Shoe Factory in China Moves to Indonesia

Tempo Interactive, Thursday, 28 January, 2010 | 14:55 WIB

TEMPO Interactive, Tangerang:Trade Minister Mari Elka Pangestu said there seems to be a tendency for shoe manufacturers in China to relocate to Indonesia. The strengthening Chinese yuan can be one reason for this, along with the increasing cost of manpower and its regulations in China. “This is a permanent trend,” Mari said yesterday in Tangerang, Banten.

Major shoe producers like Nike, Adidas, and New Balance, have relocated their shoe purchases from China to Vietnam and Indonesia. Such a trend, Mari said, has been going on since 2005. For the last four years, the resulting value of these moves to Indonesia have resulted in US$ 1,8 billion. "Buyers are coming in large numbers,” she said.

The relocation, Mari continued, will improve production and investment in the country, especially when Indonesian shoes are now capable of competing with Chinese and Vietnamese products. The Indonesia Shoe Association board chairman, Harijanto, said with top shoe brands coming to Indonesia, the national shoe industry will make efficiencies and restructure the production system. “But the government must ensure that electricity supply is reliable and that infrastructure, like roads are repaired,” she said during the visit. She also cited the example of the Panarub factory in Pabuaran, Tangerang, which can only reach Tanjung Priok Port through the Tomang toll road which is often congested.

Harijanto also asked for more efficiency in arranging investment permits, especially in the provinces. Mari promised to reduce the bureaucracy, including the time to process the licenses. She said New Balance investors admitted that the cost and production of Indonesian manpower is competitive and the staff turnover is stable, as is the national political situation. “Then there is the infrastructure that need to be repaired,” she said. PT Panarub Dwikarya CEO, Hendrik Sasmito, said the local shoe industry will remain competitive with China and Vietnam, as long as it can keep down the cost of production. “So long as there is no out-pricing, it can still go on,” he said.

Panarub currently produces four shoe brands; Adidas, New Balance, Mizuno, and Specs. A pair of New Balance shoes is sold at US$ 12 to 16. Panarub has two factories and will open a new one in Cikupa, Tangerang. Panarub has exported 1 million pairs of shoes. Until the end of 2010, an additional 500.000 pairs per month will be produced.

IQBAL MUHTAROM