Export of footwear may keep declining

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)