Rebuilding the footwear industry in Malaysia
Historically, Malaysia thrived on agriculture for over a century and after independence (’57), making her a self-sustaining country. She was also a top world exporter of rubber, palm oil, and rice as well as natural minerals and oil. In the 80's & 90's, Malaysia shifted very quickly into industrialisation adopting manufacturing standards and letting go of her agriculture stronghold. FDIs, free market growth, and urbanization thrived and increased the benchmark for medium-income and high-income categories.
However, Malaysia declined in self sustenance, and increased in poverty line as the inability of people to provide food for their families or adapt to new technology fast enough grew rapidly. According to a renowned Malaysian economist, Professor Dr. Jomo, 20% of Malaysians as of 2021 are unable to sustain month-to-month. 50% live paycheck to paycheck. This was made worse after the Covid-19 pandemic.
From a technology status quo, Malaysia moves towards IR4 (Industry Revolution 4) — however learning from history, there has to be fluidity of adoption for sustainable and incremental growth. This article will review one industry at large — the shoemaking industry — as well as touch on artisans and startups in Malaysia.
Why does it matter? SMEs provide almost half of the country’s GPD and employment.
Why the shoe industry? Well, other than it being my primary industry at the moment, in the 90s, Malaysia was once one of the top 5 shoe exporters in the world. Before the lockdowns 2 years back, we were the top 3 footwear exporters to the US. However, we are now no 46 in the world. For SEA comparison, Vietnam is No 2 after China.
Where did we go wrong and how can we rebuild this industry as well as adapt to the technology of the future?
To structure economic growth for this industry, it is important to create an environment that is conducive to the growth and success of these businesses. Let’s look into 3 areas as follows :
1. Manufacturing assistance for artisans and startups
Firstly, SMEs is a broad term covering micro businesses, small and medium businesses, artisans, and startups. Each has a different trajectory, financial needs, and business assistance. Micro, small and medium businesses have small but stable revenue. However this is not the same for artisans or startups as finance, marketing, digital penetration, and production differs.
Finance — Artisans and startups will have insufficient cash flow and low capital (especially if you are from Malaysia). The current economic assistance for Artisans and Startups are tacked onto stable Micro, Small, and Medium Businesses hence misconstrued financial resources makes it extremely difficult for low and mid-income artisans and startups to sustain.
Growth — Artisans tap into the mainstream market but startups have a high growth trajectory from the early adopters hence marketing also differs. The current financial assistance has locked down the programs such standard FB ads only instead of getting creative with sales and content creation which limits growth.
Pay and Claim — Grants such as reimbursement grants expect founders to have tens of thousands or millions in the banks to spend first before claiming. This makes zero sense to low and mid-income entrepreneurs. Worst, if the claims never come thru (like what happened to me) as I refused to give into bribes.
Supply chain growth — 90% of raw materials for shoemaking today are imported. This raises the cost, timeline, and logistics. SME supply chain in Malaysia targets the local sales industry hence their Total Available Market (TAM) size is small. Expanding this so that the supply chain itself can be a standalone industry for export is crucial.
Manufacturing technology – rewarding high tech implementation such as advanced 3D printing to replace legacy moulds, machine learning automation, and climate change innovations would increase innovations in these sector.
Other forms of support such as business development resources include
− training programs
− implementing policies and regulations that support small businesses
− providing tax incentives for small businesses
− implementing fair labor practices.
− promoting and supporting local businesses and buying locally-made products to help to stimulate economic growth for artisans and small manufacturers.
2. Digital adoption of shoe-making business
Over 50% of Malaysian SMEs do not have an internet presence. Digital adoption has been lagging. Future technologies such as Web5 provide access to build easy commerce platforms that convert MYR to USD/BTC (which is crucial for international trade as 80% of Malaysia’s trade volume is done in USD) making it simple and quick foreign transfer. There has to be more training and better incentives in obtaining types of equipment such as laptops and wifi discounts that engages a better digital framework. Innovation and entrepreneurship in digitizing manufacturing practices and sales should be highly encouraged and rewarded.
3. Curated trade program for the footwear industry
We have Matrade under Miti which facilitates trade programs. The challenges I faced are as follows :
− No specific curation per industry — Important footwear partnership for international distribution and retail, trade commerce memberships and international trade consultations are ignored.
− All funds are a “Pay and Claim” reimbursement grant which is not suitable for low and mid-income entrepreneurs. A lot of businesses including mine did not get back the money.
− Race-based economic suppression.
− Matrade requires businesses to be registered for a few years before they can trade. In this digital world, businesses start trading immediately upon launch. I hit 21 countries in my 1st year just by being online.
Unfortunately my challenges with Matrade went as far as them asking me to leave the country. The challenges for a non-export trade acclimatised artisan manufacturing would be far greater.
Curating trade and understanding how businesses work these days would make a huge impact.
We can rebuild this industry — our expert hand-makers are among the rarest in the world and a niche trait. But we can only rebuild when we are aligned with the Ministry of Economy and the Ministry of International Trade to make this work
