Mustaqim Adamrah, Jakarta – The footwear industry may earn zero profits in the second quarter of next year as the global economic downturn has severely affected overseas consumer purchasing power, forcing local manufacturers to cut profit margins in a bid to remain competitive.

An advisory board member of the Indonesian Footwear Association (Aprisindo), Djimanto, said Monday that footwear manufacturers have been in tough negotiations with their business partners to secure deals.

"Foreign buyers have demanded order volumes to be lowered by an average of 30 percent compared to previous orders," he said on the sidelines of a two-day national meeting of the Indonesia Chamber of Commerce and Industry (Kadin).

"As a consequence, our manufacturers have yet to secure orders for the second quarter of 2009, and this may end up with us generating no profits, or worse with losses on orders," he added.

While forecasting that revenue for the industry would drop by 30 percent, Djimanto said the industry would feel good if it managed just to keep production capacity intact and to avoid more losses and layoffs, by squeezing out profit margins.

If the industry failed to book profits next year, Djimanto said, the government would consequently receive less revenue in income tax.

Orders for footwear are usually made three months in advance for three months of production. Manufacturers have secured orders of 400 million pairs of footwear for January-March deliveries, relatively similar to the 400 million to 450 million pairs ordered for deliveries in the fourth quarter this year, according to Djimanto.

For April-June deliveries, he said, manufacturers previously used to have orders secured by early December at the latest.

Weakening demand in the European Union, the United States and Japan has brought the industry to the brink. According to the association, 41 percent of total orders usually come from the United States, 30 percent from the EU, and 15 percent from Japan, while the remaining 14 percent are from other countries.

Djimanto said the industry had booked US$1.8 billion in full-year exports for 2008. The industry previously targeted to achieve a 10 percent export growth this year from $1.76 billion booked last year.