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)