Ivan Dasa Saputra – The Indonesian government is set to provide tax incentives to textile machinery industries next year as part of a move to boost the ailing textile sector, Industry Minister M.S. Hidayat said late last week.

The minister said the textile industry needed at least 500 pieces of new equipment next year to revive the sector. Hidayat said that such machines should be produced in Indonesia, and that a tax holiday was planned to reduce imports.

Many machines currently used by the sector were produced overseas, often at high cost, damaging the competitiveness of the country's textile industry.

"We have to do that to help cut the import of textile machines in the next two years," Hidayat told reporters in Jakarta on Friday during a press conference to discuss the 2013 state budget. The minister was not specific on the nature of the planned tax incentives.

Hidayat said the country's upstream textile industry – machinery, much of which is outdated and in need of upgrades to boost efficiency – remained weak. "The tax holiday is meant so that there will be growth in investment in textile machines," Hidayat said.

Separately, Imron Cotan, Indonesia's ambassador to China, said in Beijing on Tuesday that two Chinese textile companies were considering relocating their plants to Indonesia to benefit from the growing economy and favorable business environment.

"The investment climate in Indonesia remains conducive, and a growing economy will lure Chinese investors to relocate their textile plants to Indonesia," Imron was quoted as saying by Antara news agency. Imron did not name the Chinese investors.

The ambassador said that Indonesia was attractive to Chinese investors because of low labor costs, a conducive political environment and recent investment grade assessments by rating agencies.

Fitch Ratings raised Indonesia's sovereign debt rating to investment grade last December and Moody's Investors Service raised its assessment early this year.

Imron said various policies in Indonesia coupled with stable political conditions had enticed many foreign investors, including from China. "Indonesia remains the target of investment," Imron said.

The diplomat said that several potential investors from China and neighboring countries will visit Jakarta next month to explore business opportunities in Indonesia.

[Additional reporting from Antara.]