Assistance proposed for Indonesian shoemakers

The national government plans to create a package of benefits to help the country’s footwear manufacturers.

The Indonesian Investment Coordinating Board (BKPM) has proposed income tax cuts to give support to the nation's footwear and textile industries. According to the BKPM's deputy director for investment monitoring and implementation, Azhar Lubis, the board had suggested to the Office of the Coordinating Economic Minister and the Finance Ministry a reduction in some employees' income tax by as much as 50 per cent.

"It’s still a suggestion, but we hope they will grant it soon," said Mr Lubis, adding that the strategy was intended to last for five years and would come with terms and conditions.

The reduction in tax would only be applied to companies that employ at least 5,000 workers, provide details on their employees' Social Security Management Agency policies and salary slips, and export 50 per cent of the footwear they produce. The incentive is expected to benefit the Indonesian footwear industry's cash flow, as some companies file their workers' taxes directly to the tax office.

The government is pushing efforts to revive the growth in labour-intensive industries after the country's economy weakened during the last in the past three quarters of 2015 to the lowest level since 2009.

To avoid layoffs and to revive the industries, the BKPM has launched a special help desk (called 'DKI-TS') for the footwear and apparel industries. To date, the desk has assisted 33 companies that are under pressure to lay off workers, reportedly saving close to 1,500 jobs.

Indonesian Textile Association (API) chairman Ade Sudrajat welcomed the tax incentive. However, he believes that the plan will benefit employees but not business owners. He added that, in his opinion, the terms and conditions are too strict, and that it would be better if the entry level for assistance is 2,000 workers because fewer than half of Indonesian shoe companies employ more than 5,000 people.

Head of the Indonesian Footwear Association (Aprisindo), Eddy Widjanarko agreed with Mr Sudrajat. "The benefit for us [the businesspeople] is only a little, but we appreciate the stated effort and intention to support the labour-intensive industry," he remarked.

As an additional aid, state-owned electricity producer PLN has lowered the industry electricity tariff from around Rp1,200 (£0.06) per kwH to Rp1,100 (£0.05). There is also a 30 per cent discount on power used between 11pm and 8am, although this reduction only applies if the usage exceeds 'normal' volumes.

Publishing Data

This article was originally published on page 7 of the February 2016 issue of SATRA Bulletin.

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