Shoe firms warn of dangers of general election unrest

Shoe firms warn of dangers of general election unrest

JAKARTA (JP): Footwear exporters warned on Wednesday that a
disruptive general election and continuing political
uncertainties could scare away foreign buyers.

The secretary-general of the Indonesian Footwear Association,
Djimanto, said most foreign buyers were playing a wait-and-see
attitude.

"If the general election runs smoothly, we will see a sharp
increase in foreign orders. However, if not, we will see our
exports continue to decline just like last year," he told The
Jakarta Post.

Djimanto said shoe exports reached US$525 million during the
first five months of this year, about the same level in the
corresponding period last year.

Shoe orders began to decline sharply after riots broke out in
May 1998, which led to the resignation of the long-serving ruler
Soeharto.

Buyers of locally produced shoes feared political uncertainty
in the country would affect production and delivery.

"Shoes are fashion and seasonal goods. If they are delivered
late, they are of no use anymore."

Buyers normally place orders three months before the delivery
date.

Because of the unstable domestic situation, foreign buyers had
taken their business to China and Vietnam, he said.

"It is ironic that, when our products are $2 or 20 percent
cheaper than China's, our greatest competitor, we cannot use that
opportunity.

"We can't take advantage of our export competitiveness
resulting from the rupiah's sharp depreciation, due to domestic
political instability."

Indonesia's shoe exports dropped from $2.2 billion in 1996 to
$1.9 billion in 1997 when the regional economic crisis started to
be felt. The figure dropped again by 37 percent to $1.2 billion
in 1998.

This year, shoe exports are expected to top $1.2 billion, the
same level as last year's, but this figure is dependent on the
country's political and security situation, Djimanto said.

The country's four major brand shoe producers -- Nike, Reebok,
Villa and Adidas -- recorded an average 50 percent fall in their
subcontract orders, he said.

Local supplies for the four major shoe lines make up 72
percent of the total shoe exports.

Djimanto said shoe factories were only working at 50 percent
production capacity.

"There are only three million pairs of shoes produced per
month in the country now, compared to seven million pairs in a
normal situation."

Djimanto said shoe exporters, as well as exporters of other
non-oil and gas commodities, hoped the country's political and
security situation could be restored to normal so businesses
could prosper again.

"We hope this political infighting can be settled as soon as
possible.

"If the country's situation returns to normal and calm
(prevails), we hope we can gain at least $1.5 billion from shoe
exports in the year 2000. Many foreign buyers have expressed a
wish to buy more shoes from Indonesia."

Djimanto said shoe exporters had also called on the government
to speed up the implementation of trade financing facilities to
support local exporters.

The shoe industry also urged the government to abolish the 10
percent value-added tax imposed on raw materials for shoes bought
from local industries.

"Abolishing a value-added tax will encourage local shoe-
supporting industries to grow and also encourage shoe producers
to buy locally produced raw materials and reduce imports," he
said. (gis)