Wed, 03 Dec 2003

Indonesian footwear producers in life or death struggle

Eva C. Komandjaja, The Jakarta Post, Jakarta

Indonesian footwear producers are struggling to maintain their existence, which has been threatened by political instability, high production costs and other problems such as worker strikes.

Indonesian Footwear Association (Aprisindo) chairman Harijanto said on Monday that many producers had closed down their factories in Indonesia and relocated to other Asian countries such as Vietnam, Thailand or China.

He added that, at present, there were only about 20 factories producing brand-name shoes left in the country.

"This is because the Indonesian government has failed to provide a supportive business environment," he said.

He cited as an example that the government encouraged companies to boost their exports without improving the infrastructure or efficiency.

He also stressed the importance of assisting small- and medium-sized enterprises (SMEs) such as footwear-supporting industries, like shoe-lace producers, because these companies could easily relocate their businesses (outside the country) if they felt the environment was not supportive enough.

"If we do not have them (support businesses) here anymore, we will have to import all shoe materials, which would drive the production costs up even higher and make our products lose their competitiveness compared to products from China," said Harijanto.

He added that only 40 percent of shoe materials were currently being imported.

He said that before the monetary crisis in 1997, Aprisindo had a total of 170 member companies, ranging from brand-name shoe producers to footwear-supporting firms. Currently, there are only 120.

"However, even with the decrease, we are still in third place in the U.S. market, right after China in first place and Brazil. But our market share was only 3.77 percent in 2002 compared to China's 78.64 percent," said Harijanto.

He noted that this year's footwear exports to the U.S. were valued at US$1.2 million, contributing to approximately 41 percent of Indonesia's total footwear export earnings.

Responding to the robust U.S. economy, which recorded a growth of 8.2 percent of Gross Domestic Product (GDP) this year, Harijanto was a bit pessimistic, saying that it would not immediately affect Indonesia's footwear exports.

He was more concerned about the political instability that might happen during the elections here in 2004. He hoped that it would not bring other problems, such as worker strikes.

Harijanto said that the current Aprisindo target was to encourage SMEs that produce other kinds of footwear, such as sandals, slippers and dress shoes for people in the lower-income brackets, because the market could still expand compared to the brand-name shoe market, which was stagnant.