Shoe producers blame govt for their inefficiency

JAKARTA (JP): Indonesian shoe producers have blamed the government for their production inefficiency and uncompetitive products.

They said the government had failed to create a business atmosphere that could support the sector's growth and increase its competitiveness on a global level.

Chairman of the Indonesian Footwear Association (Aprisindo), Anton J. Supit, over the weekend asked the government to set up a special board to smooth out all export-related matters to solve the efficiency and investment problem.

He said lack of coordination between government offices made it difficult for exporters to maximize their earnings.

He said the government's recent decision to increase the minimum wage was an example.

"The Ministry of Trade and Industry sets our (export) target, but the Ministry of Manpower suddenly pushes up wages while the Ministry of Finance does not provide any breakthroughs. This makes it practically impossible for us to reach target," he said.

Anton, who was accompanied by Aprisindo Secretary General Edi Widjanarko and Secretary Then Ngim Fu, said the footwear manufacturing industry had very bright prospects.

"It would be a pity not to grab an opportunity like that," he said.

From the world's footwear export market worth US$45 billion last year, Indonesia managed to contribute only $2.1 billion, or less than 5 percent of the world's exports.

Anton said he was convinced Indonesia could increase its contribution to the export market to 10 percent before the ASEAN Free Trade Area (AFTA) in 2003.

He said Indonesia's small share in the export market was caused by the low competitiveness of Indonesian footwear manufacturers.

"This, in turn, is caused by the poor condition of the supporting industries that provide raw material supplies," he said.

Anton said the situation was worse with the development of new competitors in the region, such as Vietnam and China. Both countries, he said, had attractive investment policies and a competitive business climate.

Anton said about 60 percent of the raw material used in Indonesia's footwear industry was imported, particularly from South Korea and Taiwan.

"So although our footwear exports each year continue to increase, it is always followed by an increase in raw material imports," he said.

He insisted that if more raw material components were produced domestically, footwear manufacturers would stop getting their supplies from overseas.

"Even if the imports and domestic products have the same price, we would opt for local products. But currently imports are much cheaper, so we have no choice," he said.

Minister of Trade and Industry Tunky Ariwibowo said last week that leather product exports, which included shoes, rose 4.6 percent last year to $2.4 billion. Leather products are among the 10 leading export commodities stipulated by the government.

Anton said the proposed establishment of a special "export planning board" consisting of government officials and businessmen could eliminate all the red tape barriers that obstructed the flow of exports.

"If necessary, this board should restructure the whole industry... A revolution is needed to strengthen it," he added.

He suggested the government provide incentives to manufacturers who efficiently use raw material.

Currently imports of raw material for export-oriented footwear producers may get import duty and value-added tax drawbacks through the Export Service Facilitating Agency.

Any raw material leftovers must be reported to the agency to have their import duty drawbacks paid.

"But most of the time, the leftovers are a result efficiency rather than miscalculations on the part of the manufacturer," Anton said.

He said the government should reward this by exempting manufacturers from paying the drawbacks.

Aprisindo currently consists of more than 200 footwear manufacturing companies and is dominated by producers of sports shoes.

About 70 percent of Indonesia's sport shoe exports consist of four international brand names: Nike, Fila, Reebok and Adidas.

Aprisindo is scheduled to have its national convention, on April 16, opened here by Minister of Industry and Trade Tunky Ariwibowo. (pwn)