Mustaqim Adamrah, The Jakarta Post, Jakarta
The world's second-largest sportswear manufacturer, Adidas Group, has placed its final orders with local shoemaker PT Prima Inreksa Industries, under an agreement signed by both companies on Friday at the Industry Ministry.
Adidas Group Indonesia representative chief Georg Krebelder (speaking on behalf of Adidas Group footwear sourcing head Horst Stapf) said the agreement marked the termination of the business partnership between Prima and Adidas.
"As part of our final agreement, we have committed to a total order of 900,000 pairs (approximately 300,000 pairs per month) from October to December 2008."
"This (order) is to help PT Prima with their cash flow during the transition period. The final date for the termination of the business relationship, however, remains unchanged: That is Dec. 31, 2008."
Also attending the signing was Prima president director Paulus Harli, Industry Minister Fahmi Idris and a number of ministry officials.
From July to September, Adidas has placed orders with Prima of 200,000 pairs every month.
Adidas, which ordered 201 million pairs of shoes from the Indonesian shoe industry last year, had been ordering 500,000 shoes per month from Prima since 1997 before it first aired the idea of terminating the partnership in July, because Prima had been implicated in debts.
Prima is one of six Indonesian companies manufacturing sport shoes for Adidas.
According to a letter received by the ministry, last year Prima owed US$37.25 million to state lender Bank Negara Indonesia (BNI) and $8 million to suppliers.
Reports suggested Prima had previously asked Adidas to extend the contract for two years starting December, but Adidas offered only three months of extension.
Paulus said his company would post a break-even point if the factory (which has a full capacity of 500,000 pairs of shoes per month) produced at least 400,000 pairs monthly.
The production of 100,000 pairs was equivalent to between $1 million to $2 million in revenue, he said.
Despite the termination, Paulus promised none of Prima's 6,000 staff would be affected.
"We're optimistic our company will keep running next year because many buyers have expressed an interest in us," he said, refusing to name potential buyers.
Echoing Paulus, Ansari said Indonesian shoes were gaining ground in the international market, as sports shoes produced by Vietnam and China have been subjected to anti-dumping duties by the world's large markets, notably the European Union.
"Indonesian labor is also cheaper compared to China," he said.