Husin added that the Indonesian government considers the footwear industry as one of the priority industries to be developed in order to maximize foreign exchange earnings in the non-oil and gas sector and provide employment opportunities for the local population. (the footwear industry is a labor-intensive industry). The government hopes the South Korea-based Changshin Group can promote Indonesia as a production hub for Asia’s footwear industry. Currently, the main export destinations for footwear products made in Indonesia are the United States, Belgium, Germany, Britain and Japan.
During the years 2011-2013, investments in the Indonesian footwear industry increased by an average of 4.7% year-on-year (y/y) according to Husin. In 2013, investment in the footwear industry in Indonesia amounted to IDR 10.7 trillion (USD 836 million). The minister said that Indonesia now accounts for about three percent of total global footwear production (Indonesia is among the world’s top six exporters of footwear).
In 2014, Indonesia exported a total of $4.1 billion in footwear, up 6.4% from the previous year. However, this meant that the country fell short of its shoe export target of $5 billion in 2014. This failure was partly the result of canceled investment projects by foreign investors. Earlier this year, it was reported that a total of sixteen investors, mostly from South Korea and Japan, had canceled plans to establish shoe factories in Indonesia due to wage growth uncertainty. minimum in Indonesia. These wages have risen rapidly in Indonesia in recent years and weigh heavily on the financial balances of companies (in fact, low labor costs have been one of the main reasons why foreign shoe companies have started to produce in Indonesia). In recent years, dozens of shoemakers have reportedly moved their factories to East Java or other ASEAN member countries (such as Cambodia and Vietnam) where wages are more competitive.
Another obstacle in the Indonesian footwear industry is the lack of domestic supply of raw materials – mainly leather and rubber. Although it is one of the world’s leading producers of natural rubber, rubber must first be exported for processing as domestic processing facilities are still insufficient.