Slow demand for EFIC's Indonesian export fund<\/p>\n
SYDNEY (Reuters): The Export Finance and Insurance Corp (EFIC)
\nhas seen slow demand for its A$900 million in special funding to
\nunderwrite Australian exports to Indonesia.<\/p>\n
The government agency believes it would remain able to
\nunderwrite the trade despite the Indonesian crisis, EFIC's
\ngeneral manager business development Geoff Hickey told Reuters in
\nan interview.<\/p>\n
But one acid test remained on whether special funding would
\ncontinue to flow -- continued Bank of Indonesia (BI) sovereign
\nguarantees.<\/p>\n
\"As long as the BI can provide that sovereign guarantee, prima
\nfacie we can continue with the trade,\" he said.<\/p>\n
\"But if we saw something happening in the country that really
\nunnerved us and the BI was still prepared to issue guarantees,
\nyou might want to take stock.\"<\/p>\n
EFIC, given access to a total of A$900 million in federal
\nfunds to underwrite exports to Indonesia -- almost all in wheat
\nand cotton -- had so far received applications for about A$100
\nmillion.<\/p>\n
\"They're pretty exceptional circumstances. The whole process
\nof making it happen will go perhaps more slowly than otherwise.\"
\nBut trade was flowing, even in the eye of Indonesia's political
\ntyphoon.<\/p>\n
BI processed some paperwork on Tuesday for EFIC-backed deals,
\nHickey said, the same day that President Soeharto said in a live
\ntelevision broadcast that he would not stand in his promised but
\nso far untimed special election.<\/p>\n
EFIC regarded Wednesday as a key day on whether matters
\nremained manageable in Indonesia, but would not forecast events
\nfrom here, Hickey said, who added he would watch carefully any
\nfurther protests or uprisings in Jakarta and other cities.<\/p>\n
Moslem leader Amien Rais, who had vowed to bring a million
\npeople onto the streets of Jakarta Wednesday, called off the
\nplan. But thousands of students continued their protest at the
\nParliament building.<\/p>\n
\"I'm assuming we'll still be able to write this trade. But
\nclearly things will be volatile.\"<\/p>\n
The Australian government's national interest facility,
\nthrough EFIC, was one of the few viable ways to ensure trade
\nfinance for Australian exports, Hickey said.<\/p>\n
But even with the facility, protracted negotiations and
\nprocesses were slowing both wheat and cotton exports.<\/p>\n
Despite EFIC's backing of about A$500 million for wheat and
\nA$400 million for cotton exports, commercial negotiations were
\nstill proceeding between the Australian Wheat Board and its
\nIndonesian customers and between cotton exporters and their
\nbuyers, traders and trading houses, he said.<\/p>\n
Some wheat trade had taken place but the bulk of it that would
\nhave access to EFIC funding was still under negotiation, he said.
\nCotton traders were also still negotiating with buyers.<\/p>\n
A greater amount of funds would start to increase in the next
\nmonth or so, he said.<\/p>\n
Bank of Indonesia, in exercising its sovereign guarantee, was
\nputting quite prudential limits and constraints on what risk it
\nwould accept, Hickey said.<\/p>\n
BI was not nominating dollar limits, while the Australian
\ngovernment also treated deals on a case-by-case basis, he said.
\nBut procedures involved EFIC, after receiving a deal, allocating
\ncover then sending it to BI for approval. Any change in prices or
\nshipping terms required the work sent back to BI.<\/p>\n
\"Exporters, buyers, banks and ourselves are all going through
\na process which is quite unusual. That's not that extraordinary
\nwhen you think about it, the risk is extremely high.\"<\/p>\n
Hickey painted an Indonesian commercial landscape of
\ncompressed demand, with a large number of businesses not credit-
\nworthy and unable to open letters of credit with banks which were
\nwinding back on credit whether they had viable clients or not.<\/p>",
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"sponsor": "Okusi Associates",
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