Industry Ministry may set minimum subsidy allocation for textile manufacturers

The government is planning to set a minimum amount of interest subsidy that a textile company can apply for under a revitalization program designated for the industry. The Industry Ministry’s textile industry director, Arryanto Sagala, said Tuesday the ministry had come up with that idea to balance government costs between the amount of interest subsidy received by a company and the cost of verification the Ministry must cover. “ There should be a minimum amount of subsidy to strike a balance,” he told reporters at the ministry. “That minimum amount should be a little bit more than the verification costs,” he added. Arryanto pointed out as an example a company that had asked for Rp 10 million (US$ 884.96) in a 10 percent interest subsidy, while the government had to spend around Rp 24 million to verify the company’s documents before deciding to grant the subsidy. He said the plan, which was still being deliberated at the ministry, was also expected to boost investment in the industry. Besides the planned minimum amount, the ministry has set up Rp 5 billion as the maximum amount a company can benefit from the program. Launched in 2007, the program aimed to encourage ailing textile manufacturers to replace their aging machines with new ones, to help rejuvenate the industry. The program is divided into two schemes: interest subsidies and soft loans. For this year, the ministry plans to disburse a total of Rp 200 billion for program, targeting at least 173 textile companies – the same amount of companies applying as last year. In 2008, the ministry spent almost Rp 200 billion under the first scheme and around half of the targeted Rp 50 billion under the second scheme, according to Arryanto. He said nearly Rp 2 trillion in investment was secured last year, thanks in part to the program, which apparently helped create confidence in the industry. The ministry’s director general for metal, machinery, textile and miscellaneous industries, Ansari Bukhari, previously said that in 2007, the program promptly created 4,395 new jobs, boosting production capacity from 10 to 15 percent and increasing productivity from 16 to 25 percent. In that year, the government disbursed Rp 152,8 billion, or 60 percent of the total allocation. Of that amount, Rp 128,3 billion went to 78 large-scale companies and Rp 24,5 billion to 14 SMEs because “many small enterprises do not have proper financial reports as are required to apply for the loans,” said Ansari. “Another problem was that most of them were only willing to import second-hand machinery, while the loans were intended for companies restructuring their plants with new machinery,” he said. Source : The Jakarta Post Date : 28 January 2009