Textile industry up for more subsidies

The Jakarta Post ,  Jakarta   |  Fri, 03/28/2008 1:39 AM  |  Business

The government launched Thursday the second phase of its textile industry revitalization program, which includes a Rp 266 billion (US$30.6 million) subsidy for machinery restructuring and Rp 45 billion as an interest rate subsidy.

"This year our target is to attract 150 to 160 textile producing companies," said Anshari Bukhari, the Industry Ministry'sdirector general for metal, machinery, textile and multifarious industrial machineries.

Textile companies applying for the program can receive subsidies in the form of a 10 percent discount for the purchase of imported textile machinery and a 15 percent discount for domestic textile machinery. Every company is entitled to a maximum of Rp 5 billion in reimbursements.

Anshari said the interest rate subsidy would cover half of the 14 percent interest rate applied to the textile industry.

For the second phase, the ministry is aiming to increase the number of companies receiving subsidies from 92 in the first phase to 160.

The first phase of the program, launched in April last year, absorbed a total subsidy of Rp 153.31 billion from the allocated Rp 255 billion.

"The program wasn't promoted well enough last year," said Anshari explaining the slow subsidy disbursement rate.

However, he claimed the first phase had stimulated a foreign and domestic investment worth Rp 1.55 trillion within the industry.

According to Anshari, last year's program created 4,395 new jobs, boosted the production capacity from 10 to 15 percent and increased productivity from 16 to 25 percent.

Chairman of the national Indonesian Textile Association Benny Soetrisno said the problem with last year's program was the time limit on company participation.

"Reimbursements were only given out to companies that had their machinery installed within the time span of the program. Infrastructure was causing delays in deliveries, as well as other administrative problems," Benny said.

He said companies needed to have the machinery ready and installed between June and November last year, while usually it would take six months for their orders to arrive.

"However, the program had a multiplier effect. It rejuvenated the industry and attracted investment," Benny said.

He predicted this year the international market, which is currently dominated by China, would see the coming of new players from Europe, such as Poland and Serbia and Montenegro, making competition more fierce for Indonesia.

Anshari said Indonesia's textile exports had been constant at around $7 billion to $8 billion annually for the last eight years.

Benny explained to further promote Indonesia's brands in the international market, local producers should exploit its advantage over other nations in producing rayon, a type fiber made from wood.

"There are only two companies producing rayon in Indonesia," he said. (lva)

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