Textile export earnings seen to drop about 35%

Textile export earnings seen to drop about 35%

JAKARTA (JP): A shortage of raw materials may cause the
country's textile export earnings to fall about 35 percent to
US$4 billion this year from $6.2 billion in 1997, the Indonesian
Textile Association has predicted.

The association's chairman, Bambang Riyadi Soegomo, said
yesterday the supply of imported materials had become scarce
because of financing problems.

"Our condition is very bleak currently, since all cotton and
polyester supply is imported," Bambang, a member of the People's
Consultative Assembly (MPR), said after yesterday's general
sessions.

About 95 percent of textile materials are made of imported
cotton, he said.

Importing has become difficult for textile companies because
foreign banks will not accept letters of credit (L/Cs) issued by
local banks, he said.

The government's pledge to provide a facility which guarantees
exporters' L/Cs for imported raw materials, had not come to the
rescue, he said.

The pledges of several foreign countries to guarantee L/Cs had
also not materialized, he said.

"Everything announced to the media about facilities and
guarantees for us have been mere promises, and are not applicable
at this point," he said.

The monetary turmoil, prompted by a dramatic drop in the
rupiah's value against the dollar, triggered a crisis of
confidence in Indonesia's frail banking sector following the
government's closure of 16 insolvent private banks at the end of
last year.

International banks have been hesitant to accept letters of
credit issued by local banks, and importers are forced to ask
local industries to finance their imports in cash.

As a result, many textile producers have suffered a liquidity
problem, he said.

Bambang said the textile producers, which market most of their
products on the domestic market, faced more serious problems
because the plunge in the rupiah's value of about 70 percent
since July last year, had caused an increase of about 300 percent
in rupiah-based prices of imported raw materials.

"If the rupiah's value is set at Rp 5,000 to the dollar we
could still manage, but if it is more than Rp 7,000 there is
nothing we could do."

The rupiah closed at Rp 9,400 against the dollar at the close
of trading yesterday, down from about 2,500 last June.

Bambang said members of the 8,000-strong association were home
industries.

Between 10 and 15 companies had already laid off about 200,000
employees, he said.

"We try to make laying off the last resort."

He said he urged the companies to begin slashing their
production and reduce the shifts of employees instead of sacking
them.

For example, they could divide their employees into two
groups, with each group working every other month, he said.

"We could help a little with the raw materials, as long as
they (the companies) reduce production," he said.

"We have to evaluate the structure of our textile industry."
(das)