About 100 shoemakers stop operations

Adianto P. Simamora, The Jakarta Post, Jakarta

About 100 local footwear manufacturers are believed to have ceased or postponed operations in the last three years for reasons which include labor disputes and rising production costs, the Indonesian Footwear Association (Aprisindo) says.

Aprisindo head Anton J. Supit said suspicions that the 100 companies had stopped operating was based on the association's data that it had only 90 "active" members, compared to 190 three years ago.

The association's members include 50 large companies which produce international brands such as Reebok, Adidas, Fila and Nike.

Anton said production costs in the country had risen over the past three years following the increase in electricity and fuel costs and the minimum salaries for workers.

This has made Indonesian-made shoes more expensive than those made in others countries. As such, many buyers have shifted their orders to countries like China and Vietnam, which offer cheaper prices.

Many of the local companies which have suspended their operations are believed to have relocated their plants to those countries due to cheaper labor and a more conducive climate for investment, Anton said.

He warned that more footwear producers could stop operating this year unless the government solved the problems confronting the industry.

The country's footwear exports, which fell to US$1.6 billion last year from $2 billion in 2000, could further decline to US$1.5 billion this year.

Anton warned that the government-proposed bill on labor protection and development, now being debated at the House of Representatives, would further hurt the industry, unless the legislators changed some clauses in the bill which are considered as overly protective of labor interests.

"This is a serious problem. If the government and legislators fail to issue favorable policies, I believe all local footwear companies will shut down their factories in the next five years," Anton said.

The bill stipulates, among other points, that night-shift workers will not be allowed to work more than 35 hours per week and companies have to pay severance payments to workers who voluntarily resign. It also obliges companies to pay workers's salaries during a strike.