Indo the future - Indo Leather & Footwear Expo 2017

The 12th Indo Leather and Footwear Expo (ILF) will take place at the at the JIExpo–Kemayoran in Jakarta, on 18–20 May. Supported by the Ministries of Trade and cooperatives and SMEs of the Republic of Indonesia, as well as the Indonesian Footwear Association (APRISINDO) and the Indonesian Tanners’ Association (APKI), among others, there’s enough backing to make this year’s event a standout from its predecessors.

Featuring semi-finished and finished leather, exotics, components and accessories, and machinery for tanning and footwear, ILF can take advantage of the trend of leather production moving from China.

Industrial scale

According to a report by Jones Lang LaSalle (JLL), relocating manufacturers from China to Indonesia will stimulate growth until 2021, providing ample investment opportunities in the country’s numerous industrial complexes. The study, titled ‘A Revival of South East Asian Manufacturing Hubs’, said low-cost, export-oriented foreign manufacturers were facing rising labour and land costs at a time when China was trying to refocus its economy towards higher domestic consumption rates, increased services and larger exports.

Typical manufacturing wages were now $3.90 an hour in China, compared with around $1.00–1.40 in Indonesia, the report said.

“Indonesia’s manufacturing sector is expected to grow 6–7% annually until 2021 – up from 5% in 2016 – thanks to a stabilising currency and changes to economic policy,” said Regina Lim, head of South East Asia capital markets research at JLL.

Indonesia also recently implemented policies to encourage foreign participation in the country’s industrial sector by providing tax incentives and relaxing restrictions in its negative-investment list.

In addition, the JLL report noted that Indonesia was looking forward to strong levels of domestic consumption as the country’s middle-income population was expected to increase to 80 million by 2020, providing significantly wider markets for manufacturing goods.

Solid footing

This year, Indonesia will welcome new investments from at least eight footwear companies that plan to relocate production bases to the country from China and South Korea, said Achmad Sigit Dwiwahjono, the Industry Ministry’s director general for chemicals, textile and miscellaneous industries.

Those companies will invest nearly Rp7.6 trillion ($570 million) in Indonesia this year, which represents a vast increase on last year’s Rp1.9 trillion investments in the footwear and leather products industry. The government initially set a target of Rp2.0 trillion investments in the sector this year.

JLL warned, however, that Indonesia and its South East Asian counterparts needed to implement lasting reforms to sustain long-term manufacturing growth.

“The ability of South East Asia to move up the value chain will depend on the extent to which China’s costs increase,” added Lim. “It will also hinge on the growth of domestic consumption in these markets, the quality of education provided, the availability of infrastructure and the ease of doing business.”

Work in progress

With the momentum in Indonesia’s favour, organisers are hopeful that this edition will be more of a success than last year, when only one European tannery – Italy’s La Querce – exhibited.

ILF is fairly small, relatively speaking, and only very few Indonesian tanners exhibited last year. Many Chinese producers of shoe-making machines exhibited, but struggled to attract many visitors.

As reported in Leather International following ILF last year, Indonesian tanners, unlike their Pakistani and Indian colleagues, weren’t especially bothered by their national sector show, but it ought to be a showcase for the industry. If every tannery and shoe factory participated, it would encourage overseas buyers and sellers to attend, which would make it more successful.

Organisers, visitors and exhibitors are hoping there will be more of a collective effort to spur on this potentially robust sector, especially considering the details in the JLL report and the growth that Indonesia stands to achieve.