RI eyes top shoemakers to relocate from China

The Jakarta Post, Jakarta

The government, with support from the private sector, is approaching branded footwear makers to chose Indonesia in the event they want to relocate their plants from China following increasing incidence of trade disputes between China and its major trading partners, the United States and the European Union.

Minister of Trade Mari E. Pangestu said major footwear players in the United States and the EU used to depend on one or two countries as their main production bases, but in today's more complicated trade system they were considering having multiple sources.

"We have to play 'total football' in luring foreign investors, which are now at the cross roads to reinvest in our footwear industry," Mari said.

Speaking during a visit to footwear factory PT Panarub Industry in Tangerang, Banten, on Wednesday, Mari said when branded footwear manufacturers decided to relocate to Indonesia, other non-branded shoe producers would likely follow suit.

According to Mari, Indonesia had a big opportunity to attract footwear makers following last week's yuan revaluation and increasing costs of doing business in the world's most populous country.

Also, China faces increasingly more trade disputes with its major trading partners, especially the U.S. and EU, as industry players in these developed countries were concerned with surging cheap imports from the Asian giant.

Any anti-dumping or safeguard duties imposed by the U.S. and EU will cause Chinese footwear to become more expensive relative to the same commodity from other countries, including from Indonesia.

To convince international footwear makers, Mari said, the government would inform them of what the government had done and would do to solve problems related to labor issues, taxation and infrastructure.

Labor and taxation issues as well as weak infrastructure had been a major discouragement for investors. Many have chosen to relocate to neighboring countries like Thailand or even Vietnam, rather than Indonesia.

Separately, Indonesian Footwear Association (Aprisindo) chairman Harijanto said that the conditions in China should be seen as a great opportunity for Indonesia to convince global footwear manufacturers to relocate their plants to Indonesia.

"China has been dominating footwear markets in the U.S. and EU. The ongoing trade dispute would be a great opportunity for us to fill in, thus we ask the government to assist us," he said.

Aprisindo data shows that national footwear exports have been declining in recent years. Footwear exports dropped from US$2.19 billion in 1996 to $1.18 billion in 2003, before increasing slightly to $1.32 billion in 2004. The association expected exports to reach $1.69 billion this year.

Indonesia's main footwear export markets last year were the U.S., the EU, Japan and Mexico.

Harijanto went on to say that the poor local investment climate had been a major cause for the declining number of footwear factories in the country, from 400 in 1987 to only 236 in 2001.

Nevertheless, he expected that if the country succeeded in convincing international brands to enter Indonesia, the local footwear industry would rebound and provide more employment opportunities.