The government plans to provide Rp 240 billion ($20.8 million) in assistance this year under an industrial retooling scheme to help some 200 textile and clothing manufacturers replace aging and obsolete machinery, a senior official said on Tuesday (31/03).
Anshari Bukhari, director general of metals, machine, textile and miscellaneous industries at the Ministry of Industry, said that loans would be provided to cover up to 10 percent of the cost of purchasing imported machinery and 15 percent of the cost of locally made machinery. State banks will also provide companies with state-guaranteed, low-interest loans to replace machinery.
Approximately Rp 213 billion of this year’s allocation of Rp 240 billion will be used to cover the first two types of loans, while Rp 27 billion will be used for the state-guaranteed loans, he said.
But textile and clothing manufacturers said the scheme would be doomed to failure if nothing was done to reduce lending rates.
They also complained that it was generally difficult to secure loans from state banks, compared with private-sector banks.
“The retooling scheme is essential, but the rates are a great burden, even if the government offers reduced rates,” said Ernovian G. Ismy, secretary general of the Indonesian Textile Association.
With business lending rates hovering at about 14 percent, Ernovian said that firms were finding it difficult to make repayments. “Rates would have to fall into single digits to make borrowing feasible,” he said.
Anshari said the retooling scheme was expanded this year, with a total of 200 firms targeted.
A total of 92 firms participated in the first year of the scheme in 2007, receiving Rp 153 billion out of the Rp 255 billion that was available.
Uptake was also disappointing last year, with 175 companies receiving Rp 181.7 billion in loans, out of Rp 330 billion available.
Source: The JakartaGlobe (01/04/09)