Texmaco Group grapples with alleged loan scam

Texmaco Group grapples with alleged loan scam

JAKARTA (JP): Indonesia's widely-diversified textile
conglomerate Texmaco Group has steadily shown impressive
performance, weathering well the country's worst economic crisis
in three decades.

But the revelation last week of its alleged massive loan
scandal involving former president Soeharto is confronting the
group with its most severe crisis.

"The revelation of the alleged scandal could cause a serious
blow to Texmaco as contracts and orders from its customers within
the country and overseas may be canceled," said Pande Raja
Silalahi, an economist at the Center for Strategic and
International Studies (CSIS).

State Minister of Investment and State Enterprises Development
Laksamana Sukardi surprised legislators last week when he
revealed that Texmaco had received US$754.1 million plus Rp 1.9
trillion in preshipment trade facilities from state-owned Bank
BNI between November 1997 and March 1998 with the personal help
of former president Soeharto.

Attorney General Marzuki Darusman named last week Texmaco
founder Marimutu Sinivasan a suspect in relation to the alleged
scandal and slapped a travel ban on him as well as on two other
key Texmaco people: Marimutu Manimaren and S. Wairo.

"The name of Texmaco is closely linked to Sinivasan. If
Sinivasan sneezes, Texmaco will cough," said an analyst at a
securities firm.

To many Indonesians, Texmaco is the country's textile leader.

The company, which started from humble beginnings in 1962 in
Pekalongan, Central Java, has become a conglomerate with assets
of around US$4.5 billion and some 150,000 workers.

It has major stakes in a wide range of businesses, ranging
from synthetic fiber, textiles, garments, textile machinery,
machine tools, small farm machinery, trucks and car parts as well
as steel interests.

After a short career at a plantation firm and a textile
trading company in North Sumatra, Sinivasan, the son of an Indian
businessman, decided to go to Pekalongan to start his own
business. He was 20 years old at the time.

In 1963, Sinivisan established PT Perkasa Jaya, which produced
traditional sarongs.

He introduced modern weaving machinery in 1969 which produced
higher quality textile products and changed the name of his
company to PT Textile Manufacturing Company (Texmaco) Jaya.

In addition to the Pekalongan plant, it now has factories in
Kaliwungu and Pemalang in Central Java, in Malang (East Java) and
in Karawang and Subang in West Java.

"The textile and textile product businesses were chosen
because they are basic needs along with food and housing,"
Texmaco said in a company profile.

In a bid to strengthen its competitiveness, Texmaco expanded
upstream in the mid-1980s creating an integrated industry by
developing a polyester and a purified terepthalic acid (PTA)
plant.

PTA is a basic material used in the production of polyester
chips.

With a 340,000-ton capacity, PTA producer PT Polysindo Eka
Perkasa started commercial production in April 1997. Last year,
the company was operating at 60 percent capacity. It is publicly
listed on the Jakarta Stock Exchange.

Texmaco has two other listed firms: PT Texmaco Jaya, a textile
maker and PT Texmaco Perkasa Engineering, which produces
machinery.

Texmaco began to develop its steel and machinery companies in
1982 amid the booming textile industry, manufacturing and
exporting textile machinery and machine tools.

In another ambitious expansion, Texmaco entered the automotive
industry in the early 1990s. It now produces various automotive
parts, rototillers and the Perkasa trucks.

Texmaco's steel, machinery and automotive products have
penetrated export markets in Europe and the U.S.

The company is also eying other export markets, particularly
in developing countries such as South Africa and Malaysia.

Its textile products have been exported to more than 60
countries. International brand names such as Polo Ralph Laurent,
Tommy Hillfiger and Levi's are among the users of Texmaco textile
products.

Texmaco commissioner S. Wairo said that over the past three
years the group had combined total exports of about $1.5 billion.

"Over the next three years, Texmaco could realize total
exports of $2.5 billion," he said at a press conference late last
week.

Texmaco expects sales to reach $472 million this year, from
$518 million in 1998 and $850 million in 1997.

Wairo said the company had survived the country's economic
crisis which started in 1997 and had not dismissed any of its
employees.

Some legislators dubbed Texmaco a "national asset." They
supported the move of the previous government to provide the
loans to bail out the business group.

Sinivasan has admitted that some of the loans were used to
repay its short-term overseas loans to prevent the company from
defaulting.

He also admitted that he had sent a letter to Soeharto in
connection with the loan transaction, but denied that it was a
form of collusion.

Sinivasan said it was the then central bank governor
Soedradjad Djiwandono who told him to write the letter to
Soeharto after Bank Indonesia and Bank BNI could not find a
solution to his problem.

He claimed that he didn't arrange a special meeting with
Soeharto, that he just pushed for the disbursement of the loans.

"I also don't have any business connections with Soeharto's
relatives," he said, in a bid to dismiss the allegation of
collusion. (rei)