Andi Haswidi, The Jakarta Post, Jakarta
The Finance Ministry has promised to soon start operating a scheme worth Rp 255 billion (about US$27.8 million) for subsidizing the interest on loans taken out by textile and garment industry firms for reequipping purposes.
"I will soon sign the approval," Finance Minister Sri Mulyani Indrawati said, without giving any further information, at her ministerial offices, as quoted Tuesday by Antara.
Meanwhile, the ministry's head of fiscal policy, Anggito Abimanyu, confirmed that the money had been allocated under the 2007 national budget. However, he said he was unable to give any time frame for the commencement of the interest subsidy scheme.
"Hopefully, there will be no problems ahead," Anggito added.
The Indonesian Textile Association (API) has threatened to send a petition to the government, via the Finance Ministry, which it claims has delayed the commencement of the scheme, even though it had been agreed to by the House of Representatives.
The scheme is designed to subsidy the interest payable on loans taken out by textile firms for purposes of reequipping so as to improve the competitiveness of the industry.
"We will submit a petition to the government, which will be singed by all the workers in the industry," said API chairman Benny Sutrisno.
"Actually, we do not want to intervene as this is an internal matter for the government. However, it is imperative for the industry that the updating of equipment commences soon," he added.
The domestic textile industry is losing out in terms of production capacity and quality compared to its foreign competitors as most of the firms operating in the industry use machinery that is more than 20 years old.
Interest subsidies are essential for the industry as the banking sector has still not reduced lending rates despite the improved macroeconomic situation, including the fact that the Bank Indonesia rate has been reduced 10 times since last May to currently stand at 9 percent.
In 2006, the textile and garment industry contributed $9.4 billion to the balance of payments, with the surplus of exports over imports standing at more than $6 billion.
A recent Industry Ministry report says that the textile and garment industry employed 1.18 million people in 2006, plus approximately 600,000 other workers in small and medium enterprises.
With the proposed interest subsidy scheme, the industry hopes to be able to boost employment by 469,000 and increase production capacity by 3.7 tons in three years.
By value, it expects exports to increase to $10.5 billion this year and $14 billion in 2010.
