The Industry Ministry has allocated a total of Rp 177 billion (US$20.36 million) this year for a program to revitalize the country s textile, footwear and leather industries.
The director general of the Industry Ministry manufacturing industry division, Panggah Susanto, said that the financial aid would be distributed to 150 textile firms and 20 footwear producers and leather tanners so that they could replace their aging equipment.
We expect that with improved technology, the firms can be more productive and efficient in their production, and therefore they will be more competitive, he said during the program announcement on Tuesday at the ministry office.
He said that with better production and increased output, the local firms might also win a greater share of the global market.
Panggah cited data showing a surge in domestic consumption of textile products in recent years.
Annual per capita consumption of textile products has increased from 3.9 kilograms in 1999 to 4.5 kilograms in 2005 and to 5.3 kilograms in 2008. Consumption is estimated to increase to 6.5 kilograms this year.
The share of Indonesian textile exports in the global market, for example, is expected to rise from 1.8 percent this year to 2.5 percent in 2014. The revitalization program for the textile industry was initiated in 2007, and similar programs for footwear and leather were launched in 2009.
Under the revitalization program, qualified companies will receive aid worth 10 percent of the total purchases of new machines.
According to the ministry s data, there are around 4 million spinning machines, 200,000 weaving machines and 34,000 knitting machines that are more than 20 years old currently in use by thousands of textile companies nationwide.
Last year, under the same program, the government disbursed around Rp 144.37 billion to 151 textile firms, which was lower than the government target of Rp 154.15 billion. It also channeled around Rp 18.30 billion to 24 footwear and leather firms, also less than the Rp 24.45 billion budgeted for.
The lower-than-expected amount of loans distributed was partly because many eligible companies had not been prepared to join the program, director for textile and miscellaneous industries Budi Irmawan said during the program launch.
Separately, Indonesian Textile Association (API) chairman Ade Sudrajat said that last year a number of textile companies were not eligible to access the incentives due to delays in purchases. However, apart from such obstacles, he said, the machine revitalization program had benefitted the local textile industry.
The 10 percent stimulant fund is quite meaningful for us as we mostly spend our own money to buy the machines, he said, adding that bank loans could cover only up to 30 percent of the total purchase costs.
Currently, Indonesia imports textile machines from China, Japan, and European countries including Germany, Belgium, Italy and Spain.
Ade said that partly as a result of the ministry program, the competitiveness of certain Indonesian textile products, such as fiber and yarn, had increased relative to those produced in China, and that exports had jumped significantly.
CITATION http://www.chinaleather.org/eng/show.php?itemid=6037
