Shoe industry braces for more gloomy days

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.