Indonesian footwear manufacturers urge the government to remove leather from the quarantine requirement in order to improve the competitiveness of the Indonesian footwear industry. Indonesia's footwear industry imports about 70 percent of its leather consumption (while Indonesia exports most - if not all - of its domestically-made premium leather).
Binsar Marpaung, Secretary General at the Indonesian Footwear Producers Association (Aprisindo), said quarantine checks at the customs add costly time to the process of obtaining the raw material (in this case: leather) for the footwear industry. Moreover, the shoe industry imports finished leather (not raw leather that may carry diseases) and therefore quarantine is unnecessary. "In fact", he adds, "if finished leather that is imported into Indonesia for the domestic footwear industry needs to pass through quarantine, how come products such as bags and shoes that are imported into Indonesia are free from these checks?"
Based on existing regulations, all leather products that are imported into Indonesia need to be quarantined (while Indonesian companies are only allowed to import leather from 65 countries). There are now 396 footwear manufacturing companies in Indonesia (with a combined annual production capacity of 560 million pairs of shoes). The main problem for this industry is that it needs to import about 70 percent of its raw materials. If this process takes a lot of time - due to red tape - then it undermines the competitiveness of Indonesian manufacturers.
According to information from Aprisindo, production costs in Indonesia's footwear industry are higher compared to its counterparts in most of the regional peers. In China production costs have become highest and that explains why many shoe manufacturers decided to relocate to Vietnam or Indonesia over the past couple of years.
However, Indonesia has limited room to tap the potential (of China's declining dominating role in the footwear industry). The table below shows production costs in Indonesia's footwear industry are higher compared to Vietnam and Cambodia. If this situation is not improved then footwear manufacturers will be more willing to relocate to Vietnam and Cambodia rather then moving to Indonesia.
Production Costs Per Pair of Shoes:
Source: Bisnis Indonesia