar shoes that are planned to be exported, using the above margins, exporters can calculate what a competitive and acceptable FOB selling price should be. The most popular price points at retail in the UK are between 35 and 60 (approximately euros 40 70). This would give a factory FOB price of around euros 11 to 19. There is no magic formula on how to approach these companies. Advertising for an agent is a good first step in entering the market. A good agent will ease entry into potential customers and make the export process quicker. However good agents only deal with equally good factories. Direct introductory letter to the import company principle or potential agent, with a short profile of the Agadir company and an overview of the product range with price indicators is helpful. In the letter information of why it would be beneficial to deal with Agadir with unique selling propostions and key customer values is necessary. Mentioning a web site, including a professionally produced catalogue or brochure, even a sample shoe(s) will separate one company from another. Invitation to visit stand at a trade fair. Whatever happens there has to be a plan to follow progressive steps until a face to face meeting is achieved. In terms of customer preference the wholesalers are probably the easiest targets. They have their customer list and buy in smaller quantities which matches up with the abilities of the Agadir manufacturers. There are not as many sales openings in Germany as there are in the UK. The buying of footwear is dominated by buying groups with thousands of shops and large chains in turn with thousands which in effect means fewer customers to sell to. There are smaller retail chains and manufacturers (or ex manufacturers who import under their brands). The smaller chains are easier to sell into although Deichmann, with over 2,000 shops has an affinity to do
CHAIN STORES C and J Clarks Stead and Simpson Russel and Bromley Jones Bootmaker Faith Shoes Benson Shoe
DEPARTMENT STORES Marks and Spencer Debenhams British Home Stores John Lewis House of Frazer Coop
WHOLESALERS Brevit Reiker Magnus and Warren H. R. Marrum Newmans Footwear Gardiner Brothers Patrick Shoes
DISTRIBUTORS Pentland Industries Peter Black Kidderminster Shoe
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business with developing countries. Department stores tend to be at the low end volume segment of the market and difficult to supply against low cost producing countries. Examples of the major buyers are:
BUYING GROUPS *Ariston Nord West Ring *Garant Schue+Mode RETAIL CHAINS Diechmann Salamander Breuninger Schuhhof Ceka Roland-Schuhe Hamm- Reno M A N U FA C T U R I N G IMPORTERS Salamander Gabor Reiker Seibel Sioux Ara DEPARTMENT STORES Karstadt Kauthof Lidl Metro Aldi
* These companies have been having a difficult time recently due to the financial crisis. Birkenstok, Bama and Gauter specialise in health footwear. Information can be found at the association of traders, manufacturers and exporters at hds-schuh.de. As mentioned above, there is no particularly recommended way to approach these customers. Companies need to develop their own techniques for this. An approach similar to that outlined for the UK would be a good point of reference. The principles of pricing for the German market are the same as the UK. Possibly the prices like for like are slightly higher in Germany. This means that all players in the value chain can get a little more profit. However the German market is more demanding and the higher prices sometimes reflect higher levels of service and quality. Retail selling prices therefore require the 50%+ margin of profit on the selling price and the wholesaler requires the 30% margin. For getting detailed information on EU importers the following sources are available: An Indian company called Exim Infotek publishes a directory of European importers of all types (http://www.eximinfo.com). A good link to wholesalers and wholesale prices in the UK is the Footwear and Shoe UK Wholesale Suppliers Directory (http://www.the- wholesaler. co.uk) Actions required for EU distribution are as follows:
Action
Define profile, job description and TOR for an agency agreement Seek out agents in potential markets UK at the road show and GDS Germany at the GDS Benelux at the GDS
Responsibility
Company management
Resources
In house Legal representation Export promotion agencies Export promotion agencies ATU Companies
Company Management
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6.2.3. Personal Leather Goods i. Product Development Leather goods manufacturing can be broadly categorised into 5 groups.
Group
Ladies bags
Percentage of Market
30 - 40
Item
Medium /higher, elegant fashion Classic fashion Young look Functional Wallets, purses, bill folds, stationery items, keyholders, camera cases, phone cases etc 2 levels High quality upper market segment Medium quality corporate giveaways Brief cases, attach cases, shoulder bags, folios, overnight bags, toilet bags Bags, trunks, suitcases Mens and ladies, sometimes become a fashion item Watch straps
Small leather goods
25 30
Mens items Luggage Belts
10 10 7 10
Apart from the above there is a plethora of other items that can be made from leather if there is a demand. Ladies bags is a dynamic market and unlike footwear, has shown considerable growth in recent years. Of necessity ladies bags made from leather, because of cost structures, need to be in the medium to high quality fashion segments. Ladies bags are in high demand in the EU markets becoming a fashion statement this also translates to an extent to the Agadir markets, at the same levels. The leather goods industry has developed from a craft base to where it is today. However much of the manufacturing has remained at a craft level with few mechanized factories. Most factories are at best semi mechanized and rely to a large extent on the skills of the hand workers. The successful manufacturers are those which have mechanized as much as possible. From a product development point of view factories should assess their production processes and transform from a batch hand worked system to a machine operated production line system. The SIMAC machinery show in Italy has on display the latest developments in manufacturing techniques. Successful operations also specialize in a particular type of product ladies bags mens briefcases corporate givaways, etc. This brings in economies of scale and increases in productivity. A smaller product line usually means better product development through specialization. Ladies bags, the biggest market, is subject to fashion as are belts in recent times and product development here must keep up with the trends. Fashion forward information is needed. This information is available at international shows such as Mipel in Italy and to some extent from the internet. Leather products consist of a large product range, nonetheless there are certain categories worth considering for action which have a demand. All these items lend themselves to international markets be they inter Agadir or EU.
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Ladies bags Ladies belts Mens shoulder bags Lap top bags
A key performance indicator in product development would be the degree to which a factory can change its production from craft based to machine based with the consequent savings in costs the impact of which would give them a considerable competitive advantage. Actions required for product development are as follows:
Action
Assess production methods with a view to mechanize. Visit Simac show in Italy for latest machinery developments Consider specialization by product line
Responsibility
Company Management
Resources
Business upgrading programmes ATU In house Export promotion agencies ATU Companies
Company Management
Get fashion forward information for ladies bags and belts. Visit Mipel show in Italy.
Company Management
ii. Promotion The promotion of personal leather goods should follow the same mechanisms as footwear. In fact certain leather goods are also sold in footwear shops, namely ladies bags and to some extent belts. The volume of inter Agadir trade will be less in leather goods than footwear as leather goods really are aimed at the top end of the Agadir markets. There are more opportunities in Europe where the buying power is greater. For Agadir PLG, promotion should run in conjunction with the footwear action plan as outlined above. The Company DVD and brochures should be designed and produced. The companies should be an integral part of the electronic advertising plan. They should attend the Agadir country leather shows. Actions required for inter Agadir promotion are as follows:
Action
Be part of the AgadirLeather & Footwear Database
Responsibility
The Associations The Companies The Associations The Companies The Associations The Companies
Resources
Export Promotion Agencies ATU Export Promotion Agencies ATU Export Promotion Agencies ATU
Design of a Brochure and DVD on the Agadir zone PLG sector
Be part of the creation of a virtual Agadir exhibition
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Be part of the creation of Agadir Leather and Footwear Portal Be part of the set up a monthly Agadir Newsletter Agadir pavilion in local leather shows in 4 countries
The Associations The Companies The Associations The Companies The Associations The Companies
Export Promotion Agencies ATU Export Promotion Agencies ATU Export Promotion Agencies ATU
Promotion to the EU should follow conventional lines. Two things are required vis the attendance at international shows and the appointment of sales agents. Attendance at the shows should be used to sell products and also attract established sales agents. Show attendance should be over a minimum of three years twice per year to be effective and produce results. The key performance indicator here would be the increase in export orders from the point of first show attendance. Actions required for EU promotion are as follows:
Action
Attend international show. Choose between Mipel and Offenbach Seek out sales agents
Responsibility
Company Management
Resources
Export Promotion Agencies ATU Advertise at show Advertise in Trade Press
Company Management
iii. Distribution As with footwear the project is concerned with distribution options intra Agadir and Europe. Intra Agadir distribution has various methods open to the companies. It is up to individual companies to decide which method or methods they feel comfortable with for implementation. It is probably not sensible for PLG companies to utilise the catalogue stores option. To recap the options are: Partnership Vertical marketing Agency sales Franchising Distribution company Actions required for inter Agadir distribution are as follows:
Action
Evaluate method of distribution that company feels comfortable with Under the fact finding tour evaluate the options for distribution in the field Feasibility study for establishing a distribution chain
Responsibility
Company Management Company Management Companies Associations
Resources
In house Export promotion Agencies Country Associations ATU Export promotion Agencies Country Associations ATU
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As far as the EU is concerned the route from manufacturers to consumers in the EU trade for leather goods is varied. There is a clear distinction between specialist distribution, where the product is handled by intermediaries (agents, buying groups) and retailers who primarily deal with different types of leather goods, and non-specialist distribution. In non-specialist distribution, leather goods are just one of a (wide) range of products handled by the companies in question. However, there are differences between the segments. For luggage (suitcases and briefcases), specialist channels remain important, as specialists tend to provide more display space. This is not easy for a non-specialist. For bags and small leather accessories there is a wide distribution network, which includes sales by all sorts of other shops. For all segments, department stores take up a large proportion of retail sales. TYPICAL DISTRIBUTION STRUCTURE FOR LEATHER GOODS IN EU
From the above for Agadir companies importers and/or wholesalers probably offer the best opportunity for distribution. By buying on their own account importers takes title to the goods and ar responsible for their onward sale and distribution. Importers usually buy and sell the goods, take care of import/export procedures and hold items in stock. Many importers sell directly to specialist retailers, department stores, sports or clothing shops through permanent exhibition centres. Others have their own sales staff that visit retailers on a regular basis and take orders. The importer has contacts in the local market, knows the trends and can supply considerable information and guidance
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to the overseas manufacturer. The development of a successful working relationship between manufacturer and importer can lead to a high level of co-operation with regard to appropriate designs for the market, new trends, use of materials and quality requirements. Some importers also act as wholesalers. Wholesalers often supply independent or specialist luggage and leather accessories shops and play a major role in the supply of a particular type or style. They usually specialise e.g. ladies bags or laptop cases, or in travel goods, but they often carry a wide variety of products. Wholesale margins have traditionally been quite high, but their influence is diminishing due to the increasing dominance of large retailers and the increasing acceptance of online trade. A secondary form of distribution would be through selling agents They usually work on a contract and commission basis for one or more manufacturers. Some sell from stock supplied on consignment by the exporter in order to meet their clients short-term demand. If an agent builds up his own stock, he is in fact functioning as a wholesaler or distributor. Information on wholesalers and selling agents can be found at www.eximfo.com a company which publishes lists of operators in various countries on a subscription basis. Examples of distributors in the EU of various types are as follows: CHAIN STORES DEPT. STORES IMPORTERS BUYING GROUPS
Accessorize, UK Claires Accessories, UK Zara, Spain Next, UK Top Shop, UK Mango, Spain C and A, Belgium
Karstadt, Germany Kaufhof, Germany El Corte Ingles, Spain Galleries Lafayette, Fr John Lewis, UK Coim, Italy
Samsonite, Belgium Bags etc, UK Rimowa, Germany
Goldkrone, Germany Assima, Germany Lecombi, Germany
Actions required for EU distribution are as follows:
Action
Evaluate method of distribution that company feels comfortable with Under the fact finding tours evaluate the options for distribution in the field
Responsibility
Company Management Company Management In house
Resources
Export promotion Agencies Country Associations ATU
6.3.
Aspect 3 Investment
Before talking about potential investments or presenting the actions needed to attract more investments either intra Agadir or Foreign Direct Investments (FDI), the following annual production quantities are presented in each of the 4 countries so investors could estimate the Agadir market size and potential investment opportunities according to phase 1 report:
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Annual Production Quantities

Leather production Type Beef Buffalo Camel Veal/small calf Sheep Goat Imported leather Merino (imported Australian sheep skin)** Total Footwear production (pair per year) Egypt Square feet 74.434.680 47.352.600 9.307.250 10.801.200 15.042.400 3.167.160 22.500.000 182.605.290 70 million 3.000.000 4.500.000 2.250.000 9.000.000 18.750.00 *** Half million 27.272.725 76.546.757 11.789.472 115.608.954 Jordan Morocco Tunisia*
Source: Chambers of Industry and professional associations in the four countries ***** *: All data obtained from Tunisia are in Tunisian dinar, and can not be converted in this table because they reflect only the quantities produced. **: They are all exported as raw hides from Jordan. ***: Jordan exports 80% of local raw hides and tans only 20% in the only tannery currently existing, or about 2 million square feet annually. ****: None of the four countries provided any data on production quantities of clothing and personal leather goods. *****: The above mentioned data were obtained from leather associations and leather industries in the four countries, which contacted the relevant ministries in their countries. The following table shows some of the potentials in the four countries in terms of potential investments, which depend on the availability of the industrys basic materials, the existence of industrial zones specialized in leather and other leather industries, the availability of water, energy and labor at affordable prices and sufficient quantities, the availability of the required technical expertise and the adequate supply of components.
Country
Raw hides *** ***** ***** ****
Specialized cities Not available **** *** Not available
Industry's basic materials (1) ** **** **** ****
Water
Energy
Labor
Technical expertise ** *** **** ****
Jordan Egypt Morocco Tunisia
* ***** **** ****
* ***** *** ****
* **** **** ****
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(1) Like raw hides or half-processed leather, salt, lime, pigments, chromium, oils, fillers in the case of tanning, tanned leather and components in the case of footwear and other leather industries. (2) In this classification, * means weak and ***** means the strongest country of the group. (3) In regards of basic resources, like water, energy and labor, two factors were taken into account: the availability and the competition in terms of cost and quality. (4) Technical expertise includes knowledge of manufacturing and design methods, keeping up to date with fashion trends, providing high-level specialized vocational training and knowledge of export markets. The information contained in the above table was concluded based on the results of the first phase of the study, but it is only a preliminary analysis that can be more useful when feasibility studies and other investment studies, which will be recommended here later, are conducted. A-Development of investment intra-agadir countries 1. Encouraging the creation of platforms for trade houses and big integrating projects focused on leather and footwear in Agadir countries: The international markets current trend towards the demand for finished products, the development and rapid evolution of fashion products and the manufacturing of small series, requires more capital to finance raw materials, the investment in technological equipment (CAD/CAM and automatic cutting and quilting), creation and design, marketing and training workforce. This characteristic contradicts with the dimension of subcontractor SMEs and the existing businesses, which dont have enough equity capital to buy sophisticated equipment and suffer from lack of working capital, which in turn forces them to work as subcontractors for the ordering parties, providing them with raw materials. To repair this, it is important to create big platforms in Agadir area or international trade companies (Trade House) and streamline the relationship between subcontractors and ordering parties. The platforms should have substantial financial resources to finance the acquisition of new technologies, the procurement of quality raw materials, highly qualified technical staff, the creation of new collections and promotion abroad. Given the high risks associated with these platforms, the governments of Agadir Agreement Member Countries can grant these platforms the same advantages as those given to priority industrial projects. The establishment of partnership relations between subcontractors and ordering parties and improving the management of subcontractors are necessary conditions for the success of platform development project. To that end, it is necessary to encourage the creation of a new generation of subcontractors by supporting the investment platforms in subsidiary subcontractors in the form of consortia and by increasing the funding granted to subcontractors contracts. It is also necessary to: Promote the certification of subcontractors, supervisors and auditors. Develop an accreditation system for internationally recognized certification bodies in Agadir countries. Establish a promotion, extranet and video conference program with subcontractors to enable them to work in networks with ordering parties.
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2.
Creating integrated projects for tanning and finishing quality leather
Although Egypt is a big exporter of semi-finished leather, Agadir area is poorly integrated vertically compared to the competition. To limit the impact of this competition advantage, it is necessary to improve the conditions and quality of finished leather supply by encouraging the creation of leather finishing projects. With the exception of the existence of some high-end leather finishers, especially in Tunisia, the leather finishing sector is weak in Agadir area. Given the high risks associated with these investments, the governments can grant Agadir area investors and foreign investors additional advantages, such as aids for the construction of industrial space and other benefits to be negotiated case by case according to the technological contribution of the developer. To attract these developers, it is also necessary to emphasize the importance of the needs of exporting companies in Agadir area of quality leather. Identification of new industrial projects where integration and complementarities in the Leather and Shoes sector in the Agadir countries is possible, and henceforth, promoting exports of these projects in the E.U market. 3. Carry out a feasibility studies of identified opportunities of investment in Agadir countries and particularly for the creation of footwear industrial parks offering all needed facilities for Footwear Micro and SMEs: tanning facilities and supporting services.
4. Developing in Agadir Supporting services projects: Creating in Agadir supporting services that cover: The marketing The quality and design The Information Technology 5. Creating a database of projects and make it available to the investors in the area: Creating this database will be accomplished through conducting opportunity studies of the investment projects in Agadir area. These opportunity studies will study demand and supply in Agadir area, determine the available export possibilities and the best locations for the projects, as well as the profitability of the current investments. They focus on high potential sectors such as finished leather, high-end leather footwear, specialized footwear for niche markets (orthopaedic and safety footwear) and the manufacture of footwear components. 6. Developing an investment promotion plan in Agadir area
Organizing publicity campaigns to promote the production in Agadir area in foreign media (specialized journals, television programs presenting companies that successfully produced and exported quality products for the top three companies in the best designer and best exporter contests). Developing cooperation agreements with all professional associations and organizations which encourage investment and foreign trade, and the targeted countries in the European Union. Organizing missions to explore foreign investment opportunities in Agadir countries, highlighting the advantages offered by Agadir area. Organizing an open door day between European platforms, support organizations, investor, European distributors and industrial distributors and financiers in Agadir area and the Gulf countries. B-Development of FDI:
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Besides the national FDI development program, developing of an FDI development program that include: Negotiating with EU countries to establish credit lines to finance short-term operations (purchase of raw materials, funding subcontracting operations and other services) performed in Agadir area. Develop an investment funding program in Agadir area: 1. Asking the European Investment Banks help in setting up a guarantee fund to finance regional investment projects and an intra-Agadir investment development fund to encourage joint projects in the area. 2. Develop credit insurance mechanisms for exports at the regional level: Promote a regional export credit insurance system to strengthen the partnership between the national export credit insurance organizations on the one hand and between these organizations and their European insurers and reinsurers counterparties on the other. Consider the advisability of establishing a regional export credit insurance company. Expand the export credit insurance system to include the purchases completed for the purpose of export. Investment Development Action Plan
Actions Provide incentives for the creation of platforms Provide incentives for investment in tanning & finishing Creation of Ideas of projects Data base Conduct feasibility studies for identified opportunities and particularly for the creation of footwear industrial parks dedicated to Footwear Micro and SMEs and including tanning facilities and supporting services Creation of supporting services projects FDI promotion mission in the EU & Gulf countries Establish feasibility study of the investment financing supporting system and Action Plan Responsibility Business Associations Business Associations ATU Business Associations Business Associations Business Associations Business Associations Funding Agadir countries Agadir countries EU Agadir countries Agadir countries Agadir countries Agadir countries
C- Agadir Artisan Leather Crafts Subsector: Handcraft production is a major form of employment and in the Agadir countries and constitutes a significant part of their export economies. The escalating number of small businesses turning to handcraft production is unlikely to decline significantly in the future. Artisans have been identified as the second largest sector of rural employment after agriculture in the region. Artisan production has thrived because handcrafted products offer distinct advantages: minimal start-up capital flexible work hours the ability to work at home freedom to manage ones own business.
Unlike many other forms of labour, artisan production can also enable a degree of labour autonomy for those who have limited access to the cash economy. As a means of livelihood, handcrafts provide an ideal avenue for creative, independent entrepreneurs. According to the Creative Economy Report 2008, arts and crafts are the only creative industry where developing
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countries have a leading position in the global market. For this creative sector, developing-country exports nearly doubled in ten years, increasing from $7.7 billion in 1996 to $13.8 billion in 2005, accounting for 60% of total world exports of creative goods. Tourism and the expansion of leisure and art markets will continue to contribute to the dynamism of arts and crafts in the world market. The report also quantified international trade in arts and crafts as totaling $23.2 billion in 2005. The report further states: The global market for arts and crafts is expanding and clearly is not negligible; world exports increased 31% during the period 2000-2005, from $17.7 billion in 2000 to $23.2 billion in 2005. Arts and crafts are the most important creative industry for export earnings in developing countries. The Moroccan Ministry in charge of handcrafts evaluates the number of persons considered as craftspeople in the country to be 20% of the active population. There are 2 million full-time craftspeople, approximately 1 million families living at least partially from handcrafts, and 4,390 exporters. Tunisia in terms of crafts production counts 300,000 craftspeople (11% of the active population) of which 2/3 work on a part-time basis (4 working hours a day). Their production accounts for an average of 3.8% of the Gross Domestic Income and ensures an annual income of US $2,400 per household (an average of 5 members). One of the major problems the Agadir artisans have is in distributing, marketing and selling their work. In order to reach an export market, most artisans work through a traditional distribution channel. The traditional distribution channel consists of artisans, exporters, wholesale importers, retailers and consumers.
In this distribution channel structure, artisans are responsible for producing products and transporting them to an exporter.
UNCTAD, UNDP Special Unit for South-South Cooperation, 2008, Creative Economy Report. Adapted from USAID Building a profitable craft business 130
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In addition to quality control, packing the product and transporting goods to the port of exit, the exporter has the responsibility to market the products to wholesalers or retailers: producing a catalog establishing and selling at FOB prices sales meetings with wholesalers and retailers maintaining an in-country showroom
The wholesaler then exhibits in international trade shows, selling the products to retailers at wholesale prices. In order to be a successful wholesaler, these businesses should have a website, full product catalog, and incur all the cost associated with trade show exhibition, which include inventory procurement, transportation to the show, booth display, marketing collateral such as hang tags, brochures and product catalogues. Because of increased technology, ease of communication, and more shipping options globally, this traditional distribution channel is flattening. Artisans are becoming more sophisticated and taking on the responsibility of not only producing products, but also exporting them. Additionally, more retailers, even independent retailers and small shops, are buying directly from artisans and taking on importing responsibilities. This flattening distribution channel does put a small incremental amount of profit into the hands of artisan exporters and retailer importers, however it is important to note that even though a player is removed from the distribution channel, the responsibilities and associated costs are not removed. For the leather product artisans working in the Agadir zone they should concentrate on certain aspects of the business in order to remain competitive, survive and prosper in the global economy. These are: Product Development Streamlined Production to provide economies of scale and to speed up delivery times. Quality Control Marketing / Distribution in working towards developing a direct distribution channel as above. Actions required for the Agadir Zone Artisan Handcraft sector:
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Action
Protect Agadir Handicraft products through their registration in the international intellectual property record as done for Tunisian and Moroccan sandals (balgha and countra) Move to a flattened distribution channel Product Development improvement
Responsibility
Agadir Intellectual property Institutions Associations, entrepreneurs Associations, entrepreneurs Associations, entrepreneurs Associations, entrepreneurs
Resources
Central Government support ATU support Central Government support International consultants ATU support Central Government support International consultants ATU support Central Government support International consultants ATU support
Improve production techniques and quality
Develop marketing plan based on above chart
7. SUMMARY OF ACTION PLAN

7.1. PRODUCTION A. Leather Cost Competitiveness
Action
Each Country to commission a study on hides and skins collection with an emphasis on reducing waste Create an international data base on sourcing, suppliers, and prices of the major chemicals required in tanning Take advantage of the new leather cities as an opportunity to re-organise production processes to reduce costs Hold an Agadir Group seminar on the latest tanning techniques with a view to reducing costs Meeting of Tanners Associations to decide areas of co-operation, integration and supply requirements
Responsibility
Resources
Central Government support ATU support Central Government support ATU support Business development agencies offering preferential inducements for capital investment Invitations to international chemical and machinery companies to attend the seminar Export Promotion Agencies in 4 countries
Tanners Associations The Tanning Companies Tanners Associations
Integration and Supply Opportunities
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Market research to determine types of finished leather required in each country especially for import substitution. Fact finding tour by potential exporters Decide what types that can be produced with current technology by evaluation of current manufacturing plants Decide which types in demand that cannot be produced but could be with new technology by evaluation of current manufacturing plant Decide on most appropriate market segments (which type of leather to be used in each subsector of the leather and shoes sector) : Cow Shoes Sheep PLG Goat Garment
Responsibility
Tanners associations Export Promotion Agencies The Tanners
Resources
Country associations, in cooperation with Export Promotion Agencies to plan, cofinance with individual companies, and organize a study tour for each of the four countries to the others. Companies to be pre-selected as to suitability and commitment Contact machinery manufacturers Contact chemical suppliers Contact machinery manufacturers Contact chemical suppliers
The Tanners
The Tanners
The Tanners
Company management in house strategic thinking
Quality Improvement
Action
In conjunction with the study above further work should study slaughtering and preservation techniques with the object of upgrading the raw material. Introduce an Agadir wide classification system for finished leather In conjunction with the Agadir group seminar above further work should study the latest finishing techniques
Responsibility
Tanners Associations Tanners Associations Tanners Associations The Tanning Companies
Resources
Central Government support Central Government support ATU support Government support agencies and Tanners
Action
Feasibility studies on man versus machine for productivity gains Benchmarking productivity best practices in Spain, Italy, India and Turkey Implement a productivity improvement drive
Responsibility
The Tanning Companies The Tanning Companies The Tanning Companies
Resources
In house management Government support agencies and Tanning companies Government support agencies and Tanning companies
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Training
Action
Assist any country from Agadir Zone who is interested to establish specialized training center in the Leather and shoes industry. Shop floor supervisors, laboratory technicians and research and development personnel should attend the proposed seminar above Selected and appropriate personnel to attend the Linea Pelle leather show in Italy to study the latest developments on display. Develop up to date specialized training program in the tanning industry benefiting from what will be presented by the international chemical and machinery companies during the seminar and the leather show above
Responsibility
Individual Leather and shoes associations
Resources
Government support agencies Any country form the 4 countries who have advanced experience in this field Government support agencies ATU Individual country development agencies ATU
The Tanning Companies Tanning associations and Tanning companies of the 4 countries
Government support agencies ATU
B. Footwear Integration and Supply Opportunities
Action
Responsibility
Resources
Country associations, in co-operation with export promotion agency to plan and cofinance with individual companies to organize a study tour for each of the four countries to the others. Companies to be pre-selected as to suitability and commitment Brain storming sessions with Associations
Country associations Individual manufacturing companies Companies with inputs from Associations Companies Associations Companies Government Ministries
Decide target market by country and analyse results of tour Reasoned decision from experiences from fact finding tour, decide type of product to be manufactured Set targets for import substitution
Using information obtained from study tour Export promotion agencies
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Cost Competitiveness
Action
Study current production techniques with a view to reengineering them Consider alternative labour and material saving constructions Visit SIMAC show in Italy for research on latest machinery and equipment available Research suppliers of raw materials and components in Agadir countries with a view to reduce import substitution and lower costs Agadir Group meeting to formulate policy on logistics and export finance for cost competitiveness Media campaign introducing the leather culture
Responsibility
Companies Companies Associations Companies Associations Companies Associations Companies Associations Companies
Resources
In house management Association experts In house management Association experts Export promotion agencies Business development agencies Associations Association experts Companies own management ATU Export Development Banks Export promotion agencies Business development agencies ATU Export promotion agencies
Action
Critically assess current manufacturing practices Re-design and re-engineer operational areas Conduct feasibility study into automated and semi automated machinery and equipment Analyse and consider new, less labour intensive constructions Set productivity targets
Responsibility
Company Management Company Management
Company Management Company Management Company Management
Experts from Associations In house experts ATU international experts Experts from Associations In house experts ATU international experts Experts from Associations In house experts ATU international experts In house In house
Resources
Training
Action
Review training courses available from institutions for relevance and quality needs of the modern industry Adjust where necessary Assess the quality of instructors Benchmark the attainment levels of trainees to European levels Hold seminars on marketing and selling for management
Responsibility
Ministries Associations Ministries Associations Ministries Associations Ministries Associations Associations
Resources
The institutions Corresponding training institutes in Europe The institutions The institutions The institutions Corresponding training institutes in Europe ATU International consultancies
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C. Personal Leather Goods Integration and Supply Opportunities
Action
Responsibility
Resources
Country associations, in co-operation with export promotion agency to plan and cofinance with individual companies to organize a study tour for each of the four countries to the others. Companies to be pre-selected as to suitability and commitment
Country associations Individual manufacturing companies
Creation of Center of excellence in design and creation for leather goods industry in each Agadir country and initiate cooperation between these institutions through the creation of a coordination committee
Industrial development agencies Country associations
Industrial development agencies
Cost Competitiveness
Action
Study current production techniques with a view to reengineering them with time and motion studies Visit linea pelle show in Italy for research on latest machinery and equipment available Investigate the use of CAD especially for ladies bags production
Responsibility
Companies Associations Companies Associations Companies
Resources
In house management Association experts Export promotion agencies Business development agencies Associations Business development agencies Associations
Action
Critically assess current manufacturing practices by time and motion study Conduct feasibility study into automated and semi automated machinery and equipment Attend the SIMAC international footwear and leather goods machinery show Set productivity targets
Responsibility
Company Management
Resources
Experts from Associations In house experts ATU international experts Experts from Associations In house experts ATU international experts ATU Business development agencies Associations In house
Company Management Associations Management Company Management
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Training
Action
Review training courses available from institutions for relevance and quality needs of the modern industry in stitching operations Train pattern cutters in CAD operation Invest in and train up supervisors in time and motion study
Responsibility
Ministries Associations Company management Company management
Resources
The institutions Corresponding training institutes in Europe Associations Machinery suppliers Associations Independent consultants
7.2. MARKETING A. Leather & Footwear Product Development
Action
Visit Linea Pelle show Study for the establishment of a new business producing soles / moulds / lasts / adhesives in an Agadir country
Responsibility
Associations Companies Trade associations Fashion forward information from Associations, Possible co-financing for services of international design studio Companies Companies Companies Training institutions Associations Companies
Resources
Export promotion agencies ATU ATU Utilise local and/or international designers Companies Associations Export promotion agencies Company management Machinery suppliers Chemical suppliers Company management ATU Business development agencies ATU Business development agencies ATU Business development agencies International agencies Country associations, in co-operation with export promotion agency to plan and cofinance with individual companies to organize a study tour for each of the four countries to the others. Companies to be pre-selected as to suitability and commitment
Research and design a shoeline for Agadir, UK and German markets. Product development function
Analyse the machinery and equipment available for finishing Assess the technical knowledge of technicians Train technicians to the required standard Field international consultants on finishing for 12 months over a 3 year period. Visit European chemical suppliers for information on finishing techniques. Combine with visit to Linea Pelle Sponsor study tours to EU finishing tanneries and chemical suppliers for technicians
Companies
Research the market in all four Agadir countries. Fact finding tour by potential exporters. Special attention in Jordan for re-exporting opportunities
Export promotion agencies Country associations Individual manufacturing companies
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Country associations, in co-operation with export promotion agency to plan and cofinance with individual companies to organize a tour Companies to be preselected as to suitability and commitment
Study tour and market survey to UK, Germany and Belgium
ATU Export promotion agencies Country associations Individual manufacturing companies
Actions required for inter Agadir promotion:
Action
Set up of AgadirLeather & Footwear Database Design of a Brochure and DVD on the Agadir zone Footwear(& Leather) sector Creation of a virtual Agadir exhibition Creation of Agadir Leather and Footwear Portal Set up a quaterly Agadir Newsletter Agadir pavilion in local leather shows in 4 countries Set performance targets
Responsibility
The Associations The Companies The Associations The Companies The Associations The Companies The Associations The Companies The Associations The Companies The Associations The Companies The Associations The Companies
Resources
Export Promotion Agencies ATU Export Promotion Agencies ATU Export Promotion Agencies ATU Export Promotion Agencies ATU Export Promotion Agencies ATU Export Promotion Agencies ATU Export Promotion Agencies ATU
Actions required for Agadir promotion in EU:
Action
Organize a road show to the UK Attend the GDS shoe show Organize a Footwear Road Show & FDI and Finance raising mission in Brussels Belgium Organize the participation of Agadir Leather and footwear companies in International Exhibitions
Responsibility
Associations Companies Associations Companies Associations Companies Associations Companies
Resources
Export Promotion Agencies ATU Export Promotion Agencies ATU Export Promotion Agencies ATU Export Promotion Agencies ATU
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Actions required for inter Agadir distribution:
Action
Evaluate method of distribution that company feels comfortable with Under the fact finding tour evaluate the options for distribution in the field
Responsibility
Resources
In house Export promotion Agencies Country Associations ATU
Actions required for EU distribution:
Action
Define profile, job description and TOR for an agency agreement Seek out agents in potential markets UK , Germany and Benelux
Responsibility
Company management
Resources
In house Legal representation Export promotion agencies Export promotion agencies ATU Companies
Company Management
B. Personal Leather Goods Actions required for product development:
Action
Assess production methods with a view to mechanize. Visit Simac show in Italy for latest machinery developments Consider specialization by product line Get fashion forward information for ladies bags and belts. Visit Mipel show in Italy.
Responsibility
Company Management Company Management Company Management
Resources
Business upgrading programmes ATU In house Export promotion agencies ATU Companies
Actions required for EU promotion are as follows:
Action
Attend international show. Choose between Mipel and Offenbach Seek out sales agents
Responsibility
Resources
Export Promotion Agencies ATU Advertise at show Advertise in Trade Press
Actions required for inter Agadir distribution are as follows:
Action
Evaluate method of distribution that company feels comfortable with Under the fact finding tour evaluate the options for distribution in the field
Responsibility
Resources
In house Export promotion Agencies Country Associations ATU
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Feasibility study for establishing a distribution chain
Companies Associations
Actions required for EU distribution are as follows:
Action
Evaluate method of distribution that company feels comfortable with Under the fact finding tours evaluate the options for distribution in the field
Responsibility
Company Management Company Management In house
Resources
7.3. INVESTMENT Investment Development Action Plan Investment Development Action Plan
Actions Develop an Investment Development Program targeting Agadir investors Responsibility Concerned Agadir Government Agencies Business Associations & Industrial Development Institutions ATU Funding Agadir countries
Promote the creation of complementing projects dedicated to tanning and finishing of high quality leather Creation of Ideas of projects Data base Conduct feasibility studies for identified opportunities and particularly for the creation of footwear industrial parks dedicated to Footwear Micro and SMEs and including tanning facilities and supporting services
Agadir countries
EU
Business Associations
Agadir countries
Perform a feasibility study for the setting up of industrial park dedicated to Micro, Small and Medium Enterprises Provide incentives for the creation of platforms Provide incentives for investment in tanning & finishing Creation of supporting services projects
Business Associations
Agadir countries (Business Development Centres) Agadir countries Agadir countries Agadir countries
Business Associations Business Associations Business Associations
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FDI promotion mission in the EU & Gulf countries Establish feasibility study of the investment financing supporting system and Action Plan
Business Associations Business Associations
Agadir countries Agadir countries
7.4. Actions required for the Agadir Zone Artisan Handcraft sector
Action
Protect Agadir Handicraft products through their registration in the international intellectual property record as done for Tunisian and Moroccan sandals (balgha and countra) Move to a flattened distribution channel
Responsibility
Resources
Agadir Intellectual property Institutions
Associations, entrepreneurs Associations, entrepreneurs
Central Government support ATU support Central Government support International consultants ATU support Central Government support International consultants ATU support Central Government support International consultants ATU support
Product Development improvement
Improve production techniques and quality
Associations, entrepreneurs Associations, entrepreneurs
Develop marketing plan based on above chart
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8. PRIORITISATION OF ACTION PLAN

8.1. Short and Medium terms plan
Before discussing the plan, it should be noted that the private sector stresses the need to develop a program to facilitate trade and improve logistic services, transport and ports, as well as facilitating the granting of visas for businessmen in Agadir countries. This is an important factor in encouraging cooperation among member states in the fields of transport and provision in order to reduce shipping cost and promote professional cooperation in the sector in Agadir area. To this end, it is suggested to use the findings and recommendations of the transport study undertaken by Agadir Technical Unit (ATU). The representatives of the private sector stressed the importance of specialization for the successful implementation of the plan. Therefore, the companies in Agadir area should focus and specialize in certain types and industries in their sub-sectors to become more competitive and thus increase export opportunities.
Proposed Recommendation First: Tanning and Leather 01- The study recommends the adoption of a three-dimensional plan on the national level for the tanning sector that takes the following into consideration: Switching from hand slaughter to machine slaughter in the slaughterhouses Building leather warehouses in the Arab countries Providing reliable and well equipped transport to ensure proper leather preservation The Responsible Body Expected Budget
Professional associations in Agadir countries financed by their governments. These associations should hold coordination meetings, conduct the necessary studies and identify the expected costs of this plan
25 thousand (for the study)
02- Organizing and holding joint coordination meetings and developing a cooperation framework among professional associations which represent the tanning industry in order to identify potential areas of cooperation and integration and supply needs and establish committee for permanent consultation
Professional associations
25 thousand
03- Creating a digital data bank on the suppliers and the main chemical materials needed in tanning industry and make it accessible online (Agadir Technical Unit gate)
Agadir Technical Unit
30 thousand
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04- Considering the new leather cities as an opportunity to reorganize production processes to reduce costs and promote cross-investments in this area 05- Increasing professional meetings between private sector companies in the leather sector to further identify the market needs in each country 06- Harmonizing standards by agreeing on a broad classification system in Agadir for final leather within the framework of technical cooperation 07- Exchanging experiences between the four countries in the area of training and the possible development of joint training programs Second: footwear and Personal Leather Goods 08- Organizing and holding joint coordination meetings and developing a cooperation framework among professional associations, which represent the sectors of footwear and personal leather goods in order to identify potential areas of cooperation and integration and supply needs and establish committee for permanent consultation 09- Increasing professional meetings between private sector companies in the sectors of footwear and personal leather goods to further identify the market needs in each country 10- Creating a digital data bank on the suppliers and the main materials needed in manufacturing footwear and personal leather goods and make it accessible online (Agadir Technical Unit gate)
Agencies for supporting the industry and promoting investment in Agadir countries
20 thousand
25 thousand
Professional associations and Agadir Technical Unit Professional associations with support from the agencies and programs for supporting the industry in Agadir countries
35 thousand
100 thousand
25 thousand
25 thousand
Agadir Technical Unit
Around the same cost mentioned earlier in the tanning and leather plan of 30 thousand Euro 5 thousand for each company eligible for support from rehabilitation programs in the four countries 25 thousand 25 thousand 30 thousand for each exhibition
11- Developing an action plan to train companies operating in the sectors of footwear and personal leather goods in Agadir area similar to the Tunisian-Moroccan experience, within the framework of technical cooperation 12- Promoting partnership projects 13- Encouraging international trade between merchants in the four countries 14- Cross-participation in exhibitions organized in Agadir countries
Professional associations with support from existing rehabilitation programs in their countries
Professional associations Professional associations with support from relevant government agencies Professional associations and Agadir Technical Unit
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Professional associations Agadir Technical Unit The relevant government agencies in the four countries
15- Participating in specialized exhibitions in Europe, to be chosen by the professional associations in coordination with Agadir Technical Unit Third: Handicraft Products
200 thousand for each exhibition
16- Developing a technical cooperation program between the bodies responsible for traditional and heritage crafts to further promote these products in the markets of Agadir member states as well as in the European Union
The bodies responsible for craft industries in the four countries
100 thousand
17- Protecting the traditional and heritage crafts by registering brands at the international level like the Tunisian cuntra and the Moroccan belgha
The bodies responsible for craft industries in the four countries
50 thousand
Fourth: Investment Professional associations Agadir Technical Unit
18- Creating an investment digital map on the promising projects in the sectors, and make it available to investors in the region
25 thousand
19- Analyzing investment opportunities in regional projects in the leather, footwear and other leather products
Institutions charged with supporting the industry and encouraging/ promoting investment in the four countries in coordination with the professional associations
100 thousand
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8.2. Long term
The various proposals and recommendations of this study can be categorized according to a schedule that takes into account the available resources and the willingness of various parties. It is suggested to authorize the ratification of the proposed plan for implementation over the coming years.
ANNEX I
1. Global Imports and Exports All Leather Products
Designation 4101 4102 4103 4104 4105 4106 4107 4112 4113 4114 4115 Total
Global export in million of US $ 4,664,794 994,499 534,295 7,063,069 530,869 45,8587 12,666,010 1,003,938 1,817,903 770,386 351,407 30,855,757
Share 15 3 2 23 2 1.5 41 3 6 2.5 1 100
Raw skins of cattle Raw skins of sheep Raw skins of goat Prepared leather of cattle Prepared leather of sheep Prepared leather of goat Prepared leather of reptile, porcine and others Finished leather of sheep after tanning Finished leather of goat after tanning Finished chamois leather Finished reproduced leather
The above table shows the following: 20 % of exports are raw skins, 67 % are semi-finished leather and 10 % are constituted of finished leather The leading raw skin exported product is raw skin of cattle The leading semi-finished exported product are leather of cattle and leather of porcine, reptile and others The leading exported finished leather products are goat, chamois leather and finished reproduced leather
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1.1
HIDES, SKINS and LEATHER 1.1.1 Global imports hides, skins and leather:
The Global imports of hides, skins and leather during the period 2003-2007 is as follows:
Trade Indicators Importers Value imported in 2007, in USD thousand 29,492,510 5,964,674 4,219,962 3,568,065 1,046,123 903,355 851,306 850,554 848,715 782,626 744,111 256,706 115,045 1,5245 610 Trade balance in 2007 in USD thousand 1,497,264 -4,787,713 845,500 -621,176 175,938 -47,713 -689,233 -736,224 2,216,066 -59,579 -46,6426 -231,160 -91,194 13,0471 7,149 Annual growth in value between 20032007, % 5 12 7 3 8 -2 13 5 0 -1 -4 11 12 68 -15 Annual growth in value between 20062007, % 6 7 10 -8 6 5 22 3 -4 18 -12 33 6 59 -12 Share in world imports, % 100 20.22 14.31 12.1 3.55 3.06 2.89 2.88 2.88 2.65 2.52 0.87 0.39 0.05 0
World China Italy Hong Kong Germany Korea Viet Nam Romania USA Spain Mexico Tunisia Morocco Egypt Jordan
Trade Map ITC Unit: thousand of US$ The above table shows the following: Global imports of skin and leather is slowly increasing by 5 % a year during the period 2003-2007. Most producing countries of leather are producers of footwear and leather goods The world top ten importers are global leading producers and exporters of footwear: China, Italy, Hong Kong, Germany, Korea, Viet Nam, Romania, EU countries, USA and Japan. They represented 67 % of the global demand The biggest Agadir countries importers are Tunisia and Morocco that are the leading exporters of footwear of Agadir member states
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1.1.2 Global exports hides, skins and leather:
The Global exports of skin and leather during the period 2003-2007 is as follows:
Trade Indicators Exporters Value exported in 2007, in USD thousand 30,989,770 5,065,462 3,064,781 2,946,889 2,193,931 1,222,061 1,176,961 969,481 914,383 855,642 833,384 805,164 775,369 723,047 Trade balance in 2007 in USD thousand 1,497,264 845,500 2,,216,066 -621,176 2,035,844 175,938 -4,787,713 923,759 820,034 -47,713 283,738 391,157 205,319 -59,579 Annual growth in value between 2006-2007, % 6 4 7 -8 17 8 -33 9 14 3 5 9 13 8 Share in world exports, % 100 16.35 9.89 9.51 7.08 3.94 3.8 3.13 2.95 2.76 2.69 2.6 2.5 2.33
Annual growth in value between 2003-2007, %
World Italy USA Hong Kong Brazil Germany China Argentina Australia Korea Chinese Taipei India France Spain
5 5 4 3 20 4 3 7 4 -5 1 10 3 5
Trade Map ITC Unit: thousand of US$ The above table shows the following: With a significant positive Trade Balance, EU developed countries and USA are the leading exporting countries particularly Italy ranking by far the first exporter with16 % of Global exports followed by USA second with a market share of 10 %, Germany 5th with a share of 4 %. This is due to the specialisation of developed countries in high quality finished leather while delocalising the production of uppers, footwear and leather goods in developing countries. China is lagging in the sixth position with a huge negative Trade Balance. China is massively importing leather to meet the needs of its expanding industry of footwear and leather goods. Brazil ranking 4th, Argentina 7th and Australia 8th are also in good position with a very important positive trade balance due to the importance of their production of livestock and related production of raw skin
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1.1.3
Global exports of raw cow hides:
The Global exports of raw hides of cattle during the period 2003-2007 are as follows:
Exporters
Value exported in 2007, in USD thousand 4,664,794 1,774,511 350,160 294,882 282,233 245,435 195,008 153,518 119,872 116,378 108,996 107,543 6,715 686 55
Trade balance in 2007 in USD thousand -76,927 1,724,417 314,955 293,881 277,733 80,891 87,608 -51,194 58,785 116,163 -786,939 42,270 -1,590 686 -1,885
Annual growth in value between 2003-2007, % 2 3 5 8 9 6 4 -13 7 13 2 9 10 -3
Annual growth in quantity between 2003-2007, % 1
Annual growth in value between 2006-2007, % 8 14 6 31 6 -10 1 -4 5 11 -11 -4 -28 6
Share in world exports, % 100 38.04 7.51 6.32 6.05 5.26 4.18 3.29 2.57 2.49 2.34 2.31 0.14 0.01 0
World USA France Australia Canada Germany Netherlands Hong Kong UK Ireland Italy Spain Egypt Jordan Tunisia
10 12 1 -15 -4 11 7 -2 3 -15
Trade Map ITC Unit: thousand of US$ The above table shows the following: Global export of raw hides of cattle is very low as most developing countries are establishing their own transformation capacities of raw hides USA is the leading global exporter of raw hides of cattle followed by France, Australia, Canada, Germany, Netherlands, Hong Kong, United Kingdom, Ireland, Italy and Spain. The leading global exporters are those who are big producer of meat and exporting raw hides as a by product and the mostly experiencing the delocalisation of their leather to developing countries.
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1.1.4 Global exports of finished cow leather
The Global exports of finished cow leather during the period 2003-2007 is as follows:
Exporters
Value exported in 2007, in USD thousand 7,063,069 1,081,930 697,628 677,147 531,044 444,407 396,528 338,069 211,299 188,197 182,099 99,040 740 450
Trade balance in 2007 in USD thousand 711,921 1,002,502 667,210 581,786 -917,218 -99,133 174,378 337,950 175,040 -6,8341 166,721 98,331 -878 430
Annual growth in value between 2003-2007, % 6 18 11 11 -3 -6 0 59 -9 36 23 12 16 0
Annual growth in quantity between 2003-2007, %
Annual growth in value between 2006-2007, % 3 20 15 3 -10 -34 4 54 -6 20 9 22 351 26
Share in world exports, % 100 15.32 9.88 9.59 7.52 6.29 5.61 4.79 2.99 2.66 2.58 1.4 0.01 0.01
World Brazil Argentina USA Italy Hong Kong Taipei Kazakhstan Australia Thailand Ukraine Egypt Morocco Jordan
10 3 9 -17 7 5 17 10 4 103
Trade Map ITC Unit: thousand of US$ The above table shows the following: The leading global exporters of prepared cow leather are big producers of meat who has a high transformation capacities of raw skin as a by-product. Some developing countries are also high exporters of prepared cow leather such as Kazakhstan, Thailand, Ukraine and Egypt Exports of Morocco, Jordan and Tunisia are not significant
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1.1.5
Global exports of finished leather of porcine, reptile and others
The Global exports of prepared leather of porcine, reptile and others during the period 2003-2007 is as follows:
Exporters
Value exported in 2007, in USD thousand 12,666,010 3,238,515 1,884,057 1,069,608 840,295 695,123 601,405 484,810 404,773 338,993 257,186 230,749 28,363 7,992 3,074 20
Trade balance in 2007 in USD thousand
Annual growth in value between 20032007, % 8 7 7 23 9 6 -3 13 31 9 0 -5 46 14 31 4 2
Share in world exports, % 100 25.57 14.87 8.44 6.63 5.49 4.75 3.83 3.2 2.68 2.03 1.82 0.22 0.06 0.02 0
World Italy Hong Kong Brazil China Germany Korea Austria India USA Argentina Thailand Egypt Tunisia Morocco Jordan
485,712 2,527,388 -275,862 1,048,119 -1,788,198 2,2951 410,433 418,037 363,287 -242,910 251,511 153,343 26,022 -104,250 -80,649 -99
-5 14 -35 13 4 63 25 17 -5 36 19 0 3 11
Trade Map ITC Unit: thousand of US$ The above table shows the following: The export leader is Italy with a market share of 26 % The leading global exporters are developed countries who are big producers of meat and have a high transformation capacities of raw skin as a meat by-product. Some developing countries are also high exporters of prepared leather of porcine such as Brazil, China, India, Thailand, and Egypt
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1.1.6 Global export of finished leather of sheep
The Global exports of finished ovine leather during the period 2003-2007 are as follows
Exporters
Value exported in 2007, in USD thousand 1,003,938 268,242 109,864 92,072 69,934 68,786 66,917 58,569 54,941 36,577 33,088 31,037 7,622 2,491 2,266
Trade balance in 2007 in USD thousand
Annual growth in quantity between 2003-2007, % 0 -4 0 18 -20 2 45 20 7 -8 -5 19 -7 109 -8
Annual growth in value between 2006-2007, % -2 -6 2 9 -19 4 29 4 6 -8 -16 -1 65 -11
Share in world exports, % 100 26.72 10.94 9.17 6.97 6.85 6.67 5.83 5.47 3.64 3.3 3.09 0.76 0.25 0.23
World Italy Hong Kong Nigeria Korea Spain India Free Zones France China UK Pakistan Tunisia Egypt Morocco
151,491 129,521 -56,555 92,072 20,155 36,203 65,642 57,022 33,638 -106,998 27,009 30,083 3,043 891 635
Trade Map ITC Unit: thousand of US$ The above table shows that the leading exporters of finished sheep leather are EU developed countries particularly the Italy who is leading the global exports with a market share of 27 %. However some developing countries such as India and Pakistan are knowing a high increase of their exports
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1.1.7
Global export of finished leather of goat:
The Global exports of finished leather of goat during the period 2003-2007 is as follows:
Trade Indicators 4113 Exporters Value exported in 2007, in USD thousand 1,817,903 2,85,712 2,24,758 184,977 184,116 169,377 115,417 87,619 65,062 61,754 56,374 45,950 43,630 39,108 9,178 814 181 Annual growth in value between 2003-2007, % 13 19 16 11 29 21 8 25 18 9 27 0 -8 17 165 49 -29 Annual growth in quantity between 20032007, % 4 15 6 13 20 -8 9 21 3 18 -3 17 126 -62 Annual growth in value between 2006-2007, % 10 39 -10 1 31 8 -1 22 8 36 33 19 -20 8 132 -28 -83
Trade balance in 2007 in USD thousand 170,255 -26,601 43,617 -59,806 183,407 165,217 109,107 87,180 59,275 11,657 51,682 -11,568 -13,974 -70,573 -7,020 670 -6,799
Share in world exports, % 100 15.72 12.36 10.18 10.13 9.32 6.35 4.82 3.58 3.4 3.1 2.53 2.4 2.15 0.5 0.04 0.01
World Italy China Hong Kong Pakistan India Taiwan Nigeria South Africa France Singapore Germany USA Spain Morocco Egypt Tunisia
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The above table shows that the leading exporters of finished leather of goat are EU developed countries. However some developing countries such as China, Pakistan, India, Nigeria and South Africa are experiencing a high increase of their exports with an yearly rate of growth respectively of 16, 29, 21, 25 and 18 % 1.1.8 Global exports of finished chamois leather:
The Global exports of finished chamois leather during the period 2003-2007 is as follows:
Trade Indicators4114 Exporters
Value exported in 2007, in USD thousand 770,386 389,802 74,121 55,283 50,959 34,382 18,461 16,615 15,160 13,587 11,228 9,184 7,931 6,296 2,319 350 1
Trade balance in 2007 in USD thousand 37,365 370,472 71,647 42,527 50,887 5,800 -183,150 -10,736 -99,734 10,286 -6,096 -29,727 -14,997 -33,307 -4,170 -548 -270
Annual growth in value between 2003-2007, % 1 11 -10 -39 977 7 22 -13 -5 20 280 -6 12 10 -24 171
Annual growth in value between 2006-2007, % 28 29 -3 684 18 72 -9 7 -33 28 79 -26 41 52 50 29
Share in world exports, %
World Italy Korea USA Dom Republic Hong Kong Mexico Spain China Brazil Slovenia Romania France Tunisia Morocco Egypt Jordan
100 50.6 9.62 7.18 6.61 4.46 2.4 2.16 1.97 1.76 1.46 1.19 1.03 0.82 0.3 0.05 0
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The above table shows the following: 1.1.9 Global exports of finished reproduced leather:
The Global exports of finished reproduced leather during the period 2003-2007 is as follows:
Trade Indicators 4115 Exporters
Value exported in 2007, in USD thousand 351,407 80,389 47,422 41,704 39,283 23,810 18,528 15,417 11,079 9,088 8,527 7,081 5,741 658 89 22
Trade balance in 2007 in USD thousand -26,633 -81,681 42,817 28,976 37,408 21,838 6,994 11,085 5,774 7,943 7,162 5,416 2,098 -43,809 -46 -43
Annual growth in value between 2003-2007, % -1 9 -1 -7 -1 -43 -9 30 -2 39 22 42 -17 -9
Annual growth in value between 20062007, % -21 18 3 7 -73 6 -28 14 -6 62 7 9 -20 -45 1171 5
World Hong Kong Germany Italy Mexico Taiwan USA Spain Rep Korea Brazil UK Poland France Tunisia Egypt Jordan
100 22.88 13.49 11.87 11.18 6.78 5.27 4.39 3.15 2.59 2.43 2.02 1.63 0.19 0.03 0.01
Trade Map ITC Unit: thousand of US$ The above table shows the following: The leading exporters of finished reproduced leather are developed countries that represented 75 % of global exports: Hong Kong, Germany, France, Italy, Mexico, Taipei, USA, and Spain Global Export growth rate is negative Global Export growth of Brazil, France, UK, Rep of Korea and Spain are highly increasing respectively with an yearly rate of 26, 23, 20, 13 and 11 % Agadir exports are not significant
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1.2 LEATHER GOODS 1.2.1 Global exports personal leather goods
The Global exports of leather goods during the period 2003-2007 are as follows:
Trade Indicators42 Exporters Value exported in 2007, in USD thousand 44,098,580 14,229,340 6,210,732 5,226,103 4,054,379 1,579,214 1,328,002 1,224,423 1,131,856 772,991 733,304 Trade balance in 2007 in USD thousand -5329356 1,372,0730 138,8942 2,565,853 1,078,839 -1,306,077 1,263,538 117,927 -9,579,754 725,823 -2,061,774 Annual growth in value between 2003-2007, % 11 10 7 18 14 18 8 12 15 13 13 Annual growth in value between 2006-2007, % 14 15 7 24 12 20 9 15 -2 22 22 Share in world exports, % 100 32 14 12 9 4 3 3 2.6 2 1.7
World China Hong Kong Italy France Germany India Belgium USA Viet Nam UK
Trade Map ITC Unit: thousand of US$ The above table shows the following: The ten leading exporters of leather goods represented 84 % of global exports The five leading exporting countries of leather goods represented 72 % of global exports. The first leading exporter is China with a market share of 32 %, followed by Hong Kong with 14 %, then Italy with 13 % followed by France with 9 % and Germany 4 %. The global leading exporters are Asian developing countries with 51 % of global exports, followed by developed countries with a market share of 33 % Leading developed countries registered an annual export growth during the period 2003-2007 higher than that of global exports whereas leading developing countries registered a lower increase.
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1.2.2
Global imports personal Leather Goods
The Global imports of leather goods during the period 2003-2007 are as follows:
Trade Indicators Annual growth Annual growth in value in value between between 2006-2007, % 2003-2007, % 15 6 6 10 25 16 22 22 20 15 18
Importers
Value imported in 2007, in USD thousand 49,427,930 10,711,610 4,941,468 4,821,790 2,975,540 2,885,291 2,795,078 2,660,250 1,546,686 1,107,008 1,106,496
Trade balance in 2007 in USD thousand 12 7 8 6 14 10 13 19 16 14 10
Share in world imports, % 100 21.67 10 9.76 6.02 5.84 5.65 5.38 3.13 2.24 2.24
World USA Japan Hong Kong France Germany UK Italy Spain Canada Belgium
-5,329,356 -9,579,754 -4,880,867 1,388,942 1,078,839 -1,306,077 -2,061,774 2,565,853 -873,480 -930,133 117,927
Trade Map ITC Unit: thousand of US$ The above table shows the following: The ten leading importers are developed countries that represented 72 % of global imports 1.2.3 Global exports of leather goods carried in pocket or handbag
The Global exports of leather articles carried in pocket during the period 2003-2007 are as follows:
420231 Articles carried in pocket or handbag, with outer surface of leather Exporters Value exported in 2007, in USD thousand 3,149,370 1,132,827 447,894 364,559 356,977 258,000 121,513 94,080 93,404 51,488 32,238 Trade balance in 2007 in USD thousand 688,511 968,932 424,024 42,194 209,822 256,095 -61,207 14,319 41,593 -80,186 26,562 Annual growth in value between 2003-2007, % 18 27 22 8 21 7 22 19 -8 37 15 Annual growth in quantity between 20032007, % -7 19 13 10 -26 19 15 -7 35 7 Annual growth in value between 2006-2007, % 27 35 21 13 42 12 31 8 20 36 38
Share in world exports, % 100 35.97 14.22 11.58 11.33 8.19 3.86 2.99 2.97 1.63 1.02
World France China Hong Kong Italy India Germany Switzerland Spain UK Thailand
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The above table shows the following: France is the leading exporter with a market share of 36 % of global exports followed by China with a market share of 14 %, Hong Kong 12 %, Italy 11 % and India 8 % The ten leading global exporters are EU developed countries and Asian developing countries Global exports are highly increasing with an yearly rate of growth of 18 % UK, France, Germany, China, Italy and Switzerland registered respectively an yearly export growth of 37 %, 27 %, 22 %, 22 %, 21 % and 19 % higher than that of the global exports. India. Hong Kong and Thailand registered a lower increase 1.2.4 Global exports leather handbags
The Global exports of leather handbags during the period 2003-2007 is as follows
Exporters
World Italy France Hong Kong China India Switzerland Germany UK Spain USA Romania Morocco Tunisia Egypt Jordan
Value exported in 2007, in USD thousand 5,580,430 2,081,774 864,334 848,560 633,183 209,599 101,657 99,113 89,007 83,404 74,072 55,803 13,730 13,456 1,740 98
Trade balance in 2007 in USD thousand -8,423 1,631,051 277,144 56,903 567,098 204,644 -61,265 -106,614 -308,757 -44,981 -1,126,381 46,063 10,178 11,575 -271 -84
Annual growth in value between 2003-2007, % 22 23 17 20 41 10 32 22 53 9 12 16 15 -2 26 22
Annual growth in value between 2006-2007% 22 29 8 20 22 6 75 15 44 32 -22 32 15 21 70 216
Share in world exports, % 100 37.3 15.49 15.21 11.35 3.76 1.82 1.78 1.59 1.49 1.33 1 0.25 0.24 0.03 0
Trade Map ITC Unit: thousand of US$ The above table shows the following: Italy is the leading exporter , with a market share of 37 % of global exports followed by France with a market share of 16 % Italy and France covered 53 % of the Global demand
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1.2.5
Global exporters of leather executive cases and briefcases
The Global exports of leather executive cases and brief-cases during the period 2003-2007 is as follows
Annual growth in value between 20032007, % 10 7 25 6 8 38 17 4 0 -1 4 2 -10 7 -28
Exporters
Value exported in 2007, in USD thousand 957,606 369,921 141,357 89,049 67,217 42,060 38,125 28,610 18,364 18,271 14,149 3,343 1,421 239 24
Trade balance in 2007 in USD thousand 206,582 355,061 92,292 54,353 -2,798 39,798 584 -60,965 13,588 -83,524 -10,029 2,938 1,338 -521 -330
Annual growth in value between 20062007, % 11 15 33 -26 5 9 38 3 -2 -18 55 9 -11 -33 -8
World China Italy France Hong Kong India Germany UK Mexico USA Spain Morocco Tunisia Egypt Jordan
100 38.63 14.76 9.3 7.02 4.39 3.98 2.99 1.92 1.91 1.48 0.35 0.15 0.02 0
Trade Map ITC Unit: thousand of US$ The above table shows the following: China is the leading exporter of executive and brief-cases, with a market share of 39 % of global exports followed by Italy with a market share of 15 % then by France 9 % China, Italy and France covered 63 % of the Global demand Italy and France are specialised in the fancy high quality segment with an unit value respectively of US$ 126 and US$ 190 whereas China and India are specialised in the mass consumer segment with an unit value of US$ 48.
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1.2.6 Global exporters of leather accessories The Global exports of leather accessories during the period 2003-2007 is as follows:
Value exported in 2007, in USD thousand 2,563,598 613,348 255,893 149,407 148,286 142,583 136,906 90,307 90,179 86,803 84,922 Trade balance in 2007 in USD thousand 962,442 521,382 205,089 316 76,303 -13,111 68,800 71,878 48,330 82,955 84,193 Annual growth in value between 20032007, % 10 18 11 30 22 16 -3 -19 5 -1 24 Annual growth in value between 20062007, % 3 3 -12 17 30 -40 52 1 -8 -12 35
Exporters
Share in world exports, % 100 23.93 9.98 5.83 5.78 5.56 5.34 3.52 3.52 3.39 3.31
Trade Map ITC Unit: thousand of US$ The above table shows the following:
World China France Mexico Hungary USA Poland Austria Italy Brazil Argentina
China is the leading exporter, with a market share of 24 % of global exports followed by France with a market share of 10 %. China and France covered 39 % of the Global demand France is specialised in the fancy high quality segment with an unit value respectively of US$ 214 whereas China is specialised in the mass consumer segment with an unit value of US$ 11. 1.2.7 Global exporters of leather apparel
The Global exports of leather apparel during the period 2003-2007 is as follows:
Annual growth in value between 2003-2007, % 1 -10 14 3 13 4 12 12 22 -4 15 4 -11 24 2 8 5 22 10 31 13 29
Exporters
Value exported in 2007, in USD thousand 8,479,044 2,567,748 1,150,341 703,054 666,691 529,247 430,283 305,472 279,096 238,307 169,958
Trade balance in 2007 in USD thousand 171,411 2,505,517 723,797 197,838 663,730 523,736 -342,891 -199,911 -1,729,535 192,080 -57,641
Annual growth in value between 20062007, %
Share in world exports, % 100 30.28 13.57 8.29 7.86 6.24 5.07 3.6 3.29 2.81 2
orld China Italy Hong Kong Pakistan India Germany France USA Turkey Netherlands
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China is the leading exporter of leather apparel, with a market share of 31 % of global exports followed by Italy with a market share of 14 % China and Italy covered 45 % of the Global demand Italy is specialised in the fancy high quality segment with an unit value of US$ 143 whereas China is specialised in the mass consumer segment with an unit value of US$ 40. 1.3 FOOTWEAR
The table shows that footwear with leather uppers represented the biggest share of global exports at nearly 60 %.
6401 6402 6403 6404 6405 6406 Total

1.3.1
Designation Waterproof footwear
Footwear with rubber/plastic uppers
Footwear with leather upper Footwear with textile upper Special footwear Parts of footwear
Global export in million of US $ 1 17 46 9 3 7 83
Share
1% 20 % 56 % 11 % 4% 8% 100 %
Global exports of footwear

Trade Indicators 64
Exporters
Value exported in 2007, in USD thousand 83,620,420 25,305,590 10,711,020 6,144,136 5,962,447 3,396,171 3,271,395 2,626,815 2,038,057 1,984,034 1,842,887 180,1224 1,782,507 1,637,959 1,412,039
Trade balance in 2007 in USD thousand -4,542,288 24,579,090 5,333,101 5,891,693 826,384 826,120 -3,105,882 106,474 1,815,789 -3,735,725 -507,985 1,102,923 1,140,083 1,556,050 1,272,471
Annual growth in value between 2003-2007, % 10 19 5 13 1 18 15 3 5 11 12 2 6 9 18
Annual growth in value between 20062007, % 12 16 9 13 -1 14 15 14 4 18 15 13 5 2 14
World China Italy Viet Nam Hong Kong Belgium Germany Spain Brazil France Netherlands Portugal Romania Indonesia India
100 30.26 12.81 7.35 7.13 4.06 3.91 3.14 2.44 2.37 2.2 2.15 2.13 1.96 1.69
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The above table shows the following:
A high increase of exports coming from developing countries through the development of the delocalisation of the production process from high cost labour countries to low cost labour countries: China is leading the Global exporters with a market share of 30 %; Vietnam, Indonesia and India are ranking respectively third, 13th and 14th exporter EU developed countries are still leading exporters particularly Italy ranking second exporter followed by Belgium 5th , Germany 6th , Spain 7th , and France 8th Romania still equally in a good position (12th ) despite the fact that Romanian exports are showing a slow increase since its accession to the EU Export growth of China, Vietnam and India with an annual growth rate respectively of 19 %, 13 % and 18 % are by far higher than that of Italy, Spain and Portugal(respectively 5%, 3% and 2%) Accordingly, the Agadir countries competitors are mostly: China and Vietnam in the price sensitive segment as they have a high market share, 30 & 7 %, and their export growth are also very high, 19% and 13 % per year. Italy in the high quality segment as its market share in the Global export is still high and the label produced in Italy is highly appreciated every where. 1.3.2 Global imports of footwear
Trade Indicators 64 Importers Value imported in 2007, in USD thousand 88,162,710 20,404,470 6,377,277 5,719,759 5,377,919 5,338,129 5,136,063 4,096,788 2,570,051 2,520,341 2,350,872 Trade balance in 2007 in USD thousand -4,542,288 -19,517,050 -3,105,882 -3,735,725 5,333,101 -4,272,993 826,384 -4,031,023 826,120 106,474 -507,985 Annual growth in value between 20032007, % 10 6 8 8 9 7 1 8 11 20 17 Annual Share in growth in world value between imports, % 2006-2007, % 10 100 1 23.14 7 7.23 14 6.49 5 6.1 6 6.05 -2 5.83 7 4.65 24 2.92 16 2.86 16 2.67
World USA Germany France Italy UK Hong Kong Japan Belgium Spain Netherlands
The above table shows the following: World imports are highly increasing by 10 % a year during the period 2003-2007 The world top ten importers are developed countries: The EU countries, USA and Japan which represent 68 % of the global demand The EU 27 countries imports represent 44 % of world imports The EU 15 countries imports represent 40 % of world imports. Their imports are highly increasing(from 8 to 20%) despite only a moderate increase in consumption(2%) this is due to an increase of their imports from developing countries Most EU imports are to EU15 and represent 40 % of Global imports whereas imports to new EU members are very limited, 4% of Global imports The biggest EU importers are Germany, France, Italy, UK, Belgium, Spain, Netherlands which represents 34% of Global imports shows a high increase of their imports: from 8 % to 20 % a year during the period 2003-2007
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1.3.3
Exports of footwear with leather upper (6405)

Value Exported 2005 36402936 7990087 6387064 3737798 898042 1679846 967472 1571039 1269818 1507747 1042302 927512 909876 751793 858293 596998 562744 408788 327365 489803 258345 157098 106919 19329 133 Value exported 2006 39949260 8697711 6895967 3753259 1266839 1873415 1428927 1634869 1294981 1450942 1117058 1037021 1144826 908778 929304 665443 622752 480596 349792 490238 275937 152576 47626 24403 233 Value exported 2007 46233028 9433576 7922096 3731803 3179710 2068301 1826797 1817854 1494180 1397517 1214213 1187797 1150492 1044946 1023263 729962 596264 586872 518487 504064 357837 193915 71799 19658 872
The Global exports of footwear with leather upper during the period 2003-2007 are as follows:
xporters World China Italy Hong Kong Viet Nam Germany Belgium Spain Portugal Brazil Netherlands France Indonesia India Roumania UK Thailand Denmark Slovakia Austria Tunisia Morocco Turkey Egypt Jordan Value exported 2003 29759424 5279301 5998846 3449418 663045 1281678 712657 1678672 1394529 1283666 685822 748409 721621 501900 691457 479198 440900 331947 251141 416936 146814 129969 74697 16983 156 Value exported 2004 32494852 6248522 6373195 3351548 761358 1482547 679572 1726770 1407032 1456114 815791 863497 817777 565320 769415 541087 450775 376038 304466 449653 228051 132803 92808 18181 123
Trade Map ITC Unit: thousand of US$ The above table shows the following: China is leading the global exports of footwear with leather uppers Italy still in good position in this segment; the second. The gap with China still limited compared to other segments . Italy has been the global leader up to 2004. Tunisia is ranking the 17th exporter in the Global market followed by Morocco ranking 26th Tunisia has the highest market share 0.7% of the Global exports followed by Morocco 0.4 % whereas the market share of Egypt and Jordan are insignificant, 0.03 and 0.01% The Tunisian, Moroccan and Jordanian export growth, respectively 12, 11 and 15 %, are higher than that of the global market, 10 % The Egyptian export growth, 7 % is lower than that of the Global export.
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1.3.4 Exports of footwear with rubber /plastic upper (6402) The Global exports of footwear with rubber/plastic upper during the period 2003-2007 are as follows:
Value exported 2003 10,361,865 4,653,986 349,083 1,633,137 537,641 666,534 199,820 762 1,655 229 417 Value exported 2004 11,644,748 5,554,458 316,158 1,652,861 600,808 743,204 284,746 1,696 1,191 416 639 Value Exported 2005 13,028,632 6,667,186 321,168 1,668,825 835,867 640,764 357,763 1,309 5,713 273 334 Value exported 2006 14,601,389 7,860,345 510,472 1,540,042 859,662 653,044 394,978 3,581 7,680 379 281 Value exported 2007 17,411,592 9,166,902 1,679,274 1,436,698 887,272 707,822 522,825 7,868 5,755 373 222
Exporters World China Viet Nam Hong Kong Belgium Italy Germany Morocco Tunisia Jordan Egypt
Trade Map ITC Unit: thousand of US$ 1.3.5 Export of Waterproof footwear (6401)
The Global exports of waterproof footwear during the period 2003-2007 are as follows:
Value exported 2003 561000 136703 76306 28713 18686 17615 3266 8302 16215 11016 8031 3710 4 168 29 Value exported 2004 663044 153914 77743 29714 20742 20722 6973 10745 21353 14038 9966 3298 4 94 42 Value exported 2006 750709 219475 87276 35333 29648 19370 10301 14774 14656 13558 11365 8740 176 127 9 Value exported 2007 838171 273268 92123 44411 33115 24964 24888 19168 19026 18980 18091 4644 981 203 19
Exporters World China Italy France Netherlands Portugal Romania Equador Canada UK Belgium Morocco Tunisia Jordan Egypt
Value exported 2005 756742 196273 77654 30877 31488 19089 8021 12173 25910 15634 9724 5048 3 145 36
Trade Map ITC Unit: thousand of US$ The above table shows that global exports are limited in this segment. Third of global exports are coming from China and 11% from Italy whereas exports from other countries are very limited particularly those coming from Agadir countries
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1.3.6. Export of Footwear with textile upper

Value exported 2003 5308787 1612084 659479 585655 331394 316263 167276 234269 137539 140935 13655 5691 97 Value exported 2006 8157397 2876681 1484107 645837 473854 321894 301140 265542 198060 166324 4999 5962 366 Value exported 2007 9021552 3474317 1117365 624153 566185 399158 364695 311606 268314 264607 7644 5404 345
Exporters World China Viet Nam Belgium Italy Hong-Kong Germany Spain France Netherlands Tunisia Morocco Egypt
Value exported 2004 6470069 1874334 1154765 624355 424502 310902 226378 218053 164898 196458 20301 8083 320
Value exported 2005 7327592 2380480 1411017 682570 427767 350126 248223 242666 167098 146101 17839 8207 351
Trade Map ITC Unit: thousand of US$ The above table shows that Exports from China and Vietnam are predominant in the global exports. They represented 50 % of Global exports whereas exports from other countries are very limited particularly those coming from Agadir countries 1.3.7 Export of Special footwear: The Global exports of special footwear during the period 2003-2007 are as follows:
Exporters
Value exported in 2007, in USD thousand 3,238,546 1,789,707 152,070 123,553 88,793 83,146 75,677 71,433 67,984 67,221 32,537 22,738 2,827 675
Trade balance in 2007 in USD thousand -91,757 1,78,7555 78,789 115,131 30,786 64,466 66,491 69,508 20,796 -1,466,201 29,342 22,320 -15,184 -1,192
Annual growth in value between 20032007, % 14 24 -6 -2 3 8 4 29 10 18 32 21 13 23
Annual growth in value between 2006-2007, % 19 32 12 -25 14 20 7 7 -5 49 15 9 42 192
Share in world exports, % 100 55.26 4.7 3.82 2.74 2.57 2.34 2.21 2.1 2.08 1 0.7 0.09 0.02
World China Italy Romania Spain Portugal Poland Viet Nam Hong Kong USA Morocco Tunisia Jordan Egypt
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The above table shows that Exports from China and Vietnam are predominant in the global exports. They represent 55 % of Global exports whereas exports from other countries are very limited particularly those coming from Agadir countries. However it is to note that Agadir countries exports of this segment are highly rising particularly that of Morocco 32 %, Tunisia 21 % and Egypt 23 %. Global exports are also increasing (14 %) higher than that of the whole footwear sector, 10 %. 1.3.8 Export of Parts of footwear (6406)
The Global exports of footwear parts during the period 2003-2007 are as follows:
Value exported in 2007 in USD thousand 6508164 1167816 1069084 388180 370806 322801 289836 272204 240609 205980 186343 180862 143507 126307 123124 103684 94364 1442 166 Trade balance 2007 in USD thousand 609956 868753 165791 50495 259151 68410 231258 -138078 209170 -159354 54747 66742 -103132 113545 81578 46626 39160 -27098 -2240 Annual growth in value between 2003-2007, % 4 24 -2 -4 3 2 10 9 -4 5 8 2 -1 13 0 1 7 51 -37 Annual growth in value between 2006-2007, % 4 46 -23 -10 -1 -3 19 10 -6 -13 16 13 1 22 4 11 23 46 1283
Exporters
World China Italy Romania Korea Hong Kong India Germany Taiwan USA Spain Tunisia France Brazil Albania Bulgaria Morocco Egypt Jordan
100 17.94 16.43 5.96 5.7 4.96 4.45 4.18 3.7 3.16 2.86 2.78 2.21 1.94 1.89 1.59 1.45 0.02 0
The above table shows the following: The leading exporting countries of footwear parts are China with a market share of 18 %, followed by Italy with 16.5 % and Romania with 6 % Among Agadir countries, Tunisia is the leading exporter of footwear parts, ranking 11th followed by Morocco ranking 14th Jordan exports of footwear parts are very limited
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1.3.9
Export of Footwear uppers
The Global exports of footwear uppers during the period 2003-2007 are as follows
Exporters World China Romania India Tunisia Italy Albania Bulgaria Germany Brazil Serbia Bosnia Morocco Egypt Jordan Value exported in 2007 2,940,599 621,202 314,728 268,604 175,930 159,588 113,086 92,766 91,703 85,709 83,915 70,008 69,416 1,105 61 Trade Balance in 2007 267,708 583,477 231,191 262,054 145,423 -573,886 87,678 73,663 -122,769 81,718 74,528 62,,081 48,775 -14,359 -869 Growth in % 2003-07 4 21 -6 10 1 4 -2 3 13 13 77 0 49 Growth in % 2006-07 13 40 -15 22 12 19 3 15 7 32 34 22 11 63 1425
$Trade Map ITC
Share in % 100 21.13 10.7 9.13 5.98 5.43 3.85 3.15 3.12 2.91 2.85 2.38 2.36 0.04 0
Unit: thousand of US
The above table shows the followings: The leading exporters of uppers are mostly from developing countries China with a market share of 21 % , Romania with 11 %, India 9 % and Tunisia 6 % covered 47 % of Global exports of uppers The labor intensive uppers are more and more subcontracted in developing countries The export growth of Tunisia and Romania is slowly increasing or dropping as they are more and more producing finished products. 1.3.10 Export of Footwear Unit soles
The Global exports of footwear unit soles during the period 2003-2007 are as follows:
Exporters
Value exported in 2007, in USD thousand 1,292,314 378,176 312,486 120,543 63,331 42,169 36,463 36,000
Trade balance in 2007 in USD thousand 10,079 302,538 268,118 24,093 55,146 18,875 -11,854 629
Annual growth in value between 2003-2007, % 6 31 2 2 4 -2 -6 -2
Annual growth in value between 2006-2007, % 16 62 4 -3 -7 18 -8 -6
Share in world exports, % 100 29.26 24.18 9.33 4.9 3.26 2.82 2.79
World China Italy Hong Kong Taiwan Spain Germany France
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Romania Portugal Austria Morocco Tunisia Egypt Jordan 26,267 26,209 19,353 10,993 1,899 210 55 -111,889 -1,826 -7,554 -9,045 -18,332 -10,930 -946 6 0 -2 71 16 50 0
14 2 4 131 -30 -21 1733
2.03 2.03 1.5 0.85 0.15 0.02 0
Trade Map ITC Unit: thousand of US$ The above table shows the following: The leading exporting countries of footwear parts are China with a market share of 29 %, followed by Italy with 24 %. Among Agadir countries, Morocco is the leading exporter of unit soles, with a high growth of 71 % a year during the period 2003-2007 Jordan and Egyptians exports of unit soles are very limited 1.3.11 Export of Other Footwear parts (heels and insoles)
The Global exports of other footwear parts during the period 2003-2007 are as followings:
Trade balance in 2007 in USD thousand 325,951 470,576 280,783 -20,289 18,368 -3,816 128,681 26,435 83,256 5,686 -68,689 -320 -60,332 -1,687 -375
Exporters
Value exported in 2007, in USD thousand 2,257,253 595,196 288,986 164,372 153,095 143,471 137,464 135,239 123,737 85,625 46,912 13,953 3,033 126 22
Annual growth in value between 2003-2007, % 3 -5 5 24 4 13 -5 8 12 -2 6 87 21 58 -55
Annual growth in value between 2006-2007, % -11 -38 1 37 -20 17 -4 -2 20 0 23 46 91 193 340
Share in world exports, % 100 26.37 12.8 7.28 6.78 6.36 6.09 5.99 5.48 3.79 2.08 0.62 0.13 0.01 0
World Italy Korea China USA Germany Taiwan Hong Kong Spain France Romania Morocco Tunisia Egypt Jordan
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The above table shows the followings: The leading exporting countries of other footwear parts is Italy with a market share of 26 %, Among Agadir countries, Morocco is the leading exporter of other footwear parts, with a high export growth, 87 % a year Jordan and Egyptian exports of other footwear parts are very limited 1.3.12 Imports of uppers
The Global imports of footwear uppers during the period 2003-2007 are as follows:
Trade balance in 2007 in USD thousand 267,708 -573,886 -210,216 -122,769 -121,232 -109,305 -6,1783 -31,780 -69,051 231,191 -49,015 Annual growth in value between 2003-2007, % 1 -4 11 4 -4 -7 25 3 -2 11 24
Importers
Value imported in 2007, in USD thousand 2,672,891 733,474 223,078 214,472 155,401 131,093 129,312 95,617 85,703 83,537 67,665
Share in world imports, %
World Italy Japan Germany USA France Slovakia Korea Portugal Romania Spain
4 -13 14 2 -6 9 41 1 21 33 4
100 27.44 8.35 8.02 5.81 4.9 4.84 3.58 3.21 3.13 2.53
Trade Map ITC Unit: thousand of US$ The above table shows the follows: The leading importers of footwear parts are developed countries (Italy, Germany, France, Portugal, Spain, USA and Japan) that are still a high producers of footwear while subcontracting the uppers in developing countries Slovakia and Romania are also important importers of uppers
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ANNEX II
1. EU Imports and Exports All Leather Products 1.1 HIDES, SKINS and LEATHER 1.1.1 European imports of hides, skins and leather.
For the imports of hides, skins and leather during the period 2003-2007 see the statistics presented in Annex I under global section 1.1.1. This also gives information for Europe. 1.1.2 European exports of hides, skins and leather.
For the exports of hides, skins and leather during the period 2003-2007 see the statistics presented in Annex I under global section 1.1.2. This also gives information for Europe. 1.2 LEATHER GOODS 1.2.1 Europe imports personal leather goods
The Europe imports of leather goods during the period 2003-2007 are as follows:
Trade Indicators Importers Value imported in 2007, in USD thousand 49,427,930 2,975,540 2,885,291 2,795,078 2,660,250 1,546,686 1,106,496 882,171 500,306 398,077 391,200 353,613 286,269 231,175 198,371 Trade balance in 2007 in USD thousand -5,329,356 1,078,839 -1,306,077 -2,061,774 2,565,853 -873,480 117,927 -205,470 -276,284 -233,528 -155,551 -325,560 -227,826 -160,200 -153,087 Annual growth in value between 2003-2007, % 12 14 10 13 19 16 10 15 9 14 21 12 11 23 17 Annual growth in value between 2006-2007, % 15 25 16 22 22 20 18 21 24 14 4 25 34 53 14
Share in world imports, % 100 6.02 5.84 5.65 5.38 3.13 2.24 1.78 1.01 0.81 0.79 0.72 0.58 0.47 0.4
World France Germany UK Italy Spain Belgium Netherlands Austria Sweden Denmark Greece Portugal Ireland Finland
The above table shows the following: EU imports represented 35 % of Global imports EU imports of leading importers are highly increasing particularly Italy with an yearly import growth of 19 % , Spain 16 %, Netherlands 15 %, France 14 %, United Kingdom 13 % EU small importers (Denmark, Ireland and Finland) registered a high import growth respectively of 21 %, 23 % and 17 % per year during the period 2003-2007.
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1.2.2
Europe exports personal leather goods
The EU exports of leather goods during the period 2003-2007 is as follows:

Trade Indicators42 Exporters Value exported in 2007, in USD thousand 44,098,580 5,226,103 4,054,379 1,579,214 1,224,423 733,304 676,701 673,206 235,649 224,022 Trade balance in 2007 in USD thousand -5,329,356 2,565,853 1,078,839 -1,306,077 117,927 -206,1774 -205,470 -873,480 -155,551 -276,284 Annual growth in value between 20032007, % 11 18 14 18 12 13 20 11 30 -4 14 24 12 20 15 22 34 25 29 12 Annual growth in value between 2006-2007, % Share in world exports, % 100 12 9 4 3 2 2 2 0.5 0.5
World Italy France Germany Belgium UK Netherlands Spain Denmark Austria
Trade Map ITC Unit: thousand of US$ The above table shows the following: EU exports represented 35 % of global exports The leading EU exporters are Italy, France and Germany, representing 25 % of Global exports Export growth of EU leading exporters (18 % for Italy and Germany, 14 % for France) are higher than that of the global exports (11 %)
1.3 FOOTWEAR 1.3.1 European exports of footwear
For the exports of footwear during the period 2003-2007 see the statistics presented in Annex I under global section 1.3.1. and 1.3.3 . This also gives information for Europe. 1.3.2 European imports of footwear
For the imports of footwear during the period 2003-2007 see the statistics presented in Annex I under global section 1.3.2. and 1.3.12 . This also gives information for Europe. 1.3.3 Analysis of European demand for Footwear
From the international market analysis, the market target for Agadir countries are Germany, France, Italy, UK, Belgium, Spain and Netherlands, for the following main reasons: Agadir exports to EU countries are free of taxes they could export free Germany, France, Italy, UK, Belgium, Spain and Netherlands are responsible of 34 % of the Global demand. Their demand is higher than that of USA (23%) Their demand is very active with an yearly increase from 8 to 20 %
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1.3.3.1 Italy The breakdown of Italian imports by origin is as follows:
Exporters World Romania China Belgium Tunisia India Netherlands France Indonesia Viet Nam Bosnia and Herzegovina Morocco
Imported Imported Imported value Imported value in value in 2003 value in 2004 in 2005 2006 1,754,960 596,299 70,151 50,873 117,740 48,185 52,385 58,871 30,834 128,323 55,760 14,926 2,030,403 616,424 85,581 60,490 95,432 75,918 149,371 66,230 32,593 115,550 57,130 14,869 2,395,795 662,225 287,060 83,538 119,761 86,382 149,741 80,198 47,151 143,669 58,005 16,049 2,722,779 725,244 307,560 146,438 125,011 129,589 132,400 106,608 74,946 107,298 78,694 16,805
Imported value in 2007 2,911,705 556,242 300,551 255,433 176,786 157,983 137,500 131,000 104,968 103,207 96,892 19,168
Trade Map ITC Unit: thousand of US$ The above table shows the following : The five leading exporters to Italy are Romania, followed by China, Belgium, Tunisian and India. Romanian Export Growth to Italy is decreasing since Romanias access to the EU Chinese, Tunisian, Belgium, Indian, French and Indonesian export growth is increasing Morocco with a limited market share is ranking 25th in the Italian Imports 1.3.3.2. France The breakdown of French imports by origin is as follows:
Exporters World Italy Portugal China Spain Viet Nam Indonesia Tunisia Germany India Morocco Imported value in 2003 2,315,038 674,563 290,651 173,656 295,633 205,410 56,049 59,964 43,816 34,690 55,781 Imported value in 2004 2,545,464 754,024 326,860 165,063 304,538 210,090 46,084 79,846 60,878 50,467 55,185 Imported value in 2005 2,875,479 799,891 342,716 339,451 296,202 229,209 79,137 85,684 79,804 62,704 47,148 Imported value in 2006 3,094,087 852,845 378,553 351,352 277,726 258,059 130,433 115,986 101,008 83,348 51,602 Imported value in 2007 3,435,999 969,929 454,362 374,699 294,667 261,017 151,903 126,934 118,530 110,094 70,770
The above table shows the following: The ten leading exporters to France are Italy, 1st , followed by Portugal, second, China 3rd, Spain 4th, Viet Nam 5th, Indonesia 6th, Tunisia 7th, Germany 8th, India 9th and Morocco 10th Except for Spain, export growth of the exporting countries is increasing
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1.3.3.3 Germany The breakdown of German imports by origin is as follows:

Exporters World Italy China Viet Nam Portugal India Slovakia Romania Indonesia Austria Spain Morocco Tunisia Imported value in 2003 2,979,166 666,455 168,366 294,334 286,612 107,787 139,439 138,929 79,069 197,381 156,329 49,156 34,509 Imported value in 2004 3,156,665 644,739 211,218 376,880 238,084 149,000 116,611 165,116 75,600 193,118 137,181 55,599 38,993 Imported value in 2005 3,567,642 654,641 529,029 395,666 239,026 166,913 188,094 181,183 78,605 195,509 117,574 64,803 49,331 Imported value in 2006 3,773,725 704,429 545,096 385,408 276,473 189,381 178,500 190,712 108,258 175,287 93,569 83,885 43,573 Imported value in 2007 3,852,121 754,945 469,560 379,522 292,777 229,884 196,176 191,501 155,746 133,666 90,150 82,719 54,893
Trade Map ITC Unit: thousand of US$ The above table shows the following: The eleven leading exporters to Germany are Italy first, China second, Viet Nam third, Portugal 4th, India 5th, Slovakia 6th, Romania 7th, Indonesia 8th , Austria 9th , Spain 10th , and Morocco 11th . Romanian and Slovakian Export Growth to Germany are slowing or decreasing since Romania and Slovakia access to the EU Italian, Indian, Portuguese and Indonesian export growth is increasing whereas Chinese, Vietnamese and Austrian exports are decreasing Tunisia ranks 18th in the German Imports 1.3.3.4. UK The breakdown of UK imports by origin is as follows:
Exporters World Italy China Viet Nam India Netherlands Brazil Spain Belgium Portugal Germany Indonesia Tunisia Imported value in 2003 2,658,687 480,196 196,592 395,708 152,009 201,003 109,619 210,510 79,862 282,137 89,882 78,838 9,666 Imported value in 2004 3,123,471 524,163 244,015 531,631 191,371 248,569 146,537 235,019 74,726 275,921 115,977 82,469 22,415 Imported Imported Imported value in 2005 value in 2006 value in 2007 3,261,744 463,494 581,291 493,323 193,902 284,360 183,407 180,851 95,752 199,863 127,736 84,462 24,268 3,292,863 414,014 547,363 461,119 205,591 261,673 210,148 151,991 218,205 172,577 143,553 117,003 17,344 3,403,148 518,220 496,185 419,900 253,697 233,040 229,735 170,650 169,861 169,100 146,802 125,615 22,622
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The above table shows the following:
The ten leading exporters to UK are Italy first, China second, Viet Nam third, India 4th, Netherlands 5th, Brazil 6th, Belgium 7th, Portugal 8th , Germany 9th , and Indonesia 10th . Romanian and Slovakian Export Growth to UK are slowing or decreasing since Romanian and Slovakian access to the EU Italian, Indian, German and Indonesian Export growth are increasing whereas Chinese, Vietnamese and Spanish exports are decreasing Tunisia is ranking 19th in the UK Imports Moroccan exports are not significant at US$132,000 1.3.3.5 Spain The breakdown of Spanish imports by origin is as follows:
Exporters World China Italy Viet Nam Netherlands Portugal Indonesia India France Brazil Morocco Thailand Belgium United Kingdom Germany Hong Kong Macau Tunisia Imported value in 2003 648,960 75,568 85,699 101,348 72,459 55,128 41,892 14,238 29,869 15,946 18,041 27,206 7,228 15,966 17,784 1,326 2,685 10,985 Imported value in 2004 778,492 87,708 109,734 131,427 90,073 70,356 36,990 22,576 33,325 28,655 16,732 23,189 3,655 13,233 17,369 1,086 10,096 10,966 Imported value in 2005 1,010,313 230,142 132,894 142,341 106,667 78,608 38,327 30,822 44,400 45,086 25,786 24,773 3,826 17,694 16,580 2,099 1,771 13,658 Imported value in 2006 1,188,079 271,797 161,867 132,130 123,399 79,361 57,126 53,349 45,847 49,955 29,999 28,874 14,916 17,740 19,601 8,992 10,098 14,924 Imported value in 2007 1,320,425 264,281 198,386 139,280 112,778 98,847 83,760 62,372 56,823 51,989 36,365 32,955 26,648 23,379 23,082 20,932 14,742 14,547
Trade Map ITC Unit: thousand of US$ The above table shows the following: The ten leading exporters to Spain are China first, Italy second, Viet Nam third, Netherlands 4th, Portugal 5th, Indonesia 6th, India 7th, France 8th , Brazil 9th , and Morocco 10th . Moroccan, Italian, Indian, German and Indonesian export growth is increasing whereas Chinese, and Vietnamese export growth is sluggish. Tunisia ranks 17th in imports to Spain
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1.3.3.6 Belgium The breakdown of Belgium imports by origin is as follows:

Exporters World China Italy Netherlands Viet Nam Indonesia France Germany Thailand Spain India Tunisia Imported value in 2003 863,864 90,210 183,289 107,321 114,494 45,006 81,518 64,430 32,940 44,767 9,421 1,757 Imported value in 2004 951,836 79,667 204,431 139,160 121,241 49,562 90,711 72,012 36,438 44,137 12,148 2,206 Imported value in 2005 1,125,350 169,924 220,499 172,113 126,016 62,561 88,921 76,059 51,181 42,568 15,990 3,711 Imported value in 2006 1,226,713 214,162 229,753 182,284 130,269 76,338 89,368 72,563 68,932 37,884 24,442 4,429 Imported value in 2007 1,525,574 274,502 267,925 232,996 153,329 129,041 101,272 82,619 77,652 43,525 39,260 3,369
The ten leading exporters to Belgium are China first, Italy second, Netherlands third, Viet Nam 4th, Indonesia 5th, France 6th, Germany 7th, Thailand 8th , Spain9th and India 10th . Except Spain, export growth of exporting countries is increasing Tunisia ranks 22th in imports to Belgium 1.3.3.7 Netherlands The breakdown of Dutch imports by origin is as follows:
Exporters World China Italy Belgium Germany Portugal Viet Nam United Kingdom Indonesia India Brazil Imported value in 2003 833,487 105,402 167,666 27,701 77,776 105,858 61,650 16,775 22,954 14,214 20,385 Imported value in 2004 974,113 161,051 182,145 41,803 85,532 110,654 95,045 13,033 28,366 20,027 22,135 Imported value in 2005 1,139,751 222,800 178,105 159,986 87,161 115,331 88,699 19,293 33,056 21,105 34,395 Imported value in 2006 1,280,596 188,152 174,073 244,005 149,987 128,594 44,290 42,990 46,610 30,462 40,673 Imported value in 2007 1,456,225 239,561 199,216 193,740 164,447 142,946 86,479 69,785 67,413 46,475 42,653
The ten leading exporters to Netherlands are China first, Italy second, Belgium third, Germany 4th, Portugal 5th, Viet Nam 6th, UK 7th, Indonesia 8th , India 9th , and Brazil10th . Except Belgium and Brazil, export growth of exporting countries is increasing 1.3.4 Analysis of European Demand for Uppers
Italy, Germany and France are the most important importers of uppers due to the delocalisation of their production to developing countries of labour intensive items such as uppers.
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1.3.4.1 Italy The breakdown of Italian imports by origin is as follows:
Exporters World Romania Tunisia Albania Serbia India Bulgaria Bosnia Macedonia Croatia Ukraine China Poland Hungary Morocco Imported value in 2003 911,066 377,850 89,001 100,707 0 54,949 82,971 21,328 15,781 15,680 5,634 10,939 15,328 1,356 3,092
Trade Map ITC Unit: thousand of US$ The above table shows the following: Italian imports are decreasing Exports of Romania and Bulgaria are decreasing Tunisian, Ukrainian, Hungarian and Moroccan exports are increasing Exports from other exporters are sluggish Tunisia is ranking second and Morocco 14th 1.3.4.2 Germany The breakdown of German imports by origin is as followings:
Exporters World India Viet Nam Brazil Indonesia Bosnia and Herzegovina Romania Hungary Portugal Croatia China Morocco Slovakia Ukraine Colombia Poland Czech Republic Tunisia Imported Imported Imported value in value in 2003 value in 2004 2005 186,924 33,501 89 13,185 13,993 7,308 9,616 24,977 28,661 8,656 1,909 409 9,355 219 1,675 1,357 3,613 1,569 181,259 36,429 655 15,121 10,214 8,506 10,339 17,113 35,894 10,309 4,086 853 4,863 88 1,688 1,741 1,613 1,209 180,936 35,226 12,683 12,998 13,010 10,092 16,120 14,939 30,093 9,018 8,295 373 547 462 1,274 474 660 1,118
Imported value in 2004 823,672 334,324 79,045 106,117 0 46,164 73,003 27,132 19,077 12,178 5,192 10,997 17,701 11,375 2,351
Imported value in 2005 752,082 285,003 69,520 97,999 0 42,761 75,830 22,920 24,578 9,628 6,018 11,398 15,847 6,293 1,702
Imported value in 2006 839,237 298,332 88,338 100,498 55,187 63,513 83,610 28,331 21,956 13,327 11,018 16,985 8,106 6,703 4,664
Imported value in 2007 733,474 151,935 102,164 98,161 75,443 67,846 55,203 33,465 33,118 21,255 17,483 17,057 15,122 7,324 7,005
Imported value in 2006 209,933 41,467 35,405 20,145 20,159 12,507 20,864 14,142 16,690 9,375 11,011 297 157 1,147 981 1,425 482 1,156
Imported value in 2007 214,472 45,651 34,710 21,535 20,706 18,718 16,547 13,927 13,631 12,733 5,826 2,178 1,352 1,311 1,288 993 777 635
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German imports are increasing Exports of Romania, Bulgaria are decreasing Most of German imports are from East European and Asian countries Exports from other exporters are sluggish Morocco is ranking 11th and Tunisia 17th
1.3.4.3 France The breakdown of French imports by origin is as follows:

Exporters World Tunisia India Morocco Slovakia Portugal Czech Republic China Bosnia and Herzegovina Bulgaria Imported value in 2003 161,988 63,736 18,870 45,021 6,838 13,403 456 1,484 137 0 Imported value in 2004 155,385 58,748 26,832 38,427 9,083 9,106 1,718 1,442 245 1 Imported value in 2005 133,309 45,492 27,108 26,685 12,410 7,933 2,836 2,261 829 0 Imported value in 2006 119,808 40,184 30,665 20,214 7,381 7,002 3,303 3,113 1,730 0 Imported value in 2007 131,093 43,427 34,839 21,105 9,321 6,252 3,455 2,819 2,215 1,533
Trade Map ITC Unit: thousand of US$ The above table shows the following: French imports are decreasing Exports of India and Czech republic are increasing Portuguese, Tunisian and Moroccan exports are decreasing Tunisia is ranking first and Morocco 3th 1.3.4.4 Spain The breakdown of Spanish imports by origin is as follows:
Exporters World India Romania Morocco Tunisia Colombia Sri Lanka Brazil Imported value in 2003 26,659 16,974 2,766 632 154 605 0 518 Imported value in 2004 48,429 26,645 5,308 4,744 2,384 1,569 0 1,953 Imported value in 2005 60,199 29,317 9,033 5,293 5,081 2,930 138 3,236
Imported value in 2006 64,851 26,770 8,267 8,680 5,753 3,914 2,131 559
Imported value in 2007 67,665 26,714 9,716 7,662 7,484 4,407 2,890 2,580
Morocco and Tunisia supply equal amounts to Spain but are small compared with the purchase by Spain from India. India supplies 40% of the Spanish market Morocco and Tunisia have a 11% share each.
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ANNEX III
1. Global Trade of Agadir Countries Leather Products 1.1 HIDES, SKINS and LEATHER 1.1.1 The Agadir countries exports of leather, hides and skins during the period 2003-2007 are as follows:
Trade Indicators Exporters Value exported in 2007, in USD thousand 145,716 25,546 23,851 111,683 63,486 Trade balance in 2007 in USD thousand 130,471 -231,160 -91,194 109,405 60,897 Annual growth in value between 2003-2007, % 15 4 19 16 3 Annual growth in value between 2006-2007, % 10 49 30 49 36
Share in world exports, % 0.47 0.08 0.08 0.36 0.2
Egypt Tunisia Morocco Saudi Arabia Syria
Source: Trade Map ITC
Unit: thousand of US$
The above table shows the following: Egypt, Saudi Arabia and Syrian Arab Republic are important net exporters of leather due equally to the importance of their production of meat. Tunisia and Morocco are exporters of leather but with an important negative trade balance. There are massively importing leather to support their emerging footwear and leather goods industry Accordingly, Tunisia and Morocco could benefit from the Agadir Agreement and the Arab Free trade Agreement to effectively source their leather from Egypt, Saudi Arabia and Syria. 1.1.2 Exports of Agadir countries from hides, skins and leather to the EU
Country 2005 Jordan 652 Egypt 74,487 Morocco 8,708 Tunisia 11,503 Unit: thousand of US$ Year 2006 2007 435 8 92,192 110,807 13,253 17,820 6,851 10,756 Source: Trade Map ITC
Egypt is by far the biggest exporter of semi processed leather to the EU Morocco and Tunisia have relatively low exports to EU Jordans trade is negligible. 1.1.3 Imports of Agadir countries from hides, skins and leather from the EU:
Country Jordan Egypt 46 2005 Year 2006 168 7,785 2007 114 11,350
5,610
Morocco 84,710 104,499 108,174 Tunisia 158,006 177,400 233,099 Unit: thousand of US$ Source: Trade Map ITC
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Tunisia is a large importer of finished leather to service its sub - contracting system. Much of this leather is re exported in the form of finished goods Morocco has a very similar system to Tunisia, only smaller Egypt imports leather usually for its export oriented companies Jordans trade is very small. The following charts show the import and export of hides and skins by the 4 countries in the Agadir Group.Egypt. These statistics come from the UN statistics division data base and are published under http://data.un.org. These statistics are different from the ITC Comtrade Trade Map statistics which have been used above and elsewhere in the report. These statistics have the advantage that they show the detailed breakdown by industrial code for the various commodities in the sub sector. They provide a useful guide as to the trends in the trade during the last three years. The information comes from information passed to the UN by member countries. Information, if required, for other countries (Morocco, Tunisia and Jordan), can be accessed at the above web sight. JORDAN - IMPORT OF HIDES AND SKINS
Comm. Code Commodity Trade US $ (000) 2006 410110 410121 410122 410129 410130 410140 410210 410221 410229 410310 410390 410410 410421 Bovine skins, whole, raw Bovine hides, whole, fresh or wet-salted Butts and bends, bovine, fresh or wet salted Hide sections, bovine, nes, fresh or wet salted Bovine hides, raw, nes Equine hides and skins raw Sheep or lamb skins, raw wool on, except Persian Sheep or lamb skins pickled, without wool Sheep or lamb skins, raw, except pickled, no wool Goat or kid hides and skins, raw, nes Raw hide/skins except bovine/equine/sheep/ goat/reptile Bovine skin leather whole Bovine leather, vegetable pretanned except whole skins 6,075 200 49,365 48,181 60,014 182,751 3,909 48,000 44,000 62,860 137,478 10,000 5,501 24,000 13,470 2007 2008 2006 729 Trade Kgs. (000) 2007 2008
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Bovine leather, otherwise pretanned except whole skin Bovine and equine leather, tanned or retanned ,nes Bovine or equine leather full or split grain, nes Bovine and equine leather, nes Sheep or lamb skin leather, vegetable pretanned Sheep or lamb skin leather, tanned or retanned, nes Sheep or lamb skin leather, nes Goat or kid skin leather otherwise pretanned Goat or kid skin leather, tanned or retanned, nes Goat or kid skin leather , nes Swine leather Reptile leather, vegetable, pretanned Leather of animals, nes Chamois (including combination chamois) leather Patent leather, metallised leather Parings and other waste of leather Composition leather in slabs, sheets or strip 9,385 192,089 35,763 142,923 17,631 4,463 4,227 14,595
410422 410429 410431 410439 410511 410519 410520 410612 410619 410620 410710 410721 410790 410800 410900 411000 411100
99,271 51,615 20,418 33,752 84,928 29,928 23,615 88,152
6,088 37,270 811 2,693 1,020 9,830 1,649 3,074 9,993
38,111
3,878
329 230
24,108
151
19,780
858
17,254
28,884
14,782 1,661
587
1,058
270,709
58,217
34,637
28,261
1,813
65,034
204,281
1,296
14,998
37,698
JORDAN - EXPORT OF HIDES AND SKINS

Comm. Code Commodity 2006 410110 410121 410122 Bovine skins, whole, raw Bovine hides, whole, fresh or wet-salted Butts and bends, bovine, fresh or wet salted 542,690 87,041 Trade US $ (000) 2007 642,981 43,409 2008 746,221 2006 628,000 83,000 Trade Kgs. (000) 2007 731,000 46,500 2008 797,640
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410129 410130 410140 410210 410221 410229 410310 410320 410390 410410 410421 410422 410429 410431 410439 410511 410512 410519 410520 410611 410612
Hide sections, bovine, nes, fresh or wet salted Bovine hides, raw, nes Equine hides and skins raw Sheep or lamb skins, raw wool on, except Persian Sheep or lamb skins pickled, without wool Sheep or lamb skins, raw, except pickled, no wool Goat or kid hides and skins, raw, nes Reptile skins raw Raw hide/skins except bovine/ equine/sheep/goat/reptile Bovine skin leather whole Bovine leather, vegetable pretanned except whole skins Bovine leather otherwise pretanned except whole skin Bovine and equine leather, tanned or retanned ,nes Bovine or equine leather full or split grain, nes Bovine and equine leather, nes Sheep or lamb skin leather, vegetable pre-tanned Sheep or lamb skin leather , otherwise pretanned Sheep or lamb skin leather, tanned or retanned, nes Sheep or lamb skin leather, nes Goat or kid skin leather vegetable pretanned Goat or kid skin leather otherwise pretanned
18,025
40,000
264,980 1,922,154
1,251,250 2,010,143 137,721
4,083,493 584,697 92,523
335,000 2,424,410
1,522,710 2,378,500 124,000
4,694,500 737,500 104,000
2,633,738
3,411,720
241,666
383,350
226,452
242,000
518,063
285,630
358,294 450,066 542,619 1,735 17,631 20,169 14,385
390,935 532,000 582,500 20 25,000 9,180 22,000
282,395 25,515 1,102,897 1,788,661 104,610 1,033,387
88,141 27,000 755,260 2,244,400 110,000 1,236,000
410619 410620
Goat or kid skin leather, tanned or retanned, nes Goat or kid skin leather , nes 236,031
625,887 329,261
736,938 331,284 184,350
761,000 406,500
785,500 355,500
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410710 410721 410729 410790 410800 410900 411000 411100
Swine leather Reptile leather, vegetable, pretanned Reptile leather other than vegetable pretanned Leather of animals, nes Chamois (including combination chamois) leather Patent leather, metallised leather Parings and other waste of leather Composition leather in slabs, sheets or strip 11,707 21,017 47,775
17,604
17,000
9,596 153,852 1,073 39,816
26,000
2,710 4,660
6,000 12,645
1,022
46,940
22,399
28,000
TUNISIA - IMPORT OF HIDES AND SKINS

Comm. Code Commodity 2006 410110 410121 410122 410129 410130 410140 410210 410221 410229 410310 Bovine skins, whole, raw Bovine hides, whole, fresh or wet-salted Butts and bends, bovine, fresh or wet salted Hide sections, bovine, nes, fresh or wet salted Bovine hides, raw, nes Equine hides and skins raw Sheep or lamb skins, raw wool on, except Persian Sheep or lamb skins pickled, without wool Sheep or lamb skins, raw, except pickled, no wool Goat or kid hides and skins, raw, nes 101,338 2,856,993 137,124 32,714 56,763 21,987 172,908 631,789 183,374 397 220,789 1,728,384 7,222 20,394 32,100 204 76,390 268,652 17,916 228 105,001 121,113 64,971 93,225 23,469 42,915 922,088 696,777 Trade US $ (000) 2007 1,479,955 338,662 2008 617,959 662,391 2006 42,662 433,163 Trade Kgs. (000) 2007 203,001 220,991 2008 40,045 163,473
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410320 410390 410410 410421 410422 410429 410431 410439 410511 410512 410519 410520 410612 410619 410620 410710 410721 410729 410790 410800
Reptile skins raw Raw hide/skins except bovine/ equine/sheep/goat/reptile Bovine skin leather whole Bovine leather, vegetable pretanned except whole skins Bovine leather, otherwise pretanned except whole skin Bovine and equine leather, tanned or retanned ,nes Bovine or equine leather full or split grain, nes Bovine and equine leather, nes Sheep or lamb skin leather, vegetable pre-tanned Sheep or lamb skin leather, otherwise pretanned Sheep or lamb skin leather, tanned or retanned, nes Sheep or lamb skin leather, nes Goat or kid skin leather otherwise pretanned Goat or kid skin leather, tanned or retanned, nes Goat or kid skin leather , nes Swine leather Reptile leather, vegetable, pretanned Reptile leather, other than vegetable pretanned Leather of animals, nes Chamois (including combination chamois) leather
95,903 714,608
444,673 275,295
77,125 499,224
909 38,016
20,856 57,333
11,436 83,900
754,944 1,640,851 77,876,703 25,961,976
1,126,935 2,268,704 95,240,271 30,498,615 3,515,176 113,510,203 33,647,621
125,857 483,318 3,431,954 1,188,149
34,253 661,911 3,710,994 1,398,570 622,517 4,071,516 1,674,346
355,122
339,806 1,619,684
44,654
100,854 188,990
7,235,695 56,267
30,868,443 59,280
47,830,559
313,822 2,000
1,084,636 2,695
1,367,544
41,222 3,498,282 1,469,709 6,732,602 2,010,009 3,157,236 876,988 129,723 118,704 311,057 135,853
9,020 150,006 104,142
21,555 451,468 1,550,402
120,287 38,958 2,579,607
19,640 265,326 3,684,915
404 19,579 59,658
5,583 38,958 96,446
554 9,701 128,608
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410900 411000 411100
Patent leather, metallised leather Parings and other waste of leather Composition leather in slabs, sheets or strip
35,690,981 62,107 31,346,396
37,023,063 123,218 44,343,569
35,962,080 95,313 1,288,476
3,255,606 44,188 1,220,323
3,008,948 66,148 1,410,690
2,646,514 24,878 1,288,476
TUNISIA - EXPORT OF HIDES AND SKINS

Comm. Code Commodity 2006 410110 410121 410122 410129 410130 410140 410210 410221 410229 410310 410320 410390 410410 410421 410422 410429 Bovine skins, whole, raw Bovine hides, whole, fresh or wet-salted Butts and bends, bovine, fresh or wet salted Hide sections, bovine, nes, fresh or wet salted Bovine hides, raw, nes Equine hides and skins raw Sheep or lamb skins, raw wool on, except Persian Sheep or lamb skins pickled, without wool Sheep or lamb skins, raw, except pickled, no wool Goat or kid hides and skins, raw, nes Reptile skins raw Raw hide/skins except bovine/ equine/sheep/goat/reptile Bovine skin leather whole Bovine leather, vegetable pretanned except whole skins Bovine leather, otherwise pretanned except whole skin Bovine and equine leather, tanned or retanned ,nes 397 95,327 242,141 30 11,000 99,410 1,299 60 129,981 100,499 19,423 43,140 22,300 5,635 Trade US $ (000) 2007 42,229 12,466 2008 2006 Trade Kgs. (000) 2007 700 14,000 2008
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410431 410439 410511 410512 410519 410520 410612 410619 410620 410710 410721 410729 410790 410800 410900 411000 411100
Bovine or equine leather full or split grain, nes Bovine and equine leather, nes Sheep or lamb skin leather, vegetable pre-tanned Sheep or lamb skin leather, otherwise pretanned Sheep or lamb skin leather, tanned or retanned, nes Sheep or lamb skin leather, nes Goat or kid skin leather otherwise pretanned Goat or kid skin leather, tanned or retanned, nes Goat or kid skin leather , nes Swine leather Reptile leather, vegetable, pretanned Reptile leather, other than vegetable pretanned Leather of animals, nes Chamois (including combination chamois) leather Patent leather, metallised leather Parings and other waste of leather Composition leather in slabs, sheets or strip
1,010,765 6,998,453
1,272,360 6,719,524
886,835 8,045,250
40,459 289,228
56,723 306,961
104,120 410,770
50,977
2,740,705 3,943,696
11,550
766,125 980,650
2,267,330 99,883
7,624,081
6,843,904
194,935 57,300
227,625
254,869
157,066 1,067,981 180,748 294 1,940,943 28,328 4,413 35
40,000 405,953
1,140,251 2,999,890 63,150 1,134,191
2,479,461 3,816,317 135,035 522,869
1,917,513 3,994,929 25,383 230,151
95,393 1,760,760 226,632 107,819
397,151 1,805,548 467,601 10,101
259,621 551,607 261,776 5,732
MOROCCO - IMPORT OF HIDES AND SKINS

Comm. Code Commodity 2006 410110 410121 410122 410129 Bovine skins, whole, raw Bovine hides, whole, fresh or wet-salted Butts and bends, bovine, fresh or wet salted Hide sections, bovine, nes, fresh or wet salted 5,432,850 Trade US $ (000) 2007 1,251,342 4,012 2008* 2006 2,754,974 Trade Kgs. (000) 2007 29,688 90 2008*
9,605
3,375
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410130 410140 410210 410221 410229 410310 410320 410390 410410 410421
Bovine hides, raw, nes Equine hides and skins raw Sheep or lamb skins, raw wool on, except Persian Sheep or lamb skins pickled, without wool Sheep or lamb skins, raw, except pickled, no wool Goat or kid hides and skins, raw, nes Reptile skins raw Raw hide/skins except bovine/ equine/sheep/goat/reptile Bovine skin leather whole Bovine leather, vegetable pretanned except whole skins 468,892 1,739,423 191,195 423,174 16,399 118,532 2,604 840 13,134 1,736 983 10 4,056 66,785 114,016 5,050 21 1,772
410422 410429 410431 410439 410511 410512 410519 410520 410612 410619 410620 410710 410721 410729 410790
Bovine leather, otherwise pretanned except whole skin Bovine and equine leather, tanned or retanned ,nes Bovine or equine leather full or split grain, nes Bovine and equine leather, nes Sheep or lamb skin leather, vegetable pre-tanned Sheep or lamb skin leather, otherwise pretanned Sheep or lamb skin leather, tanned or retanned, nes Sheep or lamb skin leather, nes Goat or kid skin leather otherwise pretanned Goat or kid skin leather, tanned or retanned, nes Goat or kid skin leather , nes Swine leather Reptile leather, vegetable, pretanned Reptile leather, other than vegetable pretanned Leather of animals, nes
3,530 92,507 60,049,647 18,301,748
45,196 84,757 64,239,284 20,971,888
66 9,016 2,474,370 857,947
2,978 5,777 2,512,956 943,468
328,862
108,617
8,009
4,108
1,728,952 123,647
2,322,139 11,291
72,478 1,867
70,849 325
3,483,322 8,044,139
5,345,421 8,456,989
74,984 429,026
109,755 411,817
85,785 4,054,297
27,470 3,222,706
340 1,019,651
362 371,643
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410800 410900 411000 411100
Chamois (including combination chamois) leather Patent leather, metallised leather Parings and other waste of leather Composition leather in slabs, sheets or strip
537,248 4,865,171 21,939 1,101,283
98,864 6,390,625 2,950 598,140
22,271 203,602 1,853 211,462
3,034 249,892 858 219,258
* 2008 statistics not available
MOROCCO - EXPORT OF HIDES AND SKINS

Comm. Code Commodity 2006 410110 410121 410122 410129 410130 410140 410210 410221 410229 410310 410320 410390 410410 Bovine skins, whole, raw Bovine hides, whole, fresh or wet-salted Butts and bends, bovine, fresh or wet salted Hide sections, bovine, nes, fresh or wet salted Bovine hides, raw, nes Equine hides and skins raw Sheep or lamb skins, raw wool on, except Persian Sheep or lamb skins pickled, without wool Sheep or lamb skins, raw, except pickled, no wool Goat or kid hides and skins, raw, nes Reptile skins raw Raw hide/skins except bovine/ equine/sheep/goat/reptile Bovine skin leather whole 22,075 298,168 6,940 31,563 16,608 16,884 Trade US $ (000) 2007 2008* 2006 Trade Kgs. (000) 2007 2008*
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410421 410422 410429 410431 410439 410511 410512 410519 410520 410612 410619 410620 410710 410721 410729 410790 410800 410900 411000 411100
Bovine leather, vegetable pretanned except whole skins Bovine leather, otherwise pretanned except whole skin Bovine and equine leather, tanned or retanned ,nes Bovine or equine leather full or split grain, nes Bovine and equine leather, nes Sheep or lamb skin leather, vegetable pre-tanned Sheep or lamb skin leather, otherwise pretanned Sheep or lamb skin leather, tanned or retanned, nes Sheep or lamb skin leather, nes Goat or kid skin leather otherwise pretanned Goat or kid skin leather, tanned or retanned, nes Goat or kid skin leather , nes Swine leather Reptile leather, vegetable, pretanned Reptile leather, other than vegetable pretanned Leather of animals, nes Chamois (including combination chamois) leather Patent leather, metallised leather Parings and other waste of leather Composition leather in slabs, sheets or strip 9,511,235 6,828 1,533,696 26,801 1,193,099 9,143,317 113,785 2,205,547 7,739 49 429,624 61 52,275 28,558 16,119 208,589 1,618 73,771 7,442 14 60,783 117,467 565,032 131,708 1,817 3,794 15,174 4,034 2,745,823 22,276 7,552,174 3,765 83,611 192 220,430 84 1,026 15,162 8 632 5,748 1,797,520 1,336,087 2,335 1,825,611 1,986,656 1,310 45,833 67,311 94 50,007 92,767
* 2008 statistics not available
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EGYPT - IMPORT OF HIDES AND SKINS

Comm. Code Commodity 2006 410110 410121 410122 410130 410140 410210 410221 410229 410310 410390 410410 410421 410429 410431 410439 410511 410519 Bovine skins, whole, raw Bovine hides, whole, fresh or wet-salted Butts and bends, bovine, fresh or wet salted Bovine hides, raw, nes Equine hides and skins raw Sheep or lamb skins, raw wool on, except Persian Sheep or lamb skins pickled, without wool Sheep or lamb skins, raw, except pickled, no wool Goat or kid hides and skins, raw, nes Raw hide/skins except bovine/ equine/sheep/goat/reptile Bovine skin leather whole Bovine leather, vegetable pretanned except whole skins Bovine and equine leather, tanned or retanned ,nes Bovine or equine leather full or split grain, nes Bovine and equine leather, nes Sheep or lamb skin leather, vegetable pre-tanned Sheep or lamb skin leather, tanned or retanned, nes 6 162 271 7 33 55 56 121 22 Trade US $ (000) 2007 28 436 67 63 509 1,091 54 584 96 72 10 18 434 330 453 104 234 0.5 1,483 234 323 6 2,563 2008 2,224 5,079 2006 28 71 Trade Kgs. (000) 2007 13 236 615 14 64 0.6 1 62 17 16 115 633 51 113 1,289 2008 600 1,408
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410520 410619 410620 410710 410721 410790 410800 410900 411000 411100
Sheep or lamb skin leather, nes Goat or kid skin leather, tanned or retanned, nes Goat or kid skin leather , nes Swine leather Reptile leather, vegetable, pretanned Leather of animals, nes Chamois (including combination chamois) leather Patent leather, metallised leather Parings and other waste of leather Composition leather in slabs, sheets or strip 6 337 11 8
20
384 0.1 2
9 0.1 0.3
21 5 105 465 54 24 14 122 12 324
0.6
1 -
0.8
66 41 2
4 55
10 26
6 40
EGYPT - EXPORT OF HIDES AND SKINS

Comm. Code Commodity 2006 410110 410121 410122 410130 410140 410210 Bovine skins, whole, raw Bovine hides, whole, fresh or wet-salted Butts and bends, bovine, fresh or wet salted Bovine hides, raw, nes Equine hides and skins raw Sheep or lamb skins, raw wool on, except Persian 62 214 220 34 37 34 14 90 35 Trade US $ (000) 2007 44 2008 553 105 2006 50 21 Trade Kgs. (000) 2007 26 2008 124 49
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410221 410229 410310 410320 410390 410410 410421 410422 410429 410431 410439 410511 410512 410519 410520 410611 410612
Sheep or lamb skins pickled, without wool Sheep or lamb skins, raw, except pickled, no wool Goat or kid hides and skins, raw, nes Reptile skins raw Raw hide/skins except bovine/ equine/sheep/goat/reptile Bovine skin leather whole Bovine leather, vegetable pretanned except whole skins Bovine leather otherwise pretanned except whole skin Bovine and equine leather, tanned or retanned ,nes Bovine or equine leather full or split grain, nes Bovine and equine leather, nes Sheep or lamb skin leather, vegetable pre-tanned Sheep or lamb skin leather , otherwise pretanned Sheep or lamb skin leather, tanned or retanned, nes Sheep or lamb skin leather, nes Goat or kid skin leather vegetable pretanned Goat or kid skin leather otherwise pretanned 255 0.7 81 11 3 433 23 10,405 1,060 13,156 438 33 7 4,510 3,830 72 9 33 7 51 610 9,550 7,301 4,502
653 315 4 14 26 604 2 1,171 8,009 859 5,506 866 5 989 2,323 0.5 23 3 0.8 1,346
179 76
2 234
2,107 81 1,424
269 587
410619 410620
Goat or kid skin leather, tanned or retanned, nes Goat or kid skin leather , nes
441
154
341 763
186 192
190
Final Report
410710 410721 410729 410790 410800 410900 411000 411100
Swine leather Reptile leather, vegetable, pretanned Reptile leather other than vegetable pretanned Leather of animals, nes Chamois (including combination chamois) leather Patent leather, metallised leather Parings and other waste of leather Composition leather in slabs, sheets or strip 177 60 88 211 78
36
17
79 0.5 427 31 1 152
115
41
20
1.2 LEATHER GOODS 1.2.1 Agadir countries exports of Leather Goods

Trade Indicators42 Exporters Value exported in 2007, in USD thousand 44,098,580 78,538 59,461 5,165 2,164 Trade balance in 2007 in USD thousand -5,329,356 54,772 18,589 -44,615 -11,137 Annual growth in value between 2003-2007, % 11 9 5 28 36 Annual growth in value between 2006-2007, % 14 31 -7 1 63 Share in world exports, % 100 0.18 0.13 0.01 0
World Tunisia Morocco Egypt Jordan
The most exported leather goods by Agadir countries are: Leather articles carried in pocket or handbag, leather handbags, leather executive cases, leather accessories and leather apparel articles.
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1.2.2
Leather articles carried in pocket or handbag
The following table shows Agadir exports of leather articles carried in pocket
Exporters
Value exported in 2007, in USD thousand 3,149,370 3,146 1,998 338 3
Trade balance in 2007 in USD thousand 688,511 2,798 1,898 -614 -67
Annual growth in value between 20062007, % 27 118 45 -2
World Morocco Tunisia Egypt Jordan
18 21 -23 23
100 0.1 0.06 0.01 0
The above table shows the following: Global demand growth of leather articles carried in pocket is very high; 18 % per year Moroccan exports are limited but with the highest market share in the Agadir Area (0.1 %) with a higher annual growth than that of the global growth which is 21 % Egypt and Jordan exports are not significant 1.2.3 Agadir exports of leather handbags
Agadir exports of leather handbags are as follows:
Exporters
Value exported in 2007, in USD thousand 5,580,430 13,730 13,456 1,740 98
Trade balance in 2007 in USD thousand -8,423 10,178 11,575 -271 -84
Annual growth in value between 20032007, % 22 15 -2 26 22
Annual growth in value between 20062007, % 22 15 21 70 216
Share in world exports, % 100 0.25 0.24 0.03 0
The above table shows the following: Global demand growth of leather handbags is very high; 22 % per year Moroccan and Tunisian exports are limited but with the highest market share in the Agadir Area (0.25 %) and a lower growth rate than that of the global. Egypt and Jordan exports are not significant but the highest in growth rate.
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1.2.4
Agadir exports of leather executive and brief-cases
Agadir exports of leather executive and brief-cases are as follows:
Exporters
Value exported in 2007, in USD thousand 957,606 3,343 1,421 239 24
Trade balance in 2007 in USD thousand 206,582 2,938 1,338 -521 -330
Unit value (USD/ unit) 34,722 23,055 36,436 3,414
Annual growth in value between 2003-2007, % 10 2 -10 7 -28
Annual growth in value between 2006-2007, % 11 9 -11 -33 -8
The above table shows the following: Global demand growth of leather executive and brief-cases is important; 10 % per year Moroccan and Tunisian exports are limited but with the highest market share in the Agadir Area (0.35 % and 0.15 % respectively) and a lower growth rate than that of the global Egypt and Jordan exports are not significant 1.2.5 Agadir exports of leather accessories
Agadir exports of leather accessories are as follows:

Annual growth in value between 2003-2007, % 10 31 20 52 -15 Annual growth in value between 20062007, % 3 43 -24 -52 -78
Exporters
Value exported in 2007, in USD thousand 2,563,598 14,716 3,200 733 19
Trade balance in 2007 in USD thousand 962,442 3,002 -5,936 -324 -468
Unit value (USD/unit)
'World 'Tunisia 'Morocco 'Egypt 'Jordan
26,185 21,918 23,645
Source: Trade Map ITC The above table shows the following:
Global demand growth of leather accessories is appreciable; 10 % per year Tunisian exports are limited but with the highest market share in the Agadir Area (0.6 %) and a higher growth; 31 % than that of the global growth rate Egypt and Jordan exports are not significant
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1.2.6
Agadir exports of leather apparel
Agadir exports of leather apparel are as follows:

Value exported in 2007, in USD thousand 8,479,044 28,557 24,352 248 129 Annual growth in value between 2006% ,2007 4 16 11 -33 -36
Exporters
Trade balance in 2007 in USD thousand 171,411 17,292 19,720 -4,519 -2,075
Unit value )(USD/unit 32,951 39,066 48,998 11,273 8,063
Annual growth in value between % ,2003-2007 1 -1 7 -9 17
Share in world % ,exports 100 0.34 0.29 0 0
The above table shows the following: Global demand growth of leather apparel is very limited; 1 % per year Moroccan and Tunisian exports are limited but with the highest market share in the Agadir Area (0.3 %) with a higher growth rate than that of the globe Egypt and Jordan exports are not significant 1.3 1.3.1 FOOTWEAR Agadir countries exports of footwear
Trade Indicators 64 Exporters Value exported in 2007, in USD thousand 83,620,420 575,817 338,732 22,369 4,820 Trade balance in 2007 in USD thousand -4,542,288 449,597 240,892 -77,419 -28,474 Annual growth in value between 2003-2007, % 10 12 11 7 15 Annual growth in value between 2006-2007, % 12 22 23 -11 58
The following table shows footwear exports footwear during the period 2003-2007:
World Tunisia Morocco Egypt Jordan
100 0.69 0.41 0.03 0.01
The above table shows the following: Tunisia ranks the 24th exporter in the Global market followed by Morocco 30th, Egypt 78th and Jordan 97th Among Agadir countries, Tunisia has the highest market share (0.7%) of the Global exports followed by Morocco (0.4 %) whereas the market share of Egypt and Jordan are insignificant, 0.03 and 0.01% respectively The Tunisian, Moroccan and Jordanian export growth rates are, respectively 12%, 11% and 15 %. These are higher than that of the global market; 10 % The Egyptian export growth; 7 % is lower than that of the Global export.
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ANNEX IV: 2008 Update of Agadir Trade Statistics

For this annex and along all this report all used data are in thousands of US $ and the source is ITC trade Map, except when it is expressly mentioned a different unit or source. 1. Export & Import of the Agadir Leather & Footwear Sector in 2008
Unit: Thousand of US $ Jordan 8692 624 3220 17861 4225 41876
Egypt Leather & hides Export Leather & hides Import Leather goods export Leather goods import Foot wear export Footwear Import 92826 10531 5297 65176 21069 126968
Morocco 25509 106204 61685 40167 348641 95312
Tunisia 28247 285545 94,346 27,222 608039 141,624
A long this report, all data are in thousands of US $ and the Source is ITC Trade Map 2.Growth of Export & Import of the Agadir Leather & Footwear Sector from 2007 to 2008 in % : The export and import in 2008 compared to that of 2007 registered the following growth:
Egypt Leather & hides Export Leather & hides Import Leather goods export Leather goods import Foot wear export Footwear Import -36 -38 -2 30 -10 24
Jordan 12 2 49 34 -12 26
Morocco 7 -8 4 -2 3 -3
Tunisia 11 11 17 15 6 12
The above table shows that Jordan and Egypt registered a decrease of their footwear export due to the impact of the global crisis whereas Tunisia & Morocco achieved an increase of their export. This is due to that some Tunisian and Moroccan manufacturers succeeded to shift to the production of fancy shoes in small series enabling Tunisia and Morocco to resist more to the Global crisis. 3.1.List of importing markets for leather goods exported by Tunisia
Importers 'World Italy France Germany Belgium United Kingdom Spain Morocco 78,538 26,444 24,445 20,882 2,710 603 334 67 Exported value in 2007 Exported value in 2008 94,346 36,225 32,512 17,999 3,373 421 172 132
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3.2.List of supplying markets for leather goods imported by Tunisia:

Exporters World Italy France China Spain Germany Portugal Morocco 23,766 9,779 3,716 2,790 1,531 993 2,312 384 Imported value in 2007 27,222 10,006 4,813 3,103 1,775 1,583 1,217 42 Imported value in 2008
3.3.List of supplying markets for Raw hides and leather imported by Tunisia:
Exporters World Italy France Germany India Spain Morocco Egypt Greece China 256706 141848 71027 7355 11551 7830 1374 997 14 183 Imported value in 2007 285545 155804 75551 18113 10410 6345 1210 342 333 249 Imported value in 2008
3.4.List of importing markets for Raw hides and leather exported by Tunisia
World Italy Turkey China India France Spain Morocco Egypt Importers 25546 8956 4927 1598 783 691 852 0 867 Exported value in 2007 28247 9075 4069 2383 1572 1538 1120 169 79 Exported value in 2008
3.5.Tunisian footwear import origin during 2007&2008:

World Italy France Germany India China Spain Viet Nam Morocco Egypt Exporters Imported value in 2007 126,220 71,853 30,601 1,094 8,330 4,471 3,539 1,647 101 14 141,624 77,649 29,691 12,612 6,207 4,885 3,746 2,509 56 0 Imported value in 2008
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3.6.Tunisian footwear export destination during 2007&2008:
World Italy France Germany United Kingdom Spain Morocco Netherlands Egypt Jordan Importers
Exported value in 2007 575817 271630 186454 55140 20797 24350 2079 2189 70 15
608039 304022 185778 66933 17623 16783 2981 2419 153 7
Exported value in 2008
4.1.List of supplying markets for Raw hides and leather imported by Egypt
Exporters Total Italy Greece Germany Jordan Tunisia 16995 4256 45 550 111 867 Imported value in 2007 10531 6472 1347 395 290 79 Imported value in 2008
4.2.List of importing markets for Raw hides and leather exported by Egypt
Importers Total Italy India Hong Kong (SARC) China Turkey Brazil Pakistan Greece Tunisia Jordan Exported value in 2007 146023 40492 12276 8363 5755 2460 1126 147 1001 997 1 92826 40157 15585 11860 8372 5213 5010 1859 1203 342 9 Exported value in 2008
4.3.List of supplying markets for leather goods imported by Egypt

Exporters Total China Italy Turkey Germany France India Jordan Imported value in 2004 19250 14868 913 132 634 491 137 0 Imported value in 2005 27501 20592 1410 253 611 937 247 2 Imported value in 2006 39030 29138 1964 447 1166 1029 220 0 Imported value in 2007 50143 36046 3352 932 2312 1795 314 0 Imported value in 2008 65176 47027 4670 2389 2124 2067 1727 187
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4.4.List of importing markets for leather goods exported by Egypt

Importers Total Belgium Italy Jordan France United Kingdom 5396 1349 1090 322 128 152 Exported value in 2007 5297 1592 1469 508 311 281 Exported value in 2008
4.5.List of importing markets for Footwear exported by Egypt

Importers Total Italy Greece Norway France Jordan Exported value in 2007 23423 13558 799 576 1985 543 21069 14908 1916 1361 788 364 Exported value in 2008
4.6.List of supplying markets for Footwear imported by Egypt

Exporters Total China Italy United Kingdom Jordan Tunisia Imported value in 2007 102405 75890 11740 1317 0 70 Imported value in 2008 126968 99728 13689 1872 189 153
5.1.List of supplying markets for Raw hides and leather imported by Jordan
Exporters World Australia India Italy Egypt 610 60 286 96 1 Imported value in 2007 624 176 159 73 9 Imported value in 2008
5.2.List of main importing markets for Raw hides and leather exported by Jordan
Importers World Turkey Syrian Arab Republic China Egypt Italy 7759 3783 1137 1925 111 0 Exported value in 2007 8692 3478 2862 988 290 188 Exported value in 2008
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5.3.List of supplying markets for leather goods imported by Jordan

Exporters World China Italy Syrian Arab Republic Germany Egypt Tunisia Morocco Imported value in 2007 13301 9551 519 246 208 322 12 1 Imported value in 2008 17861 12203 872 618 539 508 38 9
5.4.List of importing markets for leather goods exported by Jordan

Importers World Free Zones Lebanon Egypt Germany 2164 1905 42 0 0 Exported value in 2007 3220 2017 596 187 2 Exported value in 2008
5.5.List of importing markets for Footwear exported by Jordan

Importers World Free Zones Iraq Bahrain Egypt Saudi Arabia 4820 2498 777 6 0 194 Exported value in 2007 4225 1548 953 601 189 118 Exported value in 2008
5.6.List of supplying markets for Footwear imported by Jordan

Exporters World China Hong Kong (SARC) Syrian Arab Republic Italy Spain India Egypt Tunisia Morocco 33294 20040 233 1781 1230 927 621 543 47 3 Imported value in 2007 Imported value in 2008 41876 11193 9034 3679 1135 995 860 364 38 12
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6.Moroccan Export & Import of the leather & footwear sector in 2008
Import in 000DH Leather & hides Leather goods Footwear 849633 321332 762499 Export in 000DH 204071 493479 2789127 Import in 000US $ 106204.125 40166.5 95312.375 Export in 000 US $ 25508.875 61684.875 348640.875
Source: Office des Changes, Morocco 7. The detailed import and export charts of hides and skins: The detailed import and export charts of hides and skins in Annex 4, show that Jordan exports of sheep and lamb skin, raw wool on are important US $ 4,083,493 whereas Tunisian & Egyptian imports are respectively US $ 631786 and1,483,000 that could be an importunity to improve intra-trade among agadir countries. Tunisia, which is a big importer of sheep and lamb skin leather US $47,830,559 could import a part from Jordan which is exporting in 2008, US $1,033,387 from this item. Although, this table identifies important opportunities of Agadir intra-trade:
NSH code 410429 410431 410439 410519 410520 410620 410900 411100 Egypt Export 2008 8,009,000 859,000 5,506,000 989,000 2,323,000 763,000 427,000 115,000 Tunisian imports 2008 3,515,176 113,510,203 33,647,621 1,619,684 47,830,559 3,157,236 35,962,080 1,288,476 64,239,284 20,971,888 108,617 2,322,139 5,345,421 6,390,625 598,140 Moroccan Imports 2007
Commodity Bovine and equine leather, tanned or retanned ,nes Bovine or equine leather full or split grain, nes Bovine and equine leather, nes Sheep or lamb skin leather, tanned or retanned, nes Sheep or lamb skin leather, nes Goat or kid skin leather , nes Patent leather, metallised leather Composition leather in slabs, sheets or strip
Unit : USD Agadir Intra-Trade in Annex 3 enables us to formulate the followings: Jordan should concentrate on niche markets and high quality products to export to Agadir countries and EU. The industry has been hampered by imports from low cost Asian countries and it is no more possible for Jordan to compete in the mass consumer segment. Target products may include safety and medical shoes, high design leather shoes for the EU market and the finishing of leather to increase the value chain of the tanning process and the processing of raw skins available in important quantities. Morocco and Tunisia could increase their intra-trade in footwear and leather bags knowing a high increase of imports from the EU. Tunisia, Morocco and Jordan could replace their increased imports of footwear from China, Vietnam and India by their imports from Egypt endowed with lower production cost.
200

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A mission for Accomplishment of a Comprehensive sector study regarding the opportunities of Complementarities and Industrial Integration in the Leather

Prepared by Mahmoud Qattous and Terry McCallin

Amman, September 2009

Leather and Shoes Sector

Mahmoud Qattous and Terry McCallin

Mahmoud Qattous and Terry McCallin

Leather and Shoes Sector

4.2. DRAFT FINDINGS (RECOMMENDATIONS):

Leather and Shoes Sector

Mahmoud Qattous and Terry McCallin

145 145 169 169 177 177 195 195 195

Mahmoud Qattous and Terry McCallin

Leather and Shoes Sector

population reference bureau (USA)

Leather and Shoes Sector

Mahmoud Qattous and Terry McCallin

Mahmoud Qattous and Terry McCallin

Leather and Shoes Sector

Leather and Shoes Sector

Mahmoud Qattous and Terry McCallin

GROWTH IN 2009 Country World China India Brazil EU27 UK USA

Mahmoud Qattous and Terry McCallin

Leather and Shoes Sector

Leather and Shoes Sector

Mahmoud Qattous and Terry McCallin

Mahmoud Qattous and Terry McCallin

Leather and Shoes Sector

Leather and Shoes Sector

Mahmoud Qattous and Terry McCallin

Mahmoud Qattous and Terry McCallin

Leather and Shoes Sector

Leather and Shoes Sector

Mahmoud Qattous and Terry McCallin

Mahmoud Qattous and Terry McCallin

Leather and Shoes Sector

Leather and Shoes Sector

Mahmoud Qattous and Terry McCallin

France 56% 24 13 19 44% 3 8 20 4 5 4

Italy 57% 8 12 37 43% 4 6 12 6 2 13

Spain 70% 15 9 46 30% 11 3 8 4 1 3

Netherl. 77% 38 29 10 23% 3 2 11 3 1 3

Belgium 74% 31 23 20 26% 2 3 10 5 1 5

Mahmoud Qattous and Terry McCallin

Leather and Shoes Sector

Trade Map ITC Unit: thousand of US$

Trade Map ITC Unit: thousand of US$

Leather and Shoes Sector

Mahmoud Qattous and Terry McCallin

GLOBAL TRADE INDICATORS of LEATHER INDUSTRY

2.1. Global imports and exports:

Mahmoud Qattous and Terry McCallin

Leather and Shoes Sector

Global trade indicators in 2007 imports of leather goods:

Leather and Shoes Sector

Mahmoud Qattous and Terry McCallin

Mahmoud Qattous and Terry McCallin

Leather and Shoes Sector

Global trade indicators in 2007 exports of leather footwear:

Leather and Shoes Sector

Mahmoud Qattous and Terry McCallin

Mahmoud Qattous and Terry McCallin

Leather and Shoes Sector

European Union trade indicators in 2007 exports of leather footwear