Local shoe makers urged to shift business strategy

JAKARTA (JP): The minister of industry and trade, Tunky Ariwibowo urged footwear producers yesterday to shift their business strategies so they could compete better internationally.

Tunky said at the Indonesian Footwear Association's third annual meeting that shoe makers must make better quality shoes, instead of cheap, mass produced ones.

"Shoe makers must make more fashionable and higher quality products and less cheaper shoes, because Indonesia will not be able to compete with other countries where the labor wage for mass production will be even cheaper," he said.

The sales of and demand for high quality shoes will continue to increase, although their production costs will be slightly higher, he said.

He said Italy, which makes expensive and high quality shoes, still dominated the world's shoe market.

Shoes and leather products are Indonesia's fourth most valuable commodities after textiles, woods and rattan, and rubber.

The government is aiming for shoe exports to be worth US$3.5 billion by the end of the current sixth Five-year Development Plan in 1999. Shoe production is expected to grow by 17.36 percent a year.

Tunky said Indonesian shoes had only 5 percent of the world market, worth $2 billion, last year.

The shoe industry has been regarded as a sunset industry because of its sluggish competitiveness.

Shoe makers have blamed the government for failing to create a good business climate for the sector's growth and increase the industry's competitiveness.

They said a lack of coordination between government offices made it hard for exporters to maximize their earnings.

They also complained of the lack of local raw material providers, and urged the government to give incentives to makers who used their materials effectively.

Tunky said the shoe industry had a bright future despite perceptions it was fading.

"What the industry needs is to improve its quality by improving its human resources, productivity and technology," he said.

One way to strengthen the industry was to encourage supporting companies to make the raw materials for shoes to cut production costs and time, he said.

The government would support shoe companies' efforts to develop supporting industries like the chemical and leather industries, Tunky said.

Sixty percent of the raw materials used in making shoes was imported, mostly from South Korea and Taiwan.

Last year there were 366 middle to big shoe companies in Indonesia, mostly in Greater Jakarta.

Indonesia makes 1.26 million pairs of shoes a year at a cost of $2.80 billion.

Most of the companies make sports shoes, and 70 percent of the sport shoe companies make shoes for four international brands. These are Nike, Fila, Reebok and Adidas.

About 42.3 percent of the shoes were exported to the United States, 35.1 percent to Europe, and 5.8 percent to Japan and the rest are exported elsewhere or sold locally. (das)