Indonesia needs to restructure shoe industry

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)