Shoe exporters suffer despite rupiah's fall<\/p>\n
By Devi M. Asmarani<\/p>\n
JAKARTA (JP): Layers of problems, mostly regarding the import
\nof raw materials, are impairing Indonesian shoe exporters from
\nbenefiting from the rupiah's sharp fall in value.<\/p>\n
The country's footwear industry has, by and large, been unable
\nto become more competitive in the international market even
\nthough the rupiah has fallen 70 percent in value against the U.S.
\ndollar since last July.<\/p>\n
On the contrary, orders have been shrinking over the past two
\nmonths, mostly because foreign buyers no longer have confidence
\nin the reliability of local producers.<\/p>\n
Data from the Association of Footwear Producers shows that
\nshoe exports in January fell 7.86 percent to US$80.02 million
\ncompared to the same period last year.<\/p>\n
This month, exports fell a further 10.6 percent to $80.15
\nmillion year-on-year.<\/p>\n
The data was based on the exports of four major brands which
\naccount for 70 percent of shoes made in Indonesia: Nike, Reebok,
\nFila and Adidas.<\/p>\n
Association chairman Anton J. Supit said the shriveling orders
\nwere due to a wearing out of confidence from international buyers
\nover Indonesia.<\/p>\n
\"Many buyers have been getting the wrong signals that the
\npolitical situation in Indonesia is very unstable. They are
\nafraid that we won't be able to supply their orders,\" Anton told
\nThe Jakarta Post Thursday.<\/p>\n
Added to this uncertainty, problems regarding the issuance of
\nletters of credit (L\/Cs) hover over the shoe industry, an
\nindustry still highly reliant on imported materials.<\/p>\n
Since last year, international banks and foreign buyers have
\nbeen reluctant to accept L\/Cs issued by Indonesian banks, fearing
\nthe latter would be unable to service their commitments as the
\nrupiah continued to tumble against the dollar.<\/p>\n
Last month, Bank Indonesia, the central bank, pledged to
\nguarantee all local bank credits.<\/p>\n
But Anton said this guarantee has not been effective as
\ninternational banks and suppliers still requiring confirmation
\nfrom foreign banks here.<\/p>\n
Credibility is not the only problem because the country's
\nbanks are also drained of liquidity, he said.<\/p>\n
Banks no longer receiving credit lines from international
\nbanks now require importers to pay a margin deposit worth the
\ntotal value of the L\/C.<\/p>\n
This means shoe companies are no longer enjoying credit lines
\nfrom the issuing banks.<\/p>\n
At the same time, many companies are faced with maturing debts
\nfrom their L\/Cs issued three to six months ago, he said.<\/p>\n
Several countries have pledged to help Indonesian importers.<\/p>\n
The United States has promised to provide a $460 million
\nfacility to import American-produced commodities, including
\nleather, through 31 banks appointed by the U.S. government, Anton
\nsaid.<\/p>\n
Japan's Export Import bank will also provide over $500 million
\nin loans to the central bank to be injected into local banks, he
\nsaid.<\/p>\n
Germany has committed to give a $250 million loan facility to
\nhelp develop small and medium businesses, while Australia has
\nagreed to guarantee L\/Cs for Australian imports, he said.<\/p>\n
\"But these have not materialized, and meanwhile something must
\nbe done to help the producers themselves,\" Anton said.<\/p>\n
He is worried that if the situation persists, there could be
\ndelivery problems.<\/p>\n
\"There hasn't been problems delivering orders now, as long as
\nwe can manage to pay the 100 percent deposit,\" he said.<\/p>\n
\"But our ability to conduct business in cash will only last
\none to three more months,\" he said.<\/p>\n
He said the central bank must support producers so that they
\nwould not be required to pay the deposit.<\/p>\n
If the L\/C problems are resolved, and if political tensions
\nease after the March presidential election, Anton believes the
\nshoe industry may pick up again.<\/p>\n
But the situation must be resolved soon, he said, or the
\ncompanies would lose their customers.<\/p>\n
\"Shoes are fashion items. If delivery is late, the companies
\nwill lose their marketing opportunity, so they don't want to take
\na risk,\" he said.<\/p>\n
Around six shoe factories located here and in Surabaya, East
\nJava, have already shut down and lower production has forced
\ncompanies to lay off about 20,000 of their workers, he said.<\/p>\n
Companies are stopping or slowing production because they
\ncannot compete with more competitive producers such as those of
\nChina, he added.<\/p>\n
China's productivity is much higher, while the cost is much
\nlower, he said.<\/p>\n
\"Prior to the crisis, we could not suppress the price like
\nChina's products, but now that the crisis could make our products
\ncheaper and more competitive, we are burdened with these
\nproblems,\" he said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/shoe-exporters-suffer-despite-rupiahs-fall-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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