Indonesia needs to restructure shoe industry

JAKARTA (JP): Indonesia needs to restructure its footwear industry to further boost export earnings from this industrial sector, says an executive of a major shoe manufacturer.

Byung Moon, the president of PT Starwin Indonesia, said here yesterday that the Indonesian footwear industry is still too dependent on branded products.

"Footwear production should be more diversified so that Indonesia will not rely on only a handful of buyers," he said in an interview with The Jakarta Post.

Six years ago, during the early stages of the country's footwear industry, Indonesia's shoe manufacturers based their production mostly on products of low and medium grades. They later changed their business strategy and turned to branded products to meet the growing demand from big buyers.

Byung said that the change in the business strategy has caused a loss of business to China where importers of low and medium grade shoes can find a more substantial supply and also cheaper products.

"The impact is clear... many small and medium scale shoe producers have gone bankrupt," he said.

The Chinese shoe industry is more competitive than that of Indonesia due to the greater availability of raw materials and the higher worker productivity.

Byung said, however, that Indonesia will still be able to compete with China in the world's shoe market as long as the government restructures the industry. They can begin by revitalizing small and medium shoe manufacturing, which has partially stopped production due to their inability to sell their products.

Indonesia's earnings from footwear exports totaled only US$20 million in 1987 and jumped to over $1.6 billion last year, partly due to an increase in the number of big manufacturers from Korea and Taiwan.

"Export growth in the country's footwear products would have been higher if the small and medium manufacturers had not collapsed," he said.

Climate

Byung said that success in revitalizing the operation of small and medium-scale shoe manufacturers lies in the government's ability to provide a better business climate.

He said that the government's policy regarding the increase in the minimum wage, for example, should be more certain and clear so that shoe manufacturers would be able to predict future increases in salaries.

"The rapid increase in the minimum wage is a nightmare for shoe manufacturers, which employ over two thousand workers," he said, adding that the government's unpredictable policy concerning the minimum wage makes labor intensive industries like shoe manufacturing companies very unstable.

Byung said that an increase in the minimum wage should be based on general economic indicators such as inflation rates so that any wage hike would not seriously affect production costs.

"There should be a sounder policy so that shoe manufacturers will have enough time to anticipate the rise," he said.

Byung's Starwin Indonesia is one of about 15 Korean shoe manufacturers in Indonesia.

Many other foreign investors, especially those involved in the production of shoe parts, have expressed their intentions to relocate their operations in Indonesia, he said, predicting that their presence would further support the small and medium shoe factories that still import most of their raw materials.(hen)