Buyers turn to other states due to business uncertainty

Buyers turn to other states due to business uncertainty

JAKARTA (JP): Many buyers of Indonesian textiles and shoe
products have switched their orders to other Asian countries due
to growing business uncertainty in the country, according to
local industry representatives.

The chairman of the Indonesian Footwear Association
(Aprisindo), Anton J. Supit said on Thursday that many buyers of
Indonesian shoes had cut their imports on fears that companies
here would be unable to meet their orders.

"This year we will be lucky if we can get 60 percent (US$ 1.2
billion) of last year's trade, which was worth US$1.9 billion,"
he said on the sidelines of a seminar on trade financing
facilities.

He said that Indonesian shoes were very cheap as a result of
the sharp depreciation in the value of the rupiah against the
U.S. dollar. However despite this, foreign buyers have shown a
preference for buying from other countries because they fear
Indonesia's political instability could disrupt production.

He said the Indonesian footwear industry currently depends on
four main buyers -- Reebok, Adidas, Nike and Fila -- whose
purchases account for 72 percent of Indonesia's total annual shoe
exports.

"Foreign companies are also very worried for the safety of
their expatriate staff," he said, citing last weeks clashes
between anti-government protesters and security personnel that
left 15 people dead. He also drew attention to the wave of
mysterious "ninja" killings that has left many parts of rural
Java in an highly agitated condition.

The secretary-general of the Indonesian Textile Association,
Benny Soetrisno, echoed Anton's view and said that the country's
uncertain future had left foreign buyers unwilling to place
middle and long-term orders with local manufacturers.

Benny said exports of textiles and textile products were only
expected to increase by 9.5 percent to $8 billion this year due
to the decline in orders.

"It will be more difficult for us to export next year if the
political uncertainty continues. Buyers are currently waiting to
see what happens," he said.

Anton said that shoe exports had also been adversely affected
by trade financing problems.

Anton said that most export-oriented companies in the country
are still unable to open letters of credit (L/Cs) at the
appointed local banks, despite government guarantees designed to
ease difficulties in obtaining credit.

Anton said the 21 appointed banks are reluctant to issue L/Cs
because they are burdened by myriad unresolved banking problems.

The banks are being forced to operate more conservatively than
ever before due to liquidity problems and mounting bad debts, he
said.

"The appointed banks do not want to take any risks. Although
the government guarantees our letters of credits, they are still
reluctant because it may create more problems for them," he said.

In July, Bank Indonesia appointed 21 local banks to provide
guaranteed trade financing to help certain Indonesian export
companies import raw materials.

Plunging confidence in the country's troubled banking sector
has prompted international banks to reject local L/Cs.

Bank Indonesia has attempted to help exporters in recent
months by making available trade financing worth US$5.7 billion
in a package of measures including L/C guarantees and pre-export
financing facilities. However by the end of October, only $618
million of the total assistance made available had been used.

Without the government's guarantee, most importers are
required to deposit 100 percent security in local banks if they
want a letter of credit.

Both Anton and Benny urged the government to create a new
financial body outside of the banking system which could support
exporters without being restricted by existing banking
regulations.

Benny said the government should work to improve coordination
of trade financing facilities offered by the Ministry of Finance
and the central bank.

"Don't let's wait any longer because we've already lost
millions of dollars waiting for a trade financing scheme to be
implemented," he said. (gis)