Texmaco business should be protected, says President

JAKARTA (JP): President Abddurrahman Wahid reiterated on Thursday that the business of the Texmaco group should be protected and further developed due to its promising future, despite the controversy over its debts to state banks.

Abdurrahman said he had asked Coordinating Minister for Economy, Finance and Industry Kwik Kian Gie to discuss with the Indonesian Bank Restructuring Agency (IBRA) an arrangement whereby the Texmaco group's debts to state banks would be converted to at least 52 percent equity for the government.

"This does not mean that I favor particular businesspeople. My sole intention is to protect Texmaco as a viable business investment," the President added on the sidelines of a political seminar on direct election of the president.

According to the President, Texmaco's debts to state banks are worth at least 52 percent of the total shares of the group which has large stakes in synthetic fiber, textiles, garments, textile machinery, machine tools, as well as truck and tractor industries.

IBRA is now seeking to restructure Rp 14.9 trillion (US$1.75 billion) of Texmaco's debt, which was transferred from state Bank BNI and other banks to the agency.

One possible avenue for restructuring the debt would be to convert it into equity, which would leave IBRA with majority stakes in the Texmaco companies.

Texmaco has been embroiled in controversy since late last year after allegations that the huge loans it borrowed from state banks in 1997 and 1998 had breached lending rules and were made after pressure from then president Soeharto.

Last week, the Attorney General's Office dropped its investigation into the issue, saying there was no evidence the state had suffered losses because of the loans.

The deputy attorney general for special criminal cases, Ramelan, told reporters last Friday they discovered that the government didn't suffer financial losses from the issuance of export credits to Texmaco in 1998.

There wasn't enough evidence for further investigations, according to expert witnesses from Bank Indonesia and the Government Finance Controller (audit agency), Ramelan added.

The witnesses also said there was no evidence to suggest that Indonesia's ex-president Soeharto had influenced the granting of the export credits, he said.

The allegations were first raised in public late last year by then minister of investment and state enterprises Laksamana Sukardi who last month was sacked from the Cabinet by Abdurrahman.

Many House members, lawyers and anti-corruption organizations have criticized the stoppage of the Texmaco investigation as an act of favoritism.

Starting its business in textile trade in 1962, Texmaco has now been transformed into a big group of companies that manufactures synthetic fiber, textiles, garments, textile machinery, machine tools, trucks, small tractors and a wide range of other engineering goods

Texmaco factories, including a 360,000-ton capacity purified terephtalic acid factory in Karawang, West Java, are now spread widely in several towns across Java.

Texmaco's engineering goods such as textile machinery, machine tools, automobile components, fabric and garments have entered the market in South Africa, Southeast Asia, the Middle East, Europe and the United States.

The company said its fabric had widely been used by well-known branded apparel makers such as Marks & Spencer, Polo Ralph Laurent, Tommy Hilfiger, Levi's and Nike.

Three Texmaco subsidiaries, PT Texmaco Jaya (textile and garments), PT Texmaco Perkasa Engineering (metal, machinery and trucks) and PT Polysindo Eka Perkasa (synthetic fiber and fabric) have been listed on the Jakarta Stock Exchange.

The group directly employs a total of 50,000 workers and had a cumulative export value of US$900 million in 1997-1999. It also supplies basic materials to 270 other companies with 150,000 workers.

On the occasion, the President also talked about efforts to promote industrial exports in cooperation with neighboring countries.

Citing an example, he recounted his recent talks with Singapore Prime Minister Goh Chok Tong whereby he suggested that Singapore allocate to Indonesia 20 percent of its textile and garment export quotas, which the island republic does not use.

Referring to the economic vision of his eight-month old government, Abdurrahman said the economic principle it was pursuing was based on a competitive, efficient and open market system.

But the national economic policy focuses on the development of agriculture and small and medium-scale enterprises, Abdurrahman added. (prb)