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Govt initiates second phase of subsidies for textile sector

28
Mar '08

On March 27, the Government of Indonesia launched its second phase for rejuvenating the textile industry which entails disbursing of Rp266 billion as subsidy for machinery restructuring and Rp45 billion as interest rate subsidy.

This year the Government has plans to attract 150 to 160 textile producing companies by allowing subsidies in form of 10 percent discount on purchase of imported textile machinery and a concession of 15 percent on buying domestic textile equipments.

Moreover, the interest rate subsidy would cover nearly half of the 14 percent interest rate imposed on the textile industry. For the present phase, the number of companies receiving such subsidies has been increased from 92 to 160.

It was in April last year that the first phase of the program was launched. The Government had assigned Rp255 billion of which a total subsidy of Rp153.31 billion was absorbed by the participating companies.

Although the first phase was not promoted very well, experts believe that it attracted domestic and foreign investments worth Rp1.55 trillion within the industry. Besides, it also helped in generating 4,395 new jobs, expanded production capacity from 10 to 15 percent and increased productivity from 16 to 25 percent.

The present international market is dominated by China but the coming few years will see a number of European countries like Poland, Serbia and Montenegro playing a crucial role. This is sure to make competition more severe for Indonesia.

Textile exports of Indonesia have showed a remarkable consistency by standing at around $7-8 billion annually for the past eight years.

However, experts suggest that for promoting domestic brand in the global arena, producers must focus on the production of rayon.

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