Few firms join industry revitalization program

The Industry Ministry has reduced the amount budgeted to its machinery revitalization program in the textile, footwear and leather industries, as well as sugar mills, due to the lack of response from eligible firms.

This year, the government is allocating a total of Rp 202.74 billion (US$22.3 million) for industrial revitalization, including Rp 144.35 billion for textile firms, Rp 34.25 billion for footwear and leather companies and Rp 24.14 billion for sugar mills, the ministry announced Tuesday.

Last year, the government allocated Rp 342.5 billion to the same sectors under the same program, providing manufacturers with access to incentives to help them replace old machines with new ones to help improve industrial competitiveness.

“In absolute size, the total budget has been cut from Rp 342.5 billion last year to Rp 202.74 billion this year,” the ministry’s director general for metal, machinery, textile and miscellaneous industries Ansari Bukhari said during the launch of this year’s program at his office.

“We have learned our lessons that the utilization of the budget would only amount on average to between 63 and 64 percent of the total.”

He said he expected budget spending would be more efficient and effective with the cuts.
Likewise, the ministry’s inspector general Sakri Widianto said, “It’s not about the size of the budget is, but how much it’s spent.”

Unlike in the textile industry, fewer participants were interested in the proposed program for the footwear and leather industries and sugar mills, Ansari said.

He elaborated that these companies had been reluctant to join last year’s program due to market uncertainties caused by the continuing negative impacts of the global financial crisis.

He also said the ministry had to remove the Scheme Two component of the program due to the lack of response from producers despite the fact that the program had been implemented three years running.

There are two schemes in the textile machinery revitalizing program. Under Scheme One, the government provides 10 percent discounts for manufacturers who want to purchase new machines, while Scheme Two is aimed at small and medium enterprises and provides soft loans.

“Apparently, the number of applicants under Scheme Two was very low, while on the manpower side it took a lot of work to do the administration,” said Ansari.

Secretary of directorate general for small and medium industries Andang Fatati Nadya said her office had begun this year to include the textile, footwear and leather industries in its discount program.

“We will give 25 percent discount for every machine purchased overseas and 30 percent discount for every machine purchased locally,” she said. The machines should be worth between Rp 40 million and Rp 2 billion each, she said.

In addition, the director for the textile industry Arryanto Sagala said there were reportedly four participants under Scheme Two in 2007 and two in 2008 who could not pay their debts on their soft loans. This may have discouraged borrowers.