Japanese creditors fret over Indonesia domino effect<\/p>\n
TOKYO (Reuters): The prospect that Indonesia might declare a
\ndebt moratorium is striking fear among Japanese creditors, who
\nhold the lion's share of debt in the Southeast Asian nation.<\/p>\n
But what scares them is not so much the amount that Japan is
\nowed by Indonesia, a figure that stood at around US$23 billion as
\nof last June.<\/p>\n
What worries them most as the prospect of a debt moratorium
\nlooms is that it could deal a wider blow to confidence in the
\nAsian region as a whole.<\/p>\n
"The worse-case scenario would be if this triggers a domino
\neffect, killing confidence in the two other Asian nations sharing
\nthe same economic plight, South Korea and Thailand," said Takashi
\nNobehara, general manager of Asian research at the Japan
\nInstitute of Research.<\/p>\n
"This is a crisis of confidence more than anything else,
\nNobehara said.<\/p>\n
Under a moratorium, a debtor would postpone loan repayments to
\nall creditors in order to guarantee eventual repayment to
\neveryone.<\/p>\n
This is not the first time in recent months that talk of an
\nAsian debtor nation freezing its debt repayments has reared its
\nhead with big implications for Japan.<\/p>\n
In mid-December there were whispers of a possible debt
\nmoratorium on South Korea's estimated $171 billion debt -- an
\nindication of the level of consternation about Seoul's currency
\nand banking crisis.<\/p>\n
Doubts about Indonesia's readiness to service its crushing
\ndebt began swirling in foreign exchange markets on Thursday.<\/p>\n
The Indonesian rupiah plunged nearly 30 percent against the
\ndollar after Wednesday's release of the country's 1998\/99 budget,
\nwhich analysts said ignored the need for reform.<\/p>\n
International Monetary Fund Deputy Managing Director Stanley
\nFischer said he considered Indonesia's economy "more worrisome"
\nthan South Korea's.<\/p>\n
The IMF, which is making $10 billion available to Indonesia as
\npart of a $43 billion international bailout package, is sending a
\nteam of officials to Jakarta to see if reforms there can be
\nspeeded up.<\/p>\n
According to the Bank for International Settlements,
\nIndonesia's total foreign bank borrowings were $58.7 billion as
\nof the end of June 1997.<\/p>\n
Japanese banks accounted for 39 percent, or $23 billion, of
\nall international loans to Indonesia in the first six months of
\n1997.<\/p>\n
Analysts said much of Japanese banks' exposure to Southeast
\nAsia was in the form of loans to local subsidiaries of Japanese
\ncorporations.<\/p>\n
One Japanese banking source who asked not to be identified
\nsaid about 50 percent of his institution's exposure in Indonesia
\nwas to such offshore Japanese borrowers.<\/p>\n
And it's not all panic among Japanese corporations with stakes
\nin Indonesia.<\/p>\n
On Friday, an official at leading Japanese construction
\nmachinery maker Komatsu Ltd. told Reuters it plans to expand the
\nrole of its Indonesian and Thai plants as export bases, and has
\nno plans to pull funds out its Indonesian joint venture or to cut
\njobs there.<\/p>\n
A Komatsu spokesman said such a strengthening would help the
\ncompany cope with economic and currency woes in Southeast Asia.<\/p>\n
An official at the Japan National Oil Co., a semigovernmental
\ncorporation which has extensive oil development projects in
\nIndonesia, said the current turmoil in Indonesia would not have a
\ndirect impact on it.<\/p>",
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