Export of footwear may keep declining

JAKARTA (JP): Export of footwear products would not reach its target unless the government lent it a hand in reducing transactional costs, an executive said yesterday.

The chairman of the Association of Footwear Producers, Anton J. Supit, said the association targeted the export of footwear products at US$2.5 billion this year.

He estimated exports had declined at least 10 percent last year from $2.2 billion in 1996 due to the monetary crisis and declining competitiveness of Indonesian products.

"If the crisis continues until the second half of 1998, I doubt we can reach our target," Anton said after meeting with government officials at the Ministry of Finance.

Anton said many of the association's members could not import needed raw materials because they could not open letters of credit at private banks, as many of the banks had lost support from their corresponding foreign banks due to the crisis.

"Most of our members are clients of private banks, most of which cannot open a letter of credit to our members. Therefore, the government should assign a state bank to help us," Anton said.

He said government measures in boosting exports had not yet born fruit as there were too many officials and institutions involved.

He suggested that all export-related facilities be coordinated by one institution, the Ministry of Industry and Trade.

Accordingly, the Ministry of Finance should coordinate efforts in reducing legal levies and abolishing all illegal ones.

He said production costs in Indonesia were high, compared to those of neighboring countries due to the levies, both legal and illegal.

According to the Center for Labor and Development Studies, production costs in Indonesia's manufacturing industries in 1995 were the highest among members of the Association of Southeast Asian Nations.

"If our costs remain high and the crisis continues to grip us, I bet our shoes will not be able to compete with shoes from Thailand, Malaysia, China and Vietnam," Anton said.

"There are three components to winning the competition: competitive costs of production, good quality products and on- time delivery. For the last two, we can compete, but not in the first one," he said.

Anton said his association, along with three other associations in labor-intensive sectors, had asked for the postponement of a government-set raise in minimum wages until the crisis was over.

The three other associations are the Indonesian Association of Toy Producers, the Indonesian Textile Association and the Indonesian Apparel and Manufacturing Association.

Anton said the associations were proposing that if the government went ahead with the increase, then companies should be allowed to defer their obligatory contributions to the state workers' insurance fund.

He said the increase in wages during the difficult economic conditions would lead to a loss of the market share because of lower purchasing power coupled with higher production costs.

The Indonesian economy is currently facing its worst crisis in decades following the drastic depreciation of the rupiah against the dollar that began last July.

Tight liquidity and soaring interest rates have already slowed down the country's economic activities and forced industries to cut down production or lay off workers. (rid)