Fri, 31 Oct 2008
From: The Jakarta Post
By Mustaqim Adamrah, The Jakarta Post, Jakarta
Investors planning to invest US$200 million to build new footwear factories, or expand existing ones, may put their plans on hold, due to global financial uncertainties.

The concern was revealed Wednesday evening during a meeting between ministry officials concerned with the industry, led by inspector general Sakri Widhianto and members of the House of Representatives' Commission VI overseeing industry and trade.

In the documents presented during the meeting, the ministry projected that delay might be caused by the financial crisis because of the drying up of liquidity in international markets and the raising of interest rates at home.

"On agreements made by the BKPM (Investment Coordinating Board) and investors, up to $200 million of investment would start to be implemented by the end of the year," the ministry's miscellaneous industry director Budi Irmawan said in an interview on Thursday.

"But with the crisis, we are worried that investors may not implement their plans or may delay them," he said, adding that the investors numbered 25 foreign and local footwear firms which planned to use loans to carry out their plans.

The investment value was actually higher than $171.6 million initially, according to Budi.

Most of the companies, of 10 which will expand existing capacities, while the other 15 will build new production facilities, are South Korean and Taiwanese investors.

Early this year, the country's footwear industry was showing a lucrative rate of growth as orders placed for Indonesia-made footwear from the global market were increasing, he said.

"The high demand had attracted foreign and local companies to build new plants here and expand their already existing production facilities," he said, explaining the reasons behind the planned new investments.

Singgih Witarso, Indonesian Footwear Producer Association (Aprisindo) secretary-general, said that despite a possible delay in new investment by the 25 companies, the industry was strong enough to withstand the crisis until early next year.

"I'm sure we'll survive until March next year as Aprisindo member's order books are filled with orders from Puma, Nike, Adidas and Lacore although we don't know what's going to happen afterwards" he said.

The industry meets orders of over 200 million pairs of footwear per annum, according to Singgih.

The industry has set an export target of $1.9 billion by the end of this year, an increase from $1.6 billion last year.

Meanwhile, Manpower and Transmigration Minister Erman Suparno said his office has allocated Rp 1.4 billion in the state budget to cushion the impact of possible mass unemployment as a result of the global financial crisis.

Next year, the budget would be increased to Rp 1.6 billion, he said on the sideline of a job expo at the University of Indonesia campus in Depok Thursday.

Another measure intended to avoid massive layoffs, he said, was the joint decree signed on Oct. 11 by Erman, Home Affairs Minister Mardiyanto, Trade Minister Mari Elka Pangestu, and Industry Minister Fahmi Idris.

The decree states that companies can adjust the salaries of their employees in line with the companies' income to avoid mass dismissals.

The regulation has received sharp criticism from several labor organizations which believe employers might abuse the decree by refusing to raise employee's salaries. (naf)



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