Textile firms welcome lending commitment

Textile firms welcome lending commitment

Zakki P. Hakim, The Jakarta Post/Jakarta

Textile and apparel industry leaders welcomed plans by a dozen
banks to resume lending to the troubled sector, saying that the
funds were crucial to replace aging machinery and for working
capital.

Chairman of the Association of Indonesian Garment Producers
(APGI) Natsir Mansyur told The Jakarta Post on Friday the fresh
funds would increase the performance of the textile industry and
exports.

"The (capacity) utilization is now around 65 percent, which
can only supply 2 percent of the world market. Using the funds
from the national banks we can optimize the utilization and may
eventually increase our (global) market share," he said.

He was commenting on a promise made by some 13 banks to resume
lending to a selected group of textile and apparel companies.
The plan was disclosed during a gathering with representatives of
the textile industry at the central bank headquarters.

For the past couple of years, local banks have generally
avoided lending to the textile industry due to high risks,
particularly as the industry is plagued with a high amount of bad
debts and slow debt restructuring progress. The lack of funding
availability has further worsened the condition of the textile
industry, once the country's manufacturing mainstay, as it has
seen its market share both at home and overseas decline markedly
to more efficient producers, particularly in China.

Following the late 1990s financial crisis which forced the
government to come up with a costly bank bailout program, local
banks have been very risk-averse in their lending to prevent new
problems.

But after some strong lobbying from textile industry players,
the Ministry of Industry and Trade asked the central bank to
encourage the banks to assess the textile and apparel industry on
a case-by-case basis instead of generalizing the sector, as not
all firms were burdened with bad debts.

The 13 banks include Bank Mandiri, Bank NISP, Bank
Indexelindo, Bank Indomonex, Bank Danamon, Bank Panin, Bank Buana
Indonesia, Bank Central Asia (BCA), Bank Mayapada, Bank IFI, Bank
Danpac, Bank of China and Bank Ekonomi, as reported by Bisnis
Indonesia daily.

"Most important is the banks no longer see textile as a sunset
industry," Natsir said.

But he quickly added that the textile firms may not be able to
quickly get the loans as it would need some time for banks to
assess the companies.

"I believe there is still a long way to go before the banks
will eventually start financing us," said Natsir.

Separately, chairman of the Indonesian Textile Association
(API) Benny Soetrisno said that the lending commitment by banks
was a positive move.

However, he is looking forward to having further meetings
between the two sectors and the central bank to come up with a
more concrete agreement.

He said that one of the issues that needed further talks was
on how bank's valued the fixed assets of textile companies.

"Will the fixed assets only include land and buildings, or
also the machinery. If so, how would the book value of the assets
be calculated?" he said.

Last month, the government announced that the national textile
and apparel industry needed at least $505 million in funds to
help finance the replacement of aging machinery and the
restructuring of the sector.

Out of 4,109 companies surveyed by PT Sucofindo from 2001
until July 2004, some 774 firms, mostly garment makers, stated
that they needed funds to replace old machinery.

The textile industry provided an export revenue of up to $7.03
billion last year and absorbed 1.2 million workers.