Interview with Mr Arryanto Sagala

Mr Arryanto Sagala
Mr Arryanto Sagala
Director of Textiles
The Ministry of Industry -The Republic of Indonesia
The Ministry of Industry -The Republic of Indonesia

Fewer demands for Indonesian textiles and the localized textile goods in the backdrop of tough competition from foreign goods, is a matter of concern for Indonesian industry today; this is what current updates mention. What is your take on this?

World demand for textile and textile goods in 2009 decreased, compare with the previous years due to economy down-turn globally. Financial crisis brought in impacts such as decreasing consumption demand. In turn, that will affect the production. However, we are optimistic that in this 2010 Indonesia will recover and export is projected to increase.

On other side, domestic market for more than 220 million people is very lucrative that needs to be kept safe for local producers. Comparing the current per capita consumption in textile, the figure somewhat is relatively low with other countries, with that providing room to grow enormous .

The government is successfully encouraging increased usage of domestic production through “P3DN Program”.

Further to this, banks are of opinion that textile production is a dying industry and lending loan to these producers is absolutely baseless. What is your message to these financers? How has your Ministry planned to safeguard these afflicted private firms in textile?

Pervasive opinions considering textile industry as a sunset industry is unavoidably misleading. It is true that among the portfolio of banking institutions, the growth of textile sector is not so rapid anymore as previously. But many prominent financial institutions in Indonesia still keep textile industry as their cash-cows.

Ministry of Industry is continuously taking active actions to eliminate this biased perception. We coordinate intensively with National Central Bank, as well as the whole banking institution to overcome the problems. We received the information from Central Bank that currently, the entire banking institutions do not perceive textile sectors as a sunset industry anymore. However they will evaluate and warn the misleading firms, individually.

As indicated by our data from Indonesian Textile Industry Restructuring Project, our data shows that approximately around 80% of Indonesian textile machinery is more than 20 years old. On the other side, domestic markets are flooded by imported textile goods with cheaper price, hampering the industry to grow in an appropriate manner.

Based on those factors, the Government of Indonesia since 2007 has launched Indonesian Textile Restructuring Program to help the industry alleviate some of their problems of out-of-date or obsolete machinery. The main objective is to assist Indonesian Textile Industry to modernize its machineries and equipments as well, by providing financial assistance to them.

Entire textile industry, i.e. from up-stream to downstream firms, can take benefit of this program. However, the firms should be essentially incorporated in Indonesia, having Government Permit as a textile industry, and should be installing new machinery with certain criteria such as main machinery or supporting equipments, power plant/material-handling equipments/cooling systems/waste treatment plants and all other kind of machinery & equipments – all must be able to improve or showing efficiency and increasing productivity of the industry.

The Program is divided into 2 schemes. The first is for the company who buy their newer machinery first (either by borrowing form bank, from supplier credits, or their own money); when they finished installing their own machinery, they are granted by the Government 10% reimbursement. The second is by facilitating a relatively soft loan to would-be applicants that intended solely to buy textile machinery (this scheme was discontinued in FY 2010). The selection of applicants is done through delicate process and involving third parties as verifier to guarantee accountability, non-discriminative treatment and other responsible matters.

During the 3 years implementation of the Program, we noted satisfying responses from all involved parties and stakeholders as well. The following are the achievements of the program:

• Promoting new investment in textile industry, reaching around Rp. 5 trillion.

• Creating job opportunity for around 46,000 new workers.

• Increasing production approximately 17 – 18%.

• Conserving energy in the tune of 6 – 18%.

• Increase in productivity around 7 – 17%.

• Facilitating and promoting bank loan to the industry.

Moreover, for last 4 years (the time since program was implemented), following figures can explain the noticeable role of banking instituitions in extending their credit lines to the textile sector:

(in IDR)
Source of FundsFY 2007FY 2008FY 2009TOTAL%-age
Banks' Credit742.649.129.710654.572.900.314300.968.410.4321.698.190.440.45635,41%
Suppliers' Credit2.042.226.00018.310.686.5228.140.474.00028.493.386.5220,59%
Other Financial Institutions13.094.023.7005.356.878.74451.484.658.08269.935.560.5261,46%

For increased power rates- electricity price hikes, Indonesian textile manufacturing sector is also raising brows to foresee its subsequent upheavals. What are your concerns on it?

Indeed that the electricity-power price hikes will bring substantial impact to the industry. As we know well, energy is a prime input in production, and in the current tight competition era, not all the price hikes can be transferred to the consumers. Therefore while the electric company is still doing some exercise on their final tariff, we are always encouraging the textile industry to implement energy conservation, and exploring to utilize more economically energy resources.

Considering such a scenario, how would you rate the success of ASEAN-China Free trade agreement (AC-FTA)?

The implementation of AC-FTA is unavoidable and must be accepted by the all stakeholders. We keep seeking constantly all measures to help industry winover the drawbacks from the offset of the agreement.

####### Click here to view Previous Face2Face with Ministry of Industry, Republic of Indonesia.
Published on: 02/08/2010

DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.

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