US Companies Refocus on Shoe Making in Indonesia
At least one US shoe maker plans to build a factory in Indonesia, and other US companies are exploring opportunities to collaborate with local producers, to make footwear for both countries, an industry representative said on Tuesday.
“They are now exploring opportunities,” said Edi Widjanarko, chairman of the Indonesian Footwear Association (Aprisindo), after meeting the Footwear Distributors and Retailers of America (FDRA) at the Ministry of Trade office in Central Jakarta. Edi said he knew of a plan by a US company to build one or two new factories here and that investment could happen as soon as this year.
The United States has been Indonesia’s biggest overseas market for shoes in the past few years. According to data from Aprisindo, US consumers accounted for 22.6 percent of Indonesia’s total $2.6 billion in footwear exports for 2010. Exports to the United States would grow at least 30 percent in several years, Edi said. Belgium and Germany were the next biggest export markets, after the United States, for Indonesia’s footwear industry — each with 8.5 percent market share last year.
Matthew Priest, president of FDRA, said that US companies see great opportunity in Indonesia.
“We search for new sourcing market and some of our members have been here for many years,” he said. “For us, it is an educational process so that our members understand about the capacity and the opportunities lie in Indonesia.”
The US group said that labor shortages in China were one of the challenges in investing there, and its members are increasingly exploring opportunities in other countries such as Indonesia, Vietnam, India and Ethiopia.
FDRA represents companies that account for about 80 percent of all footwear sales in the US, including brand names such as Skechers and Nike.
Indonesia’s footwear industry reached its peak in 1996 with exports totaling $2.2 billion. In 1997, at the start of the financial crisis, companies shifted their investments elsewhere. But the industry has been making a comeback as Indonesia’s economy improved. Since 2007, foreign companies have been returning to Indonesia by building factories in the country because of the country’s competitive labor costs and skills.
“This is a fresh air for Indonesia, because the country is currently receiving attention from many countries,” Edi said.
On Tuesday, the Ministry of Trade facilitated a meeting between Aprisindo and FDRA in which both groups agreed to create a memorandum of understanding in order to increase mutual interest between Indonesia and the United States.
Indonesia, the third-largest footwear exporter after China and Vietnam, exported about 300 million pairs of shoes wordwide last year, and shipments may increase to about 400 million pairs this year. The value of Indonesia’s footwear exports globally would rise 23 percent this year to $3.2 billion,
“About seven to nine years ago, there were investments [in footwear industry] that exit from Indonesia to other country,” Deputy Trade Minister Mahendra Siregar told the media after the meeting. “Now, our growth is getting better. Therefore, we see the interest [from foreign investors] is increasing gradually,” he explained.