Banker details problems in textile industry

Banker details problems in textile industry

Abdul Khalik, The Jakarta Post, Jakarta

The banking sector is still reluctant to extend loans to the
country's textile companies as they doubt their business
prospects given the lingering problems in the industry.

The president director of Bank Mandiri, the largest bank in
Indonesia in term of assets, said that banks would stay away from
the textile industry unless there were solutions to the problems,
which include the lack of transparency in quota allocation, high
import duty on raw materials, textile smuggling and unstable
workers wages.

"Unless all these problems are addressed adequately, the
banking sector will be reluctant to provide loans to the textile
industry," ICW Neloe, the president director, told The Jakarta
Post on Monday.

With regards quota allocation, many businessmen without
factories reportedly get quotas from the Ministry of Industry and
Trade while real businessmen, who have factories but no
connections with the ministry, have to buy quotas from the phony
businessmen.

The industry imports around 90 percent of its cotton needs, on
which the government imposes a 10 percent import duty. Many say
that the duty is too burdensome for the industry as it is still
struggling to cope with the flood of smuggled goods and numerous
labor disputes over wages.

Indonesia, which was a main player in the global textile
market in the 1990s, has seen much of its market share taken over
by China and Vietnam over the past few years.

Industry players blamed their decline on the banks'
unwillingness to provide loans for them to replace their old
machinery. However, Neloe said the decline should not only blamed
on the banks, but also government policy and the failure of the
industry to improve its efficiency.

He said that several national banks, including Mandiri, BNI
and BRI, had met with the Indonesian Textile Association (API)
and the ministry last Friday to discuss the problems facing the
industry.

"I raised these problems during the meeting, and we agreed to
establish a special team to find solutions to the problems. We
will meet again on April 1," said Neloe.

He said that Mandiri had restructured debts owed by textile
companies, but called on them to overhaul their outdated
machinery without having to replace it.

The industry could also improve efficiency and increase profit
by cutting unnecessary costs.

"It is now up to them to make their companies bankable because
for now, many banks believe the textile industry has no prospects
due the problems," Neloe said.

Meanwhile, Baari La Inggi, a textile analyst, said that the
banking sector must resume lending to the industry given the huge
workforce involved in the industry. The industry employs around
3.5 million people directly and indirectly.

He also underlined that among all of the non-oil and gas
industries, the textile industry is the largest contributor of
foreign exchange to the country.

"The textile industry generated US$7.2 billion in export
revenue in 2003, up from $6.8 billion in 2002. I think the
industry deserves attention from the banking sector," Baari told
The Jakarta Post.