Australia to give Indonesian companies credit guarantees

Australia to give Indonesian companies credit guarantees

JAKARTA (JP): Australia has agreed to provide credit
guarantees for Indonesian companies to import certain commodities
from that country, Bank Indonesia (BI) said yesterday.

BI director for legal, internal supervision and logistic
affairs, Haryono, said in a statement that the central bank
signed an agreement on credit guarantees with the Export Finance
and Insurance Corporation (EFIC) of Australia on March 13.

Under the agreement, EFIC will give insurance facilities to
Australian banks and exporters against nonpayment from their
Indonesian counterparts, he said.

EFIC should nominate all transactions it wants to cover to BI
for approval because the central bank will guarantee payment in
case the opening bank in Indonesia can not settle the payment.

BI could also nominate transactions it wants to guarantee to
EFIC for approval.

Both parties agreed that the facility should cover only food
products, industrial raw materials, medicines and medical
equipment, telecommunications equipment, iron materials,
petroleum products and automotive components.

Haryono said the agreement would be reviewed after three
months.

Following the sharp devaluation of the rupiah against the U.S.
dollar and the public's loss of confidence in the country's
banking industry, most letters of credit (L/Cs) issued by
Indonesian banks have not been accepted by foreign banks.

Besides Australia, the United States, Japan, Germany and
Singapore have also agreed to back up some of Indonesian L/Cs to
import commodities from those countries.

The United States, for instance, has agreed to guarantee a
total of US$460 million in Indonesian L/Cs to import cotton,
corn, wheat, wheat flour, meat, rice and soybeans.

The government said earlier that it had designated 31 foreign
exchange banks to issue L/Cs backed by U.S. credit guarantees.

And recently some sources said the government had allowed 50
banks, instead of 31 banks, to issue L/Cs.

Germany has promised to give Dm250 million (US$183 million) in
export credit guarantees for small and medium Indonesian
enterprises to import raw materials from the country.

Japan has also agreed to provide guarantees for Indonesian
L/Cs through its Exim bank.

And Singapore has been drumming up international supports for
its international guarantee scheme for Indonesia. Singapore
itself is committed to providing some $2 billion to support such
a scheme should it be implemented. (rid)