Restructuring of textile industry needs $505 million
Restructuring of textile industry needs $505 million
Zakki P. Hakim, The Jakarta Post/Jakarta
The national textile and textile articles industry needs at
least US$505 million to "restructure" production facilities, said
the Ministry of Industry and Trade in announcing the result of a
recent survey on the industry on Monday.
The survey, carried out by state-owned surveyor PT Sucofindo,
revealed that nearly 20 percent of 4,109 companies surveyed from
2001 until July 2004 needed to rehabilitate or replace their
machinery to continue operations or stay competitive, ministry
director of textiles and textile product industry Luky Hartini
told a media conference.
The remaining 80 percent claimed that they did not need such a
restructuring program as their machinery was relatively new --
less than 10 years old.
The survey was carried out as the government was willing to
help the industry, which was formerly a major contributor of
foreign exchange earnings to the nation but is now fighting hard
to survive competition against China and other, poorer nations.
Luky said that the ministry would first focus the
restructuring program on the finishing, weaving and spinning
subindustries, whose products (fabric and yarn) were in the
highest international demand in comparison with other Indonesian
textile products.
Yarn and fabric accounted for 43 percent and 23 percent of
Indonesia's export volume from 2001 and 2003.
Luky went on that since the government had a limited budget,
the ministry would assist the industry in finding ways to get
fresh funds from other sources, starting from national banks.
The ministry said earlier that it had met with Bank Indonesia
last week and requested the central bank review its policy of
discouraging private banks from funding the textile and apparel
products industry due to a large number of large bad loans in the
sector.
BI requires a healthy industry to have nonperforming loan
(NPL) at under 5 percent, while the textile industry had an
average NPL of up to 10 percent.
"Eventually, BI understood that not all players in the textile
industry had bad debts, thus agreeing to review the policy and
encourage private banks to examine clients, instead of the sector
as a whole," said Minister Rini Soewandi recently.
According to Rini, industry associations and private banks,
namely Bank Mandiri, Bank Danamon, Bank Negara Indonesia 46 and
Bank Rakyat Indonesia, would meet this week to discuss the
details.
The Sucofindo survey showed that of the 774 textile
manufacturers that need restructuring, 703 were garment makers,
which needed a combined $206 million and 36 were integrated
textile producers needing $247 million. The remaining 35
companies were associated with spinning, weaving, knitting,
printing, dyeing and finishing.
Luky admitted the survey could not comprehensively illustrate
the complete situation with regard to the nation's textiles and
textile products industry, as some 10,000 companies were
registered in the ministry, while only 4,109 of them participated
in the survey. Most of the participants (88.6 percent) were
garment makers.
Furthermore, she said that Sucofindo had sent questionnaires
to more than 6,000 companies, but only 4,109 responded. The other
companies might have been closed, changed business or fictitious.
"But we will exclude them (the nonresponding companies) from
our list of future programs," she said.
As a follow-up on the survey, the ministry had asked Sucofindo
to produce a more comprehensive map of the national textile
industry, Luky said.
According to the ministry, the utilization of production plant
capacity at the industry dropped significantly to 65.1 percent
last year from 84 percent in 1999.
The industry, which absorbs 1.2 million workers, was the
second-largest contributor of foreign exchange earnings among non
oil and gas industries last year, after the electronics industry,
with an export value of $7.03 billion or 16.22 percent of total
non-oil and gas exports last year.