Indonesian footwear exports to fall by $1 billion; Weakening global demand and rising labor costs in Indonesia could be a major blow to the country’s exports of footwear
October 30, 2013 Leave a comment
Indonesian Shoemakers Ready to Leg It
By Eva Fitriani on 10:43 am October 29, 2013.
Weakening global demand coupled with a potential production shutdown by some factories amid concerns of rising labor costs in Indonesia could be a major blow to the country’s exports of footwear. Industry insiders expect footwear exports to fall by $1 billion next year. Eddy Widjanarko, chairman of the Indonesian Footwear Association (Aprisindo), said on Sunday that the association had projected exports of footwear this year to reach $4 billion. However, for 2014, the figure is expected to drop to $3 billion.Eddy said the decline in demand, especially from the United States — the market for 80 percent of Indonesia’s footwear exports — and frequent strikes as a result of workers’ demands for wage hikes of up to 50 percent could prove to be a double whammy for investors.
“There are 46 foreign companies ready to leave Indonesia, even if the minimum wage rises by 20 percent,” he said.
Eddy said the companies were already thinking of going to Vietnam and Myanmar, regional rivals looking to boost their own economies by offering investors lower operating costs.
Around three million workers across 20 provinces will take part in a series of coordinated strikes on Thursday and Friday in support of improved employment and welfare conditions.
Said Iqbal, the president of the Confederation of Indonesian Workers Union, said in a press release that hundreds of thousands of companies in 40 industrial estates would see production halted during the work stoppage.
He said the unions were demanding an average national wage increase of 50 percent, while in Jakarta, workers are looking for the minimum wage to be raised to Rp 3.7 million ($334) a month from the current figure of Rp 2.2 million.
According to Said, the unions are also demanding universal health coverage for all Indonesians by Jan. 1, 2014, and for the elimination of outsourcing.
Eddy said the problem of flagging demand from the United States could be addressed by footwear companies diversifying their export markets.
“But if the demand for higher wages is approved by the government, we guarantee that not only will the foreign companies leave, but the local companies could also collapse,” he said.
Eddy said that Indonesia’s footwear industry would still have room to grow if the minimum wage increase was capped below 20 percent.
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