The government has allocated Rp 9 billion (US $0.99 million) from its 2010 budget to support the modernization of aging textile and leather machines belonging to small and medium enterprises (SMEs).

One of the biggest obstacles faced by small and medium scale textile and leather manufacturers is the lack of competitiveness of their products due to their aging machinery. This results in low efficiency and productivity of their operations and the low quality of their products, said Director of Clothing Industry within the Directorate General of Small and Medium Industry (IKM) in the Industry Ministry Andang Fatati Nadya.

He said textile and leather players also faced difficulties in sourcing investments for buying new machinery and gaining access to financial institutions. Under a six-year restructuring program firstly implemented in 2009, the textile and leather industries were expected to modernize the machinery of about 80 to 100 plants per year, leading to the modernization of at least 50% of their plants by 2014.

Under the program, the government will provide a contribution of 25% of funds for the importation and 30% for the local procurement of new machines of prices ranging from Rp 40 million to Rp 2 billion each.

Separately, head of the Sub-Directorate of Resources and Financing Facilitation within the Directorate of the Clothing Industry Zulkifli Rasyid said the program would hopefully generate investments of about Rp 40 billion for textile and leather machines.