Expansion, new bank lending boosts number of start-up firms

Expansion, new bank lending boosts number of start-up firms

Rendi A. Witular
The Jakarta Post
Jakarta

Expansion by foreign companies here and new bank lending are
the main reasons for the sharp rise in the number of start-up
manufacturing companies last year particularly in the food and
beverage sector, an industry expert said.

Chairman of the Indonesian Association of Food and Beverage
Companies (Gapmi) Thomas Darmawan said that the country's
promising food and beverage sector had pushed both banks and
investors to enter the industry.

He told The Jakarta Post on Sunday that industry sales were
projected to jump to Rp 190 trillion (US$21.5 billion) this year
from Rp 167 trillion in 2002.

Thomas was commenting on the recent corporate survey by the
Central Statistics Bureau (BPS) which found that some 1,497 new
manufacturing firms were set up last year. This was a 42 percent
jump from the 2001 BPS survey.

Most of the new companies were operating in the food and
beverage sector, and the textile industry. These labor-intensive
sectors generated some 133,973 new jobs, BPS said.

Thomas explained that some foreign food and beverage
manufacturing giants had recently acquired local companies and
later set up new subsidiaries to capitalize on the promising
industry.

Among the foreign giants acquiring local food and beverage
firms are Danone and Unilever.

Thomas added that the banking industry had also started to
resume new lending in the food and beverage sector, allowing
local players to expand and set up new units.

Last year, total new bank lending was Rp 79.4 trillion, a 15
percent increase from the level in 2001.

Thomas said that according to data compiled by Gapmi, the
number of new players in the food and beverage industry last year
was around 4,460 companies, much higher than the 373 companies
reported by BPS.

But chairman of the Indonesian Textile Association (API) Benny
Sutrisno questioned the BPS report, saying that many textile
firms had gone bankrupt during the past couple of years due to
various problems both at home and overseas.

"The figure is not realistic. The textile sector has been
experiencing the brunt of the economic crisis. Until now the
textile business is still not considered lucrative for a new
player," said Benny.

He suspected that BPS compiled the figure based on investment
proposals from related government institutions.

Indeed, the BPS survey also revealed that in 2002 the number
of large and medium-sized manufacturing companies which had
closed and had to downsize their operations jumped to over 1,600,
resulting in thousands of workers losing their jobs.

Many of those companies were textile and garment producers.