Indonesian shoe industry asked the government to set standards for the Provincial Minimum Wage (UMP) and Regental Minimum Wage (UMK) which trend is increasing every year. The lack of certainty about government regulation on labor wage hinders the development of the shoe industry in Indonesia. Even, foreign investors think twice to build a shoe factory in Indonesia.
Chairman of Indonesian Footwear Association (APRISINDO), Edy Widjanarko, in Jakarta (Monday, March 17), said the trend of labor costs in Indonesia increased almost every year that cause most investors to return to their country of origin. Even a significant increase in the labor costs makes footwear producers to raise the export price of footwear by an average of USD1 per pair. While, the weakening of the rupiah against the U.S dollar, he said, does not much influence shoe production. Imports of raw materials can be supported by export value of shoes which also shows an upward trend.
Eddy said that 11 manufacturers in Indonesia were forced to move to Vietnam, following the labor costs in the country which are considered too high. He said that the footwear industry considers that the government does not quickly respond to the increase in labor costs that occur almost every year. This condition caused this industry to be reluctant in maintaining investment in the country. It is said that the relocation process of a foreign plant which was originally located in Indonesia happened last year and would continue this year. “This is due to labor costs which continue to rise, so many investors are fleeing from Indonesia”, Eddy said.
Eddy explained that currently there is no foreign investors who are interested to establish footwear factory in the country, because the labor costs in Indonesia are too high compared with ASEAN countries. Today is party continues to strive so that foreign investors would remain in Indonesia. According to him, investment in footwear factories outside Greater Jakarta is approximately Rp100 billion – Rp120 billion for a plant that absorbs about 2,000 employees. If the plant is bigger, then the investment value is greater. Nevertheless, the footwear industry did not question the amount of investment in Central Java and East Java.
Previously, Eddy also explained that at least 135 shoe companies operating in the industrial ate of Tangerang, Banten, and Jakarta were preparing to move to East Java and Central Java. Massive relocation of large, medium and small-scale industries is done considering that the increase in UMR in Greater Jakarta area continues to soar. There is no clear regulation regarding wages.
Meanwhile, Eddy also explained that as a result of the cessation of local supplies, the footwear industry was forced to import raw materials and auxiliary materials. He said that so far, the footwear/shoe industry in the country obtains raw materials and auxiliary materials from local suppliers, although the origin is from imports. But now, businesses must directly import raw materials from other countries because local suppliers are reluctant to supply due to weakening of the rupiah.
According to Eddy, this process makes the process of obtaining the raw materials becomes more lengthy and troublesome. Because businesses must go directly to buy to another country. Not to mention having to face a process that takes a long time at the customs & excise at the port. As for raw materials and auxiliary materials imported include plastics, plastic ores, iron ores, leather, plastic leather, and so on. This process affects the overall performance of the footwear industry this year. If last year, the industry could grow above 10%, for this year Eddy could only set a maximum 5% growth target. (E)
Business New - March 19, 2014