Govt supports 3 industries: Shoes, sugar, and textiles

Yuli Tri Suwarni, The Jakarta Post, Bandung | Mon, 11/10/2008 11:17 AM  

The government is expanding its industry revitalization program next year, with footwear manufacturers the latest to join a list of industrial sector subsidy recipients -- in addition to textiles and sugar -- to help renew machinery and boost output. 

The Industry Ministry will facilitate the disbursement of Rp 55 billion in interest subsidies for footwear manufacturers, as part of a total of Rp 360 billion set aside in subsidies for the three industries, director general Anshari Bukhari said Saturday in Bandung, West Java. 

"The funds are allocated on the government's 2009 state budget and have been approved by the House of Representatives," Anshari told a discussion forum. 

This is the expansion of a program started two years ago designed to help targeted strategic industries to bolster production capacity. 

Under this program, which originally only covered the textile industry, the government would subsidize part of the interest rate which banks charged on loans so that manufacturers could buy new machinery. It disbursed Rp 175 billion (US$18.77 million) to 78 textile and garment manufacturers in 2007 and expects to disburse another Rp 210 billion this year. 

For next year, textile and garments makers will be entitled to another Rp 255 billion in subsidies, while sugar factories will be entitled to Rp 50 billion. 

"We expect that this expanded program will not only stimulate investment in the three sectors, but also help improve competitiveness," Anshari said. 

Businesses have welcomed this government program, saying it will definitely help them increase production capacity and benefit their industry as a whole. 

The Association of Indonesia Textile Producers (API) has said that with the program, the industry is optimistic that it can cope with any decline in traditional export markets despite the current global economic downturn. 

It expects total exports to still grow by at least 7 percent next year, mostly resulting from export market diversification. Last year the value of textile exports reached $10.06 billion. 

The Indonesia Footwear Producer Association (Aprisindo) meanwhile said that even this year, the industry was doing relatively well and remained on course to achieving a 10 percent export growth target by end year, probably reaching an export volume of $1.76 billion. 

Meanwhile, ministry director Budi Irmawan said up to 380 footwear makers have so far applied to make use of the subsidy scheme and this volume of demand would likely continue. 

He added that most of the machinery now used by footwear manufacturers dates back to the 1980s. 

Anshari added that the government would in the near future further expand its revitalization program. 

"We're considering providing subsidies for targeted industrial cluster areas in the country. This would not be via an industry-based subsidy, but via industrial clusters. But, we're still working out the details," he said.