China's help sought over textile woes

China's help sought over textile woes

Zakki P. Hakim, The Jakarta Post, Jakarta

The government is seeking the help of China in restructuring
Indonesia's ailing textile industry, a senior official at the
Ministry of Industry and Trade said on Wednesday.

Director General of Metal, Machinery, Electronics and
Miscellaneous Industries Soebagyo said the government hoped the
Chinese government could provide export credit facilities to
China-based textile machinery makers to ship their products to
Indonesia to replace the old machinery of local textile
companies.

He said the request was made during a recent ASEAN Economic
Ministers (AEM) meeting in Jakarta.

Minister of Industry and Trade Rini MS Soewandi and China's
Minister of Commerce Bo Xilai held a bilateral talk on the
sidelines of last week's conference, Soebagyo said.

Although there was no immediate answer from China, the two
sides agreed to form a committee to further study the proposal,
he said.

According to one study, unveiled by the government last month,
the textile industry needs around $500 million to replace old
machinery.

"Replacement would first be concentrated on the knitting,
weaving and finishing industries," Soebagyo said.

The products (fabric and yarn) from the three industries have
strong international demand, he added.

Yarn and fabric accounted for 43 percent and 23 percent of
Indonesia's export volume, respectively, from 2001 and 2003.

Soebagyo said the government proposed a countertrade
mechanism, in which Indonesia would provide steel to manufacture
the machinery needed.

Soebagyo added that some local banks had expressed interest in
providing loans for the replacement program.

"A senior central bank official told me that at least 14 local
banks have expressed interest in financing the industry," he
said, but did not name the banks.

Indonesia's textile industry has been facing difficulties in
competing in the export market due to, among other things, out
dated machinery. Out of more than 4,100 textile companies, at
least 774 companies need to replace their old machinery.

As the global textile quota system is about to end later this
year, there has been rising concern that local textile makers
will be unable to compete in the key U.S. market against more
efficient producers, particularly from China.