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.