Ministry cuts budget for machinery upgrade
The Industry Ministry says it will cut funding for a machinery revitalization program as part of a state budget efficiency push.
The ministry will allocate Rp 145.5 billion (US$15.57 million) in 2012, down 4.6 percent from Rp 152.5 billion last year, for the program, which aims at enhancing competiveness in the textile, footwear and leather industries, the Industry Ministry’s textiles and miscellaneous industries chief, Ramon Bangun, said on Friday.
“The reduction in allocated funds was prompted by budget efficiency needed to offset the delay of the fuel price hike,” he told The Jakarta Post in a telephone interview.
Around Rp 34 billion, or 23.37 percent of the ministry’s total budget for restoring aging industrial machines, had been disbursed to 32 firms as of May, Ramon added.
“We actually approved 100 firms to get the financial aid, but so far, we’ve processed disbursements to 32 firms,” he said.
The ministry was also assessing an additional 18 companies for the program, Ramon added. At least 173 had asked to take part in the program this year, according to the ministry.
The machine restructuring program has been conducted since 2007 for the textile industry, and since 2009 for the footwear and leather industries, to revitalize the industries and attract private investment.
The Industry Ministry said it had disbursed Rp 1.21 trillion to the industries, which attracted Rp 8.23 trillion in private investment following the aid.
Around 4 million spinning machines, 200,000 weaving machines and 34,000 knitting machines
all over 20 years old were in use by thousands of textile companies nationwide in 2011, according to the ministry.
Indonesian Textile Association (API) chairman Ade Sudrajat expressed his dissatisfaction over program cut, saying that there were many firms on the waiting list.
“The government has approved 111 firms, but there are still 70 others on the waiting list. The budget should have been raised instead of cut,” he told the Post.
Ade claimed that limited funds for the program had resulted in a loss of a significant amount of potential investment. The Rp 145.5 billion allocated after the cut would only create Rp 1.4 trillion in private investment, he added.
According to Ade, the state money would have several effects on the textile industry, pushing up the industrial growth, employing workers and subsidizing purchases of imported machinery.
Indonesian Institute of Sciences (LIPI) economist Adam Latief said that the government should allocate a special budget for the program.
“Up to present, I see there has been a tendency for the allocated funds for the program to be residual, depending on the state’s fiscal capability,” he said.
The program, according to Latif, would substantially strengthen the competitiveness of the industries, especially by their cutting production costs due to high electricity consumption. Based on a previous LIPI report, Latief said that the machines used by local manufactures used 18 percent more energy than those employed by Chinese firms.
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