For a long time, Indonesia has been regarded as one of the world’s major footwear manufacturing hubs. However, behind the impressive export figures, a deeper structural contradiction is becoming increasingly evident.
According to a recent report released by Indonesia’s Ministry of Industry (Kemenperin), the domestic footwear industry’s heavy dependence on Chinese raw materials has become the biggest bottleneck constraining its international competitiveness.

“Using Chinese soles to make Indonesian shoes”:
The paradox of the supply chain

Reni Yanita, Director General of Small and Medium Industries and Diversification (IKMA) at the Ministry of Industry, stated frankly during the Industrial Confidence Index (IKI) release on January 29, 2026, that Indonesian manufacturers face an inherent disadvantage in cost control because China firmly controls the upstream supply chain of the footwear industry.

This has created an awkward cycle:
Indonesian manufacturers import soles, fabrics, and various components from China, then assemble finished products locally. When Indonesian-made shoes enter the market, they compete directly with finished products exported from China that benefit from stronger economies of scale.
Because the cost of most components is externally determined, Indonesian products have little room to compete in price wars. Without breakthroughs in research and development (R&D) and productivity, this “passive disadvantage” will be difficult to overcome.

Warning signs:
From expansion to contraction

The loss of competitiveness is clearly reflected in recent data.
In January 2026, Indonesia’s footwear industry (including leather and related products) fell into contraction territory, with its index dropping below the expansion benchmark of 50 points.

Febri Hendri Antoni Arif, spokesperson for the Ministry of Industry, further explained that beyond raw material issues, the industry is facing serious external challenges:

• Global uncertainties are directly suppressing consumer demand.

• Increasingly frequent trade barriers between countries are putting pressure on Indonesia’s export-oriented industry, which heavily relies on the U.S. and EU markets.

• Economic fluctuations in the U.S. and Europe, key consumer markets for Indonesian footwear, have led to declining order volumes.

Breaking the deadlock

Faced with both internal and external pressures, the Indonesian government is taking proactive measures rather than remaining passive. To help domestic companies — especially small and medium enterprises (IKMA) — break through current limitations, the Ministry of Industry has proposed a comprehensive strategy:

First, strengthening infrastructure support.
The “Indonesia Cooperative Industrial Empowerment Center,” completed in November 2025, is expected to play a key role. The center aims to help SMEs move away from low-end contract manufacturing by introducing skilled designers, optimizing production patterns, and improving raw material quality, enabling them to produce higher value-added and differentiated products.

Second, deeper integration of marketing channels.
The Ministry is promoting stronger collaboration between local companies and both online and offline markets to enhance the attractiveness and brand loyalty of domestic brands among consumers.

Conclusion

The current state of Indonesia’s footwear industry reflects a broader reality — the growing pains faced by Southeast Asian manufacturing as it attempts to move toward mid-to-high-end transformation.
Relying solely on labor cost advantages is no longer sufficient for long-term development. The decisive factor for the future lies in whether Indonesia can shift its industrial foundation from “import dependence” to “independent innovation” through sustained R&D investment and stronger supply-chain self-sufficiency.

As Reni Yanita noted, this is a “homework assignment” that requires joint efforts from both the government and entrepreneurs. Only by gaining greater control over design and raw materials can Indonesia’s footwear industry truly forge an independent path toward global competitiveness.

Source: Shoe Industry Professor (February 4, 2026)