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)