Manufacturing requires bank backing: Minister

Zakki P. Hakim, The Jakarta Post, Jakarta

For the country's manufacturing sector to expand by an average of 8.6 percent every year, it would need annual fresh investment of up to Rp 50 trillion (US$5.15 billion), of which 10 percent was expected to come from state banks, a minister said.

The remaining investment funds were expected to come from the private sector, including local private banks, Minister of Industry Andung A. Nitimihardja said on Tuesday.

"Without the assistance from the banking industry, it would be hard to meet the manufacturing sector's growth target and for the sector to absorb unemployment and alleviate poverty," Andung said in a seminar "Introducing National Industrial Policy" on Tuesday.

The seminar held at the office of the Ministry of Industry was attended by representatives from the Association of State Banks (Himbara) and the Private Banks Association (Perbanas).

"As of now we have 32 priority manufacturing sectors, and we expect the banking industry, both private and state banks, to allocate funds to these priority sectors," he said on the sidelines of the seminar.

According to Andung, President Susilo Bambang Yudhoyono had earlier summoned the bankers and asked them to increase their loan exposure in the manufacturing sector.

The banking sector has been seen as being reluctant to allocate funds to the manufacturing sector, preferring to focus more on consumer credit, taking advantage of robust consumer spending that has been the backbone of Indonesia's economic growth since the economic crisis of the late 1990s.

Bankers attending the seminar were reluctant to comment, saying they needed to study the country's industrial policy first.

The current administration has targeted the manufacturing sector to grow by an average of 8.6 percent annually, and to increase its contribution to GDP to 30.4 percent in 2009 from the current 27.8 percent.

With such growth, the sector was projected to provide 500,000 new jobs every year, absorbing 2.5 million new workers until 2009.

As the manufacturing sector has already expanded by 8.11 percent in the first quarter of the year, Andung was optimistic that the sector might even exceed the annual average target.

After more than a decade without clear direction, Indonesia's manufacturing sector finally has issued a comprehensive detailed plan to develop the country's industries over the next 20 years, including naming the 32 priority sectors.

The priority sectors are grouped under two main categories: the basic (core and supporting) industries, and future industries.

Over the next five years, the government would continue to support and focus the core industries of food and beverages, seafood processing, textile and clothing, footwear, palm oil processing, wood products, rubber, pulp and paper, petrochemicals, electrical machinery and appliances.

At the same time, supporting sectors would be developed including steel, heavy industry, agricultural machinery, cement, consumer electronics, ceramics, atsiri oil, handicrafts, precious stones and jewelry, and pottery.

In the longer term, besides continuing to develop the basic industries, the government would also encourage future industries including agribusiness, transportation and information, and communications technology.