Domestic sales of footwear in Indonesia declined 20 percent (y/y) to IDR 4.8 trillion (USD $393 million) in the third quarter of 2014 according to data from the Indonesian Footwear Association (Asosiasi Persepatuan Indonesia, abbreviated Aprisindo). Meanwhile, exports of Indonesian footwear declined as well but not as much as domestic sales. In fact, in terms of value, footwear exports increased due to the rupiah exchange rate that has depreciated considerably against the US dollar.
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Sonia Kong, the Chairman of the Association of Korean Businesspeople in Batam, said that the investment or business climate in this Special Economic Zone (SEZ) has become less conducive in recent years. In the past five years, 17 Korean companies decided to move to other countries. Batam (including several surrounding islands) was given the status of SEZ with Singapore in 2007. This SEZ status means that tariffs and value-added taxes for goods shipped between Batam and Singapore are eliminated between 2007 and 2077.
Indonesian newspaper Bisnis Indonesia reported that a number of foreign companies in West Java are ready to leave Indonesia because of increasingly higher operating costs. Chairman of West Java's branch of the Indonesian Employers Association (Apindo) Dedy Widjaja said that the main factors that are driving these investors away are higher regional minimum wages and the government's plan to raise the price of electricity. In May 2014, the Indonesian government intends to cut electricity subsidies for medium and large industry groups.
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Recently, Jakarta Governor's Regulation no. 20 of 2017 regarding the Minimum Wages for the Industrial Sector (Regulation 2017) was issued. The minimum wages for the industrial sector are set on annual basis. Regulation 2017, replaces and repeals Governor Regulation no. 8 of 2016 (Old Regulation). In this column we discuss the new wages set by the Regulation 2017 for each specific industrial sector in Jakarta.
Investment in Indonesia's furniture and handicraft industries is expected to slow in 2016 due to subdued global demand and the lower competitiveness of these industries in Indonesia. Local furniture companies are moving away to Vietnam due to issues related to logistics costs, minimum wages and workers' productivity. For example, Taiwan-based Woodworth Wooden Industries Indonesia, the first Taiwanese furniture company that entered Indonesia (with a USD $40 million investment), decided to exit Indonesia, leaving 200 workers unemployed.
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