National Shoe Industry Slumps: Aprisindo Highlights Raw Material Hikes and Power Disruptions

Executive Director of the Indonesian Footwear Association (Aprisindo), Yoseph Billie Dosiwoda, has clarified rumours regarding mass layoffs at PT Fengtay in Bandung Regency. Yoseph stressed that the company is currently implementing efficiency measures by furloughing some employees, not conducting layoffs. However, Aprisindo acknowledges that the national shoe industry is currently in a ‘wait and see’ phase due to significant pressures. If global uncertainty and the decline in domestic purchasing power do not improve within the next two to three months, layoffs could become a forced final option for industry players. “It is still wait and see because the challenges are quite heavy, looking at the next 2-3 months regarding the global uncertainty situation and domestic purchasing power which is also declining. If there is no change, it is not impossible that the unwanted final option of layoffs could occur, because the effect of selective imports has caused raw material prices to rise by 30-40%,” Yoseph stated when contacted on Monday (22/6). Yoseph explained that from the international market perspective, the current US global tariff stands at 10%. Although Indonesia has an Agreement on Trade Relations (ART) with the US, Indonesia must keep its tariffs lower than competitor nations to secure global order stability, such as when Indonesia was at 19% while competitor countries were above 20%. Beyond global market issues, Yoseph highlighted domestic infrastructure problems disrupting factory productivity, notably power outages or disruptions. This issue is considered dangerous as it can inflate production costs, cause shipment delays, and undermine the trust of international buyers. “Yes, efficiency is carried out by furloughing, not layoffs. Efficiency must be done, but a conducive industrial climate is also very much needed, especially these power disruptions which must be anticipated immediately by the Government. We have received reports from members and will immediately coordinate with the relevant leading sector minister so that it is handled quickly and sustainably,” Yoseph explained. If the macroeconomic situation does not change, Yoseph projects that the national footwear export outlook will decline. To anticipate this, he urged the government to immediately release a series of regulatory relaxations and fiscal incentives to maintain the cash flow of labour-intensive businesses. “Yes, if the situation does not change, the outlook will certainly decline, especially exports. What is needed from the government is the elimination of VAT restitution where business funds are held in the state treasury; this would greatly help industry players. Fiscal incentive policies with discounted electricity prices (not blackouts) and gas prices, and providing legal certainty (regulation) on wages that are friendly to the labour-intensive sector which directly absorbs workers and contributes to state revenue and taxes. Because company efficiency must also be parallel with government support so that productivity continues,” Yoseph concluded.