Kadin urges govt to save local industrial sector

JAKARTA (JP): The Indonesian Chamber of Commerce and Industry (Kadin) urged the government on Monday to bail-out the country's industrial sector to save the economy from a further slide.

Kadin's chairman Aburizal Bakrie said the government could not expect an economic recovery by recapitalizing the banking sector without revitalizing the industrial sector.

"The government has been brave injecting huge bail-out funds into the banking sector, why cannot it also revitalize the real sector?

"The real sector is the one that contributes to foreign exchange, the one that provides job opportunities, but it is also the one most badly hit by the economic crisis," he said at the chamber's national meeting.

Aburizal said the government must provide fresh working capital for companies in the sector.

Without such help, he said, more and more Indonesian companies would go bankrupt, leading to massive lay-offs.

"The real sector cannot move without fresh working capital. However, the banking sector, even though they have been recapitalized, are still reluctant to provide new credit to the real sector."

The government has moved to recapitalize the country's undercapitalized state, private and regional development banks. The cost of the recapitalization is estimated to reach more than Rp 300 trillion (US$34.5 billion).

Aburizal cited Thailand as an example of a crisis-hit economy which had commenced recovery because its government restructured and recapitalized its real sector together with its banking sector.

"The IMF (International Monetary Fund) supports Thailand's move to recapitalize its real sector, why doesn't our government seek the IMF's support to recapitalize our real sector?"

Funding for the real sector's recapitalization could come from both bilateral and multilateral foreign financial institutions such as the World Bank, the German bank Kreditanstalt fr Wiederaufbau (KfW) and the Asian Development Bank.

Aburizal suggested the government consider establishing a new reconstruction bank, with paid-up capital of $1 billion, to extend borrowed funds to the real sector.

"It would be better if the bank was established as a joint- venture between local banks and a credible reconstruction bank such as the World Bank or KfW. We could then sell their names to gain support and confidence from the international community."

Aburizal cautioned the government to be selective in choosing companies for recapitalization.

"It doesn't matter whether they are large, medium, or even small-scale companies. All of them must be eligible to join the recapitalization program. But first of all, they have to restructure their debts." (gis)