AEKI seeks foreign funds to finance retention plan

JAKARTA (JP): Indonesian coffee exporters are looking for foreign funding to enable them to participate in the Association of Coffee Producing Countries' (ACPC) plan to curb world coffee supply.

An executive of the Association of Indonesian Coffee Exporters (AEKI) said here on Saturday that foreign loans would be the association's last hope to enable it finance the retention program imposed by ACPC.

The executive, who asked not to be named, said AEKI would formally submit its request during a visit of ACPC's executives to Indonesia next month.

"We want to participate in the plan, but we're in a very difficult financial situation here ... We expect ACPC will help us get the loans so that we can still participate in the plan without having to burden the government," he told The Jakarta Post on Saturday.

Separately, another AEKI executive, Hassan Widjaja, said the association was currently seeking foreign loans of between US$80 million and $100 million to cover the retention cost.

AEKI earlier predicted Indonesia would need to have at least $47 million to cover the extra costs for storage, insurance and maintenance of about 60,000 tons of coffee to be kept under the retention scheme.

Hassan said it was important for Indonesian coffee exporters to get the loans and participate in the retention plan so that they could correct the local price, which recently decreased amid reports of the government's refusal to finance the plan.

But he did not disclose whether AEKI had contacted any foreign lenders.

According to AEKI executive secretary Noer Madjid, ACPC suggested in June that its members try to negotiate with international lending company Louis Dreyfuss to get financial support for the retention plan.

He said AEKI had approached the company, which offered to cover up to 50 percent of the cost of the total coffee retained using local interest rates.

"No deal has been made yet as some of our members said they could not afford it. The offer of a loan is still valid, I guess, because we haven't formally called it quits," he said.

ACPC members, which together control about 85 percent of the world's coffee supply, agreed in June this year to introduce a 20 percent retention program to cut the supply.

The association's members, under the program, are required to cut their exports by about 20 percent.

Indonesia pledged commitment to the plan during an ACPC meeting earlier in June, but later said that it was not able to participate in the program due to a lack of funding.

ACPC secretary-general Roberio Silva was reported by Reuters as saying that a delegation from the group would visit India this week and Vietnam and Indonesia in early September to monitor progress in meeting the retention deadline on Oct. 1.

India is committed to the plan and is currently studying the cost and methods of retention before eventually implementing it, while Vietnam's coffee exporters are still waiting for government approval regarding several issues surrounding the plan.

Silva said he was upbeat that Vietnam, a major coffee producer which was not an ACPC member, would meet the deadline, but was unsure about Indonesia.

Indonesia is the world's third largest coffee producer after Brazil and Colombia, and the world's second largest producer of robusta coffee.

The AEKI source said Indonesia would unlikely be able to meet its export target of about 300,000 tons this year due to a shortfall in production and the fact that many coffee growers were stockpiling their products amid plunging prices.

He predicted Indonesia's total coffee exports would only reach 270,000 tons this year. (cst)