Govt urged to take action to save shoe industry

JAKARTA (JP): Chairman of the Indonesian Association of Shoe Producers Anton J. Supit yesterday urged the government to take quick action to stop Indonesia's shoe industry from losing competitiveness against neighboring countries.

Anton said Indonesia's shoe industry could still compete against shoe industries in countries that offer lower wages, such as China and Vietnam, provided the government acts immediately to improve the industry's investment climate.

He said import clearance and handling at seaports should be expedited to cut the cost of raw materials.

The government should encourage investment in leather processing by exempting shoe producers from the 10 percent value added tax on domestically processed leather, he said.

"China also applies tax exemption to support its shoe industry," Anton said.

He said the 10 percent value added tax burden had prompted local footwear producers to buy imported rather than local leather because it was cheaper.

The country's shoe industry would be more cost efficient if it was supported by an efficient leather industry, he said.

Increase

The association reported that Indonesia increased its shoe exports slightly to US$2.2 billion in 1996 from $2.05 billion in 1995.

It said Vietnam, which started its shoe industry in 1994, increased its shoe exports from $338,000 in 1995 to $533,800 in 1996, while China exported $3.2 billion worth of shoes from the Guangdong province alone and $2.4 billion through Hong Kong in 1996.

Anton said the Indonesian shoe industry was less competitive than China's because Indonesian workers were less productive despite their higher wages.

He said Indonesian workers produced 2.5 pairs of shoes in nine hours with wages amounting to 17 percent of the price of a pair, while China's workers made 3.8 pairs of shoes in nine hours with wages representing only 11 percent of the price of a pair of shoes.

"If labor costs increase 20 percent in Indonesia, the shoe industry will collapse," Anton said.

He called on the government to set up a standard to link wage increases to productivity increases.

Companies should cooperate with the government to increase labor productivity, he said.

The government needed to enforce strict regulations to discipline workers, he said.

The government, in its current drive to promote technology- intensive industry, did not seem to have a clear policy on labor intensive industry such as shoe manufacturing, he said.

"We want to know, clearly, what the government's policy on labor intensive industry is. How long does the government want this industry to continue," he said. (jsk)