Textile sector needs $4.9m to upgrade machinery

Adianto P. Simamora, The Jakarta Post, Jakarta

The country's textile industry needs some US$4.9 million to upgrade or replace old machinery in a bid to boost production, according to an executive of the Indonesian Textile Association (API).

API executive director Indra Ibrahim said on Tuesday that about 60 percent of the existing textile machinery had been in use for more than 15 years and needed immediate replacement.

"Many textile companies can not replace their old machinery due to a lack of working capital," Indra said.

Domestic banks are reluctant to provide working capital to the manufacturing sector because of their weak capital condition and the continuing high risk associated with the real sector.

The government is preparing a revitalization strategy for four key industries, namely textile, electronics, footwear and pulp and paper, to help increase exports and create more jobs.

The recovery of these four industries is expected to create 350,000 new jobs and avoid mass layoffs.

Textiles are one of Indonesia's major non-oil and gas export products. The sector employs some 1.2 million people.

API previously said that export revenue this year would increase to $8 billion from $7.6 billion last year.

The government has set up the Indonesian Recovery Fund (IRF) to seek funding for the revitalization program.

Subagyo MM, director for textile and textile products at the Ministry of Industry and Trade, said the ministry was currently in talks with Bank Indonesia to seek ways to provide the needed funds for the revitalization of the textile sector.

He was optimistic that the $4.9 million funds needed by members of the textile association would become available.

"We are still discussing the financing scheme with Bank Indonesia and API," Subagyo told reporters after speaking at a seminar on textiles.

He did not elaborate on from where the funds would come.

But Indra warned that the government must immediately improve the local business climate to encourage investors to provide funding for the revitalization program.

"Investors are still reluctant to invest due to various uncertainties," he said.

Indra said the local textile industry would continue to suffer unless the government took measures to improve security and social conditions at home.

Earlier reports said that foreign buyers had been turning to other textile producing countries to ensure the timely delivery of products.

Labor strikes have at times disrupted the supply of textile products for export.

Stronger export performance is important to help the country export its way out of the current economic hardships. The phenomenal economic growth of around 4.8 percent in 2000 was largely contributed by record high export revenue.