Indonesia eyes $2 billion from shoe exports this year

JAKARTA (JP): Indonesia will likely earn US$2 billion from exports of shoes this year, up from $1.7 billion in 1999, thanks to improving political climate in the country, the Indonesian Footwear Association (Aprisindo) said on Tuesday.

Aprisindo secretary-general Djimanto said foreign buyers were now more confident about Indonesia following the election of President Abdurrahman Wahid's government in October.

They can see that security has improved and the President's extensive overseas travel has helped regain their trust. This government is better than the last one, Djimanto said.

Shoe exports slumped following the financial and political crises in Indonesia, from a peak of $2.2 billion in 1996 to $1.6 billion in 1997 and to $1.2 billion in 1998.

Djimanto said trade financing remained a major problem for some producers because locally issued letters of credit were still rejected by foreign banks due to the erosion of confidence in the Indonesian banking system.

Most companies circumvented the problem by opening an escrow account and using telegraphic transfers. "Of course this depends largely on trust and the company's track record," he said.

Aprisindo's 91 active members currently have orders for 35.8 million pairs for the first six months of 2000 and Djimanto is optimistic orders will reach 130 million by the end of the year.

The association's 87 active members produced 100.81 million pairs in 1999, including top line models such as Nike, Reebok, Fila, and Adidas.

Djimanto said that about 10 percent of the association's active members, mostly small producers in the Greater Jakarta area, would likely apply for exemption from the official minimum wage rule when the government hikes the levels beginning April 1.

Official minimum wages will increase between 15 and 55 percent. In Jakarta, the monthly minimum wage will rise to Rp 286,000 ($38) from Rp 231,000.

Companies unable to pay the minimum wages could apply for exemption, but they have to open their books to government scrutiny.

Djimanto has appealed to members to intensify communication with their employees to minimize the likelihood of disputes. (10)