Govt urged to take action to save shoe industry
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)