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7 April 2010

Indonesia to benefit from relocation of overseas shoe factories

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Relocation of shoe factories from other Asian countries such as China and Vietnam to Indonesia will help boost Indonesian footwear exports, the Jakarta Post quoted an association of local shoe producers as saying.

Harijanto, a senior executive of the Indonesian Footwear Association (Aprisindo) said that shoe exports were predicted to rise by 11 percent to $2 billion this year from $1.8 billion recorded last year. This increase is partly due to the relocation of factories from China and Vietnam to Indonesia, in addition to expansion of existing footwear factories.

“Our exports can even reach more than $2 billion when the relocation and expansion projects have been fully completed,” he said during a press conference in Jakarta. He said footwear exports had already reached more than $400 million in the first three months of the year.

At present, Indonesia is the third largest footwear exporter in the world after China and Vietnam.

Harijanto also said he expected that in the next five years, footwear exports would pass the $2.4 billion target, the record high previously achieved in 1996 just before the Asian banking and financial crisis hit the country in 1998, causing severe currency depreciation.

According to Harijanto, there are three sports shoe brands that used to be manufactured on the mainland of China which are now produced here. These include Mizuno and Asics Tiger, both originally from Japan, as well as New Balance from the United States.

Orders for Mizuno and New Balance are now handled by PT Panarub Dwikarya, while Asics Tiger shoes are produced by the Indonesian subsidiary of Taiwanese company Shang Yao Fung.

Meanwhile, Adidas and Nike have also increased their orders to local manufacturers, he said, without giving further details.

It is estimated that local footwear manufacturers are expected to spend $200 million in new investment in the next few years to boost production. “Their total production can reach about 20 million pairs by the end of 2011,” Harijanto.

For example, he said, production of New Balance shoes would increase from 50,000 pairs last year to 500,000 pairs by the end of this year and would eventually reach 1 million pairs per annum next year.

Harijanto said more and more global brand footwear companies were relocating factories from China to Indonesia.

Other Chinese companies are switching orders for branded shoes to their Indonesian partners rather than relocating factories, he said.

“China’s economy is already overheating. Their production is too big back there,” he said. “They are worried something would happen if anything gets too big.”

Relocation of overseas factories along with expansion of local shoe factory production will contribute to the projected increase in RI production figures, he said.


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