Fri, 21 Mar 2003

Taiwan banks ready to help ailing textile makers

Adianto P. Simamora, The Jakarta Post, Jakarta

The Ministry of Industry and Trade said it would facilitate a meeting between West Java textile producers and several Taiwanese banks to help the producers seek financing to replace outdated machinery.

"In the first stage, we will facilitate a meeting between China Trust Bank and the Export Import Bank of Taiwan and the textile producers in Bandung, West Java, on April 10," Luky Hartini, director of textile and textile products at the ministry, said.

She said Taiwan creditors had expressed their readiness to provide long-term credits to the textile producers to finance the purchase of new machinery from Taiwan.

"But I don't know yet the size of the loans or the interest rates because they (the bankers) want to meet directly with the textile producers," Luky was quoted by Antara as saying.

She also said a separate meeting would be arranged between textile makers in Jakarta and the Taiwanese banks.

The country's troubled textile industry has been losing overseas markets to textile producers from countries like China and Vietnam, in part because of the inefficient aging machinery used by Indonesia's textile makers.

Textile exports have declined significantly in recent years. Indonesia booked a record textile export value of US$8.2 billion in 2000, but that figure slipped to $7.6 billion in 2001.

Exports this year are projected to decline again to about $7 billion.

In the home market, Indonesia's textile producers also are beginning to be sidelined by competitors from China.

The Indonesian Textile Association has repeatedly urged the government to help replace old machinery to save the industry from ruin.

The association said some 60 percent of current textile machinery had been in use for more than 15 years.

Local banks, which are just beginning to recover from the devastating financial crisis of the late 1990s, are unable or unwilling to offer the loans necessary to upgrade the machinery. Many banks still find themselves in weak capital positions, while the real sector is still associated with high risk.

The textile industry is an important sector for the country's economy because it provides a significant number of jobs and generates export revenue.

The Ministry of Industry and Trade earlier said the country's textile industry needed some $6 billion to repair aging machinery to boost production.

The ministry has also taken several steps to help the textile industry.

A revitalization program was recently introduced with the aim of boosting exports and creating more jobs.

To find financing for the program, the government set up the Indonesian Recovery Fund (IRF).

The IRF, however, has failed to convince overseas and domestic financial institutions to provide the funds needed for the program.