Most trade financing schemes 'not utilized'<\/p>\n
JAKARTA (JP): Most of the trade financing facilities obtained
\nby the government from several donor countries has not been fully
\nutilized by local banks to help restore import activities,
\naccording to the government.<\/p>\n
A Ministry of Industry and Trade report says the government
\nhas obtained US$5.77 billion for a trade financing scheme, which
\nincludes a letter of credit (L\/C) guarantee and pre-export
\nfinancing facilities.<\/p>\n
However, only $618 million of the amount had been utilized as
\nof the end of October, Antara quoted the report.<\/p>\n
Of the total utilized funds, $486 million was used for import
\nactivities by the State Logistics Agency (Bulog) and state-owned
\noil firm Pertamina.<\/p>\n
The ministry says domestic banks appointed by Bank Indonesia
\nand the finance ministry to distribute trade financing facilities
\nto importers were still reluctant to do so.<\/p>\n
They are faced with barriers such as high credit risks and
\nhigh interest rates, legal lending limits and lack of experience
\nin intermediating trade financing facilities.<\/p>\n
Some banks said they could not issue L\/Cs in the name of
\nimporters which they considered incapable of fulfilling their
\nobligations to them.<\/p>\n
Several importers complained that they were required to
\ndeposit 100 percent security in local banks before they could be
\nissued a letter of credit, despite government guarantees of L\/Cs.<\/p>\n
In the past, after receiving their shipments many importers
\nhad a three-month grace period before they had to pay the L\/C
\namount.<\/p>\n
The ministry said many local banks also had very little or no
\nexperience regarding the system and network to deal with overseas
\nclients and financial institutions.<\/p>\n
Countries providing the trade financing facilities to
\nIndonesia include Australia, Japan, the United States, Canada,
\nGermany and the Netherlands.<\/p>\n
The report suggests that the government use joint-venture
\nbanks to participate in the trade financing scheme.<\/p>\n
Joint-venture banks normally have better trade-finance units
\nand are more active in export-import activities, compared to
\ndomestic banks, it said.<\/p>\n
Guarantee letters<\/p>\n
In addition to foreign trade facilities, the government has
\nalso pumped in $5.5 billion to guarantee letters of credit for
\nlocal exporters hit by frozen international bank lines of credit,
\na director of the central bank said last week.<\/p>\n
The measure is part of the efforts to accelerate the recovery
\nof the real sector badly hit by high interest rates, Bank
\nIndonesia director Miranda Goeltom said.<\/p>\n
Plunging confidence in the country's troubled banking sector
\nprompted international banks to reject local L\/Cs.<\/p>\n
Bank Indonesia stepped in during the middle of this year by
\nopening more than $1 billion in deposits at foreign banks to
\nguarantee the L\/Cs. (das)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/most-trade-financing-schemes-not-utilized-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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