A loan commitment by the Japan Textile Federation could help revitalize Indonesia's ailing textile industry, as long as the government is willing to guarantee the loan, a local textile association says.

The federation has expressed interest in helping Indonesian textile companies with newer generation spinning and weaving machinery, the Indonesian Textile Association (API) said.

"We have filed a proposal for some US$3 billion worth of machinery and Japan has agreed as long as the government is willing to guarantee (the loan)," API secretary-general Ernovian G. Ismy said on Friday.

Japan, along with the United States and European Union countries, is currently the largest importer of Indonesian textiles and garments, with several companies here producing textiles under Japanese brands.

Exports of textiles and garments to Japan accounted for almost 30 percent of the US$7.6 billion in total export revenue Indonesian manufacturers booked in the first 11 months of 2005.

The possible soft loan, Ernovian said, could be used to start revamping the aging production facilities of textile companies in West Java.

"They offered a 4 percent interest rate as long as we can guarantee the financial health of the companies receiving the machines," he said.

However, the government is still assessing the feasibility of the offer in order to avoid problems in the future, an official at the Ministry of Industry said.

"We have to be sure the textile companies can solve their internal problems first," said Ansari Bukhari, the ministry's director general for the textile sector.

Ansari added the loan would have to be made on a government-to-government basis, thus requiring prudent assessment beforehand.

An evaluation by the Ministry of Industry found that half the machinery at Indonesian textile companies was more than 15 years old, causing inefficiency and lowering the price competitiveness of Indonesian products.

The ministry estimated a first phase of revitalization would cost Rp 5 trillion.

Ernovian said newer generation spinning machines could produce 50 percent more yarn every hour compared to older machines.

Textile companies have had difficulty seeking loans as local banks doubt the capacity of the firms to repay the money considering their weak financial condition.

"The already ailing companies cannot afford to pay the high interest rates, ranging from 14 percent to 18 percent," Ernovian explained, hoping the industry ministry's textile restructuring team could help lobby for lower interest rates.

Ansari, however, said such treatment would be discriminatory and the details of the loans would need to be discussed on a case-by-case basis.