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
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