While acknowledging that lending to the textile industry carries a high risk, state lender Bank Negara Indonesia (BNI) will increase its loans to the sector this year.

"We estimate that loans to textile companies will increase by Rp 2 trillion (US$211 million) over the 2005 (level)," BNI president director Sigit Pramono said after a meeting with Minister of Industry Fahmi Idris on Wednesday.

Fahmi also met with Bank Indonesia Governor Burhanuddin Abdullah and several officials from local banks to discuss possible financial support for the ailing textile industry.

The industry ministry reported that textile companies were in dire need of financial support to replace aging machinery.

Data from the ministry show that half of all machines in domestic textile companies are more than 15 years old.

Old machinery creates inefficiency, and lowers competitiveness in the global market.

BNI, the third largest domestic bank in terms of assets, loaned Rp 3.1 trillion as working capital to textile companies last year.

"The textile industry players still admit that they have internal problems, that is why banks consider it a high-risk sector," Sigit added, explaining that nonperforming loans from textile debtors were currently at 2.8 percent.

BNI's outstanding loans as of September 2005 stood at Rp 63.19 trillion, up 22 percent from the same period in 2004 on higher corporate loans.

Sigit said representatives at the meeting agreed that the textile business was not considered a sunset industry, and that banks would support the sector as long as companies could settle their internal problems first.

Aside from aging production facilities, problems in the industry range from smuggling and increasing energy costs to accusations of environmental damage.

Separately, Fahmi explained that his ministry would reestablish its textile restructuring team, which first came into being over two years ago, in a bid to speed up growth in the industry.

"Next week, the team will start more detailed discussions with the central bank, local banks and industry players concerning the details of possible loans," he said.

Currently, most banks prefer short-term loans, while textile companies require longer terms and higher amounts, Fahmi explained.

His ministry estimates the first phase of revitalization will require up to Rp 5 trillion in new investments.

The ministry has set a goal for the textile industry to grow by 4.3 percent this year compared to 1.5 percent last year.