Indonesian exporters wrong-footed as quarantine stymies footwear exports

The Jakarta Post, Jakarta

Indonesia's slow bureaucratic processes once again appear to be preventing an industry from achieving its full potential in the global market.

The length of time required for the release of imported finished leather -- a main raw material for footwear manufacturers -- from quarantine could potentially impede industry players from making the most of wide-open markets for footwear in the European Union.

"The fumigation process for finished leather can take up to one month when it should take only a couple of days. Firms will have difficulties in increasing their production if they don't have secure supplies of raw materials," Indonesian Footwear Association (Aprisindo) supervisory board chairman Anton J. Supit said.

The industry is still highly dependent on imported leather, with more than 50 percent of its raw materials being sourced from China, South Korea and Argentina.

Indonesian footwear manufacturers, Anton explained, were currently seeking to increase their output to meet the demand from the European Union (EU) market.

The EU will start limiting imports of footwear from China and Vietnam starting in April. The restrictions could reduce these countries' current export values of US$5 billion and $2 billion respectively by up to 20 percent following a finding that both were guilty of dumping.

"With these quotas, importers and producers are looking for alternative production bases. They are thinking of quickly moving to Indonesia," he said.

German footwear giant Adidas, for example, has opened two new factories here under the names PT Poong Won Indonesia and PT Spotec, while global brand Puma will commence production here again.

"We cannot take the opportunity for granted and not try to overcome the problems we are facing. If we continue to suffer from these problems, the investors could easily opt for Cambodia instead," Anton stressed.

Aprisindo urged the Agriculture Ministry, which is responsible for quarantine procedures, to set time limits for fumigation.

Trade Minister Mari E. Pangestu also forwarded a similar request to the Agriculture Ministry.

The footwear industry could be one of the rare subsectors to see a revival this year with new market opportunities opening up and investments coming in.

The labor-intensive industry currently employs about 400,000 workers, excluding those working for suppliers in the plastics, leather and molding industries. Before the 1998 financial crisis, the industry employed some 850,000 workers.

Exports of footwear are expected to reach almost $3 billion this year if domestic manufacturers can make the most of the new opportunities in the EU.
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