Shoe industry braces for more gloomy days

By M.M.I. Ahyani

BANDUNG (JP): "I usually stopped production during the fasting month of Ramadhan and used my time for book-keeping, settling bills and some annual paperwork. Now, I have stopped production, but for a different reason," said Haj Roni Syahroni who runs a shoemaking business in Cibaduyut district here.

"I have also been forced to lay off some craftsmen," he told The Jakarta Post when asked about how his business was faring in the ongoing monetary crisis that has affected various spheres of people's life.

The area used to be a mecca for shoe shopping. Cibaduyut's popularity reached neighboring countries -- Singapore, Malaysia and Brunei Darussalam. The family businesses, in which nearly all members had their role, would enjoy periodic windfalls when shoe retailers came in and bought up their stock.

Not anymore. The economic slump affecting the country is also threatening the business.

Regarding production, Roni said shoe-makers now have to purchase in cash materials as leather, coloring stuff and threads, whose prices have also increased. The price of glue, for instance, has doubled over the past month.

"On the other hand, the selling price... cannot be raised, as shoe-shop owners object to an increase," he said.

The price of leather, which is the raw materials in shoe- making, has risen by 10 percent. Tanned cow hide, prepared by tanners in Garut, West Java, is sold at prices ranging between Rp 3,000 (some 25 US cents) and Rp 5,000 per foot, which is equal to 28 cm x 28 cm. A pair of shoes need 2 feet of hide.

According to Roni, there is considerable supply of hide. A look at several shops selling the raw materials for shoes located also along Jl. Cibaduyut, shows that there is an abundant supply of tanned cow and sheep hide. But business is quiet and salesmen spend their time chatting.

The supply of rubber shoe soles is now running thin as factories making these items have reduced their production owing to the monetary crisis.

"Not only there's a thin supply of shoe soles, their prices have gone up by 200 percent. Besides, we must pay for them cash. Meanwhile, the shops we supply our shoes to usually pay us with postdated checks, which we can cash only two or three months later," Roni complained.

Chain

In the meantime, the owners of shops selling the raw materials for shoe-making have their own reasons to insist that shoemakers pay cash. Yanti, an attendant in such a shop, cited a very high risk of bad debts.

Even in the absence of a monetary crisis, shoemakers cannot make their payment regularly because they have to wait for payment from shoe shops.

"Now that prices are changing very rapidly, the risk of a bad debt has become higher. We have to buy the materials cash from hide tanners," she said.

It is clear from the trading chain that difficulty does not hit shoemakers only. The first to be hit by difficulty are hide tanners because the demand for this material is low. The next are distributors of raw materials and shoemakers. Finally, there are the shopkeepers who have a headache because the purchasing power of the public is very weak.

Shopkeepers find it difficult to sell the shoes even though they do not raise their prices.

"There are quite a lot of visitors, especially on Sundays or on holidays. However, only a few of them actually buy shoes. So our income has declined sharply," said Buyung, a shoe shop owner.

Shoe shops on the average fix a 30 percent profit margin. A shoemaker makes a profit of between Rp 2,000 and Rp 3,000 per pair of shoes.

Generally a medium-scale shoemaker has 10 assistants, each of whom is paid Rp 1,000 per pair a day. In a normal condition, one assistant usually make Rp 10,000 from the 10 pairs he produces; 10 assistants produce 100 pairs of shoes a day.

Profit

"The profit a day used to be between Rp 200,000 and Rp 300,000. Now, the profit is zero. We even have to lay off our assistants. We don't know how long we can survive," Roni said.

Sad to say the craftsmen in Cibaduyut village can only make shoes. They do not know any other ways to earn a living.

"Agriculture is out of the question because they do not have the skill and also because there is no more land for farming," Roni said.

"The best they can do is to go to big shoe factories in Jakarta or Tangerang and find employment there. In the present gloomy situation, however, even these factories also have to lay off their workers."

Shoes and other footwear products ranked third in West Java exports and accounted for 4.8 percent of the province's export volume in 1993. They dropped to 3.07 percent in 1994, and fell further to 2.76 percent in 1996.

Data at the Cibaduyut Technical Assistance Unit shows at least 986 business owners. They employ some 6,300 shoemakers and produce 5.5 million pairs of shoes per annum, bringing in an annual Rp 46 billion. The industry supports some 20,000 people.

Recently, however, some 8,000 lost their jobs after around 75 shoe enterprises went bankrupt.

Conditions are expected to worsen this year and as many as 13,000 Cibaduyut residents risk losing their jobs in the next few months.

"We can just wait (the crisis out). Going on with our production means bigger debts," said Roni.

Anang Maulana, a shoemaker, concurred. "Nothing to do but wait. We do just any side job to keep bones and flesh together," he said.