About 100 shoemakers stop operations

Adianto P. Simamora The Jakarta Post Jakarta

About 100 local footwear producers are believed to have stopped operation or been in limbo over the past several years due to various reasons, including labor disputes and rising production costs, an association said.

Head of the Indonesian Footwear Association (Aprisindo) Anton J. Supit said suspicions that the 100 companies had stopped operation was based on the association's data that there were now only 90 "active" members of the association, compared to 190 three years ago.

The association's members include 50 large companies which produces 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 Indonesia-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.

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

He warned that more footwear producers could stop operations this year unless the government takes effective measures to solve 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 interest.

"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 warned.

The bill stipulates among others 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 the workers's salary during a strike.