Loans still costly for textile industry

06 Jul '10

2 min read

As Indonesia's economy proved itself from the crisis of the world economic downturn, largely unharmed, domestic industries become worried about losing impetus as entry to finances remains expensive.

As per experts from the industry, the expensive funds in the country are due to government's heavy dependency on the rupiah bond market, to finance arrears in budget and also the central bank's failure to push banks to augment their lending.

More so, government's financial policy, although traditional in nature, had led to congestion in the bond market, which has restricted private firms from issuing their own bonds to garner funds. Due to this, private firms are facing difficulties, to obtain bank loans and garner funds from their bond offerings.

Executive Secretary of the Indonesian Textile Association (API), EG Ismy said that, owing to higher lending rates, almost 16 percent in a few banks, most of the Indonesia textile manufacturers had to bear currency risk, as they were pushed to borrow from international banks.

However, banks inform that, textile producers are a dying industry and lending them loan is absolutely baseless. More so, banks cannot pressurise the entire textile industry, owing to a few defaulters.

Bank Indonesia, in one of its recent survey revealed that, banks might still refrain from providing loans, as there were fewer demands for Indonesian textiles and the localised textile goods were facing a tough competition with foreign goods.

Ismy, however, stated that, textile industry will continue to sustain as portrayed by the exports value, despite facing stiff competition in the local market, due to inflow of Chinese goods.

As API, exports of textile in 2010 will tough US $10.6 billion, attaining new levels from about $9.3 billion in 2009, which again was lower by around 9.7 percent from the $10.3 billion recorded in 2008, during the economic crisis.

Fibre2Fashion News Desk - India

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