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Apparel Makers Eye Indonesia

Indonesia’s cheap labor and low production costs — always among the highest priorities of apparel and textile makers who source outside their countries — is attracting international manufacturers in increasing numbers.

Foreign investment in Indonesia for Q1 this year was up 27 percent to almost $7 billion.

US footwear and apparel giant Nike, among the foreign firms planning to invest in Indonesia, recently announced plans to invest in more factories in the country and make it the company’s biggest production base.

Nike already has 38 Indonesian factories under contract employing an estimated 175,000 workers.

As a prelude to Nike’s increased investment in Indonesia, Nike Indonesia president director Jeff Perkins met last month with Industry Minister M.S. Hidayat to discuss details.

Nike also has factories in China and Vietnam.

Other US firms already have a presence in Indonesia including Apple, Burger King, GM, KFC and McDonald’s.  More US textile and apparel makers are expected to increase operations already established in the country, and new firms are expected to begin manufacturing there.

Indonesia is Southeast Asia’s biggest economy and most populous nation with some 251 million inhabitants.

To attract and accommodate new investors and enterprises, The Indonesian Investment Coordinating Board has made obtaining a business license much easier than previously.

But worker complaints and angry demonstrations have caused other foreign investors to abandon, at least temporarily, their plans to invest in footwear manufacturing, according to Eddy Widjanarko, chairman of the Indonesian Footwear Association.

Adding to the reluctance of some (but not all) investors, is capital city Jakarta’s recent boost of the minimum wage by 44 percent to $227 a month – still relatively cheap by Asian standards.

Despite the recent infusion of foreign cash, Indonesia is not a manufacturing paradise.  Problems persist such as an unpredictable regulatory climate, widespread corruption, and an inadequate infrastructure.

 

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