Nike Inc is committed to expanding its business in Indonesia, despite a decision to scrap contracts with two of its suppliers, a company director said on Tuesday.
Several thousand angry Indonesian workers staged a noisy protest outside Nike's office in Jakarta on Monday, urging the firm to rethink its plans to end the contracts or pay severance money.
Indonesia produced around a fifth of Nike's shoes in 2006.
We are not leaving Indonesia. Nike is committed to Indonesia and committed to grow its business in Indonesia, Erin Dobson, who is in charge of corporate social responsibility communications, told Reuters by phone from Singapore.
She said ending the contracts of two of the seven factories supplying shoes to Nike was purely a business decision, adding that the factories had failed to meet Nike's quality standards and other performance targets.
Dobson said Nike, which subcontracts to 38 factories in Indonesia employing 115,000 staff, had a good working relationship with the other five footwear factories it used.
These factories could take over the output from the other two contractors, Dobson added.
At this time the factory base in Indonesia is very steady and the plan is to grow it.
Dobson said that Nike had briefed the Indonesian government before ending the contracts.
We actually have what we feel is a very strong relationship with the Indonesian government and a very strong relationship with our other contract partner factories within Indonesia.
Asked whether Nike still saw Indonesia as a competitive place to make its products, given strong competition from countries such as China and Vietnam, Dobson said: Absolutely, and in fact, since 2004 we've grown footwear sourcing 18 percent.
The president director of Central Cipta Murdaya (CCM), the owner of the two factories which lost the Nike contracts, said on Monday that they had met the company's quality standards and the move would put 14,000 people out of work.
Nike and other global sports brands have in the past come under pressure from groups such as Australia-based Oxfam Community Aid Abroad over the treatment of staff in Asian factories subcontracted to produce their sports shoes.
Dobson said although some issues still remained, Nike felt it had a made a lot of progress in addressing these.
Indonesia is keen to seek foreign investment to help make inroads into an unemployment rate estimated at more than 10 percent.
But foreign investors have often raised concerns about doing business in Indonesia, pointing to legal uncertainty, red tape, corruption and unfriendly labor laws.