ANNOUNCEMENT 30 Jul 2009In July 2009, the government of Indonesia announced a change in private-sector financial support.
NUMBER OF INTERVENTIONS
Indonesia Investment Coordinating Board: "Indonesia`s annual shoe production reaches 1.2 billion pairs," http://www.bkpm.go.id/index.php/main/newsdetail/940
Ministry of Industry: http://www.depperin.go.id/ENG/Publication/IndReview/2009/20090707.htm; and The Jakarta Post, July 6 2009
Regulation 90/M-IND/PER/11/2008 (in Bahasa Indonesia):
The Indonesia Investment Coordinating Board (BKPM) cites an official news report (dated 9June 2009) that:
1. Confirmed that Indonesian shoe production had reached 1.2 billion in the previous year, a 10 percent increase. The total value of Indonesian shoe exports was 1.88 billion US dollars in 2008.
2. Noted strong competition from Chinese footwear manufacturers and claimed that the latter were selling 17-33 percent lower than the "normal price".
3. Quoted Director General for Textile, Metal, Machinery and Multifarious Industries, Ministry of Industry, Mr. Anshari Bukhari, as saying ""With the campaign on the use of local products, we set a target to increase locally produced shoe sales by 10 percent". Furthermore the report states "The director general said that so far there had been an increase in the use of footware made at home, particularly by civil servants. Even many consumers felt they become more confident in using domestically made footware."
In addition, nine footwear manufacturers have so far been declared eligible by the Industry Ministry to receive government aid to modernize industrial machinery to help boost efficiency and productivity. Under the aid program the government will help finance 10 percent of new machinery purchases, having allocated a total of Rp 55 billion (about US$5.1 million) for this purpose for the year. For the nine eligible shoe companies, the total funds being made available by the ministry is Rp 4.2 billion. Statements by Mr. Anshari Buckari suggest that the government was prepared to receive footwear machinery investment applications until 30 July 2009.
The government argues that country's footwear industry is eligible for the machinery renewal fund since most of the machinery now used by footwear companies is very old.
The state aid program's implementation is selective, likely to affect investment decisions of non-eligible firms (including foreign investors) and is likely to affect trade flows (Indonesia being a large exporter of footwear.)
This measure was implemented by regulation 90/M-IND/PER/11/2008 on 24 November 2008 and replaced on 1 January 2011 by regulation 123/M-IND/PER/11/2010.