Players in Indonesia's footwear industry are concerned about the sharp growth of imports of footwear (shoe) products into Indonesia, by far outpacing growth of footwear exports. Data released by the Indonesian Footwear Association (Aprisindo) show footwear imports into Indonesia rose 17 percent year-on-year (y/y) in 2016, while over the past two years exports of footwear products were recorded in the range of 3 - 4 percent (y/y).
Moreover, in the first quarter of 2017 footwear imports into Indonesia surged 22 percent (y/y) from the same quarter one year earlier, mostly originating from China where footwear products can be manufactured at lower costs. China, the world's second-largest economy, controlled 35.4 percent of the global footwear market in 2016 according to data from World Footwear.
Eddy Widjanarko, Chairman of Aprisindo, said Indonesia still has a major surplus in the footwear trade balance. However, the recent import-export figures give rise to concern. Not only does Indonesia need to be concerned about sliding competitiveness in relation to China but perhaps more alarming is that Vietnam has been emerging as a strong footwear exporting nation over the past couple of years, surpassing Indonesia and even undermining the role of China in the global footwear industry.
Investors are more interested to establish footwear factories in Vietnam than in Indonesia because the political context is more stable in the former, while Vietnamese workers are also considered to have better skills. The table below shows China's, Italy's and Indonesia's global market shares have been declining, while Vietnam's role in the global footwear market has grown sharply.
Global Market Share Key Footwear Manufacturing Nations:
Source: Bisnis Indonesia
According to data from Statistics Indonesia (BPS), imports of footwear products into Indonesia totaled USD $489 million in full-year 2016. Meanwhile, Indonesia's footwear product exports totaled USD $4.6 billion over the same period, implying Indonesia has a massive surplus.
Widjanarko added that China's plans to establish a massive network of rail and maritime links - named the "Silk Road Economic Belt" - from China to central Asia through Europe, connecting China's east coast with Europe via the South China Sea and the Indian Ocean will strengthen China's trade. This network would connect China to 65 countries representing 60 percent of the global population and around a third of global GDP.
This direct line to Europe would undermine Indonesia's footwear exports to Europe, currently Indonesia's third-largest export destination in terms of footwear.
Indonesian Footwear/Shoe Exports 2010-2017:
Source: Indonesian Trade Ministry